Undivided, Not Fragmented
“யாதும் ஊரே, யாவரும் கேளீர்“
(Yaadhum Oore, Yaavarum Kelir- ‘every country is my own and all the people are my kinsmen’)
The concept of family has always played an integral part in the cultural fabric of India. A common recurring theme across the centuries has been “Vasudheiva Kutumbakam” which means, the world is one family. Such is the respect and regard for family that, even taxmen consider ‘family’ as a separate legal entity. But, not all families are given such exalted status, it is but the ‘Hindu Undivided Families (HUF)’ that enjoy this clout. But what are these so called HUF’s? Who can form one? How to form one? All this and more will get answered in the coming paragraphs.
As per Hindu law, a Hindu Undivided Family consists of people who lineally descended from a common ancestor. Further, the lineal descendants beyond the 4th generation shall not form part of the HUF, i.e. any relation beyond the great-grandson cannot be a part of the HUF of a person. Also this type of entity is not only available to Hindus but also to Jains, Sikhs and Buddhists as they are also covered under the definition of Hindu as per the Hindu law. One of the main conditions for forming a HUF is that the member forming the HUF should be married. The structure of a HUF is as follows:
- Karta – Is generally the father of the family and the person who has authority to do things or take decisions on behalf of the family. In effect he acts as the ‘manager’ of the family.
- Coparceners – Are the people who possess the right to demand a share of the assets of the family as and when they want to separate. Generally sons, daughter, grand children and great grand children constitute the coparceners.
While forming a HUF it is recommended that the same be done by executing a deed so as to give it legal validity. Post execution of the deed, getting a PAN for the HUF and opening of a bank account in the name of the HUF needs to be done. This is to avail of the various benefits offered by the Income Tax Act to a HUF.
All said and done, HUF is an extremely useful for those looking to ring-fence their income from the reaches of the taxmen and might be a good option for people having sufficient income or those having ancestral property. But any decision would have to be taken only after considering both the pros and the cons. Therefore, it would be advisable to consult a professional as regards the same.