Computation of total Income of Hindu Undivided Family - Income Tax - Ready Reckoner - Income Tax

Computation of total Income of HUF The following Point should be taken into consideration while determining the total income of HUF (a) Income from the transfer of a self acquired property by an individual to his HUF for inadequate consideration or conversion of the self-acquired property into property of the HUF is not considered as the income of the HUF. It would be included in the income of the individual member who transferred the property to the HUF. [ Section 64(2) ] (b) Section 10(2) exempts any receipts by an individual as a member of a HUF out of the family income. (c) If a member of the HUF receive any fee or remuneration as a director or a partner in a company or firm as a consequences of the investment made in such concern out of the funds of the HUF, such fee/remuneration shall constituent income of HUF. However, any such fee or remuneration earned by a member of HUF as a director or partner for services rendered purely in his personal capacity, will be included in the income of the individual member and not the HUF. Remuneration Paid by HUF to Karta or family member for managing the family business Remuneration paid to Karta Any remuneration is paid by the Hindu undivided family to the Karta or any other member for services rendered by him in conducting family s business, the remuneration is deduction If remuneration is: Paid under a valid and bona fide agreement. In the interest of and expedient for the business of family; and Reasonable and not excessive. Remuneration paid to Member A HUF can be allowed to deduct salaries paid to member of the family if the payment is made as a matter of commercial or business expediency, but the services rendered must be to the family. Following methods or devices may prove useful in reducing the tax incidence in the case of HUF : By increasing the number of assessable units through the device of partition of the HUF; By creation of separate taxable units of HUF through will in favour of HUF or gift to HUF; Through family settlement / arrangement; By payment of remuneration to the Karta and other members of the HUF; By use of loan from HUF to the members of the HUF; Through gift by HUF to its members specially to the female members; Through other methods / devices;