The Concept of HUF is famously adopted in India due to its cultural values amongst Indian families. As concept of joint family was more prevalent, the concept is mostly adopted by Indian families living in joint family. Joint Family, here, is taken as a separate entity from that of the Individual Members consisting in HUF. The entity of HUF if governed by the Hindu Succession Act, 1956 (‘the Hindu Succession Law’), is applicable to Hindus, Jains, Sikhs and Buddhists.
The Head of the Family (i.e. Father/ any elected person in case of the death of Father) is called Karta which operates the business of the HUF. Coparcener is a term used to identify a person, who assumes a legal right in his ancestral property by his/her birth in a Hindu Undivided Family (HUF). According to the Hindu Succession Law, any individual born in an HUF becomes a coparcener by birth.
The Hindu property act recognises the concept of HUF, which means a family of persons who are lineally descended from a common ancestor and related with each other by birth or marriage. The people who are so descended from commons ancestors, were divided in two parts. In the first category are coparceners. Only males were recognised as coparceners of the HUF and all the females were called members. Although all the coparceners are members, not all members are co-parceners.
The rights of coparceners and members in the property of the HUF, are different. Coparceners have the right to ask for partition of the property and to get the shares. Members of the HUF, like daughters and mothers, had the right of maintenance from HUF property, as well as to get a share in the property of the HUF as and when partition of the HUF took place. Upon marriage, the daughter would cease to be a member of the HUF of the father and would thus, no longer be entitled to the right of maintenance as well as to get a share in the property of the HUF, if the property were partitioned after her marriage. As only a coparcener was entitled to become the Karta of the HUF, the female members were not entitled to become a Karta of the HUF and manage its affairs.
Section 6 of the Hindu Succession Act, 1956, which deals with coparcener’s right in the HUF property, was amended in 2005 w.e.f September 9, 2005. With this amendment, daughters have been put at par with sons, as far as coparcenary rights in HUF property are concerned. Consequently, the daughter gets all the rights attached with coparcenary, including the right to ask for partition of the property and to become a Karta of the HUF. The amendment drastically changed the rights of daughters in the property of the parental HUF. However, only the daughters who are born in the family, will get the coparcenary rights. Other female members, who come into the family by virtue of marriage, are still treated as members only. Thus, they are not entitled to ask for the partition but are entitled for maintenance and shares as and when partition takes place.
After marriage, a daughter will cease to be a member of her parental HUF, but will continue to be a coparcener. Thus, she is entitled to ask for partition of the HUF property, as well as to become the Karta of the HUF, in case she happens to be eldest coparcener of her father’s HUF.
Even in case of a married daughter who has died, her children shall be entitled to the shares that she would have received, if she was alive on the date of the partition. In case none of her children are alive on the day of partition, the grandchildren will be entitled to the shares that the daughter would have received on partition. Interestingly, the daughter cannot gift her share in the HUF property while she is alive but she is fully capable of giving away her share in the HUF property by way of a Will. If a Will is not prepared, on her death, her share in the joint property shall not devolve on other members of the HUF but will pass on to her legal heirs.
Recently, Supreme Court has ruled that family members on the parental side of a Hindu widow cannot be held to be ‘strangers’ and her property can devolve upon them under the Hindu Succession Act, 1956. It was clarified that the heirs of the father of a Hindu woman are covered under persons entitled to succession of property. Upholding the order of the high court and the trial court, which allowed a childless widow to enter into a family settlement to transfer her property to her brother’s son, the SC said: “A perusal of Section 15 of the Hindu Succession Act, indicates that heirs of the father are covered in the heirs (of the property), who could succeed. When the heirs of the father of a female are included as person who can possibly succeed, it cannot be held that they are strangers and not the members of the family qua the female.”
Thus, while property of the family remains in HUF, there are still discriminatory laws when it comes to treatment with female heir for their own right of inheritance.
An HUF can acquire its assets on partition of HUF of ancestors of its coparceners. Karta of an HUF can also receive assets by way of gifts from non-family members provided the donor gives specific direction that the gift is made for the benefit of the HUF. An HUF can also acquire assets under a Will thorough a specific bequest in favour of the HUF by the deceased. Even members of the HUF can also throw their personal property in the common hotchpot of the HUF. However, any income arising from such transferred asset shall be clubbed with the income of the donor till the assets of the HUF are distributed. After distribution of such HUF property the share of the HUF property which is allotted to the wife of the transferor will still continue to be clubbed with the income of the transferor.
Since members of the HUF are treated as relative of the HUF, the gifts received from the members will not be taxable under Section 56(2) at the time of receipt of the gift but the gifts received from non-members shall become fully taxable if the aggregate of all gifts received by the HUF during the years exceeds Rs. 50,000. However, the gifts upto Rs. 50,000/- in a year received by an HUF from non-members are fully exempt under Section 56(2). In case of gifts through cheque or movable assets, no registration is required to be done but in case of gifts of immovable property such gift needs to be registered and adequate stamp duty is also required to be paid.
When it comes to Succession of HUF property, the coparceners of the HUF cannot gift or transfer their rights in the assets of the HUF during their lifetime but are entitled to bequeath their share in the assets of the HUF through a Will. Prior to amendment of the Hindu Succession Law, the rights of the coparcener in the HUF property used to devolve on the surviving members of the HUF but now the situation is changed. In case no Will is made by the coparcener, the share of the deceased in the HUF property passes to the successors as if deceased died intestate.
Since all the coparceners have right in the assets of the HUF so the Karta cannot dispossess any coparcener of his right. In case the coparcener demands partition of the assets of the HUF, the karta has to give his share to such coparcener from the assets if the HUF. Though as per the Hindu Law partial partition of the HUF either as regards the assets or as regards members is fully valid but the income tax laws do not recognise such partial partition of the assets of the HUF. The income tax laws require that partition of HUF should be full as regards all the assets as well as in respect of all the members. So, unless there is full partition of the HUF, the income arising in respect of the partly distributed assets shall be continued to be taxed in the hands of the HUF.
Accordingly, succession through HUF structure has many flaws. It doesn’t give equal rights to female in the family in every situation. Additionally, Will is mandatory for effective transmission of assets in the name of members of HUF, as otherwise it is highly complicated and prone to litigations, taxes and lengthy procedures, just like as if the Karta of the family died Intestate. Also, considering concept of joint family in India is fading, HUF structure may not be effective tool for succession planning.
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