1. Basic Concept of HUF
An HUF (Hindu Undivided Family) is a separate legal entity for tax purposes, consisting of:
- Karta(head of family, usually the eldest male member)
- Coparceners(members with birthright in ancestral property)
- Other members(wives, unmarried daughters)
Key Features:
✔ Separate PAN required
✔ Can earn income from business, property, investments
✔ Taxed separately from members’ individual incomes
2. HUF Income Tax Slabs (AY 2025-26)
HUFs follow the same tax slabs as individuals under both old and new regimes:
Old Tax Regime Slabs
| INCOME RANGE (₹) | TAX RATE |
| Up to 2,50,000 | Nil |
| 2,50,001-5,00,000 | 5% |
| 5,00,001-10,00,000 | 20% |
| Above 10,00,000 | 30% |
New Tax Regime Slabs (Default)
| INCOME RANGE (₹) | TAX RATE |
| Up to 3,00,000 | Nil |
| 3,00,001-7,00,000 | 5% |
| 7,00,001-10,00,000 | 10% |
| 10,00,001-12,00,000 | 15% |
| 12,00,001-15,00,000 | 20% |
| Above 15,00,000 | 30% |
Rebate (Section 87A): Not available for HUFs
3. Computation of HUF’s Taxable Income
Step 1: Calculate Income Under 5 Heads
- Income from Business/Profession
- Income from House Property
- Capital Gains
- Income from Other Sources(interest, dividends, etc.)
- Income from Salary(if HUF employs someone)
Step 2: Claim Deductions (Old Regime Only)
✔ Section 80C (₹1.5 lakh): HUF investments (PPF, NSC, ELSS)
✔ Section 80D (₹25,000): Health insurance for members
✔ Section 80G: Donations to charities
✔ Home Loan Interest (Section 24): If property is in HUF’s name
Step 3: Determine Final Taxable Income
Gross Total Income
(-) Deductions (if old regime)
= Taxable Income
4. Special HUF Tax Provisions
(A) Partition of HUF
- Total Partition: HUF ceases to exist → assets divided among members
- Partial Partition: Only some assets divided (HUF continues)
- Tax Impact: Requires formal deed & ITD approval to avoid clubbing
(B) Clubbing of Income (Section 64)
- If HUF transfers assets to members without adequate consideration, income from such assets may be clubbed in transferor’s hands
(C) Gifts to HUF
- From Members: Tax-free
- From Non-Members: Taxable if aggregate gifts exceed ₹50,000/year
(D) Salary to Karta/Members
- Allowed as deductionif services are genuine
- Taxablein recipient’s hands
5. HUF Compliance Requirements
| FORM | PURPOSE | DUE DATE |
| ITR-2 | HUF income from capital gains/property | July 31 |
| ITR-3 | HUF business income | July 31 |
| Form 10BA | For audit if turnover > ₹10 lakh (business) | Sept 30 |
| Form 29B | CA report for AMT (if applicable) | With ITR |
Tax Audit Required if:
- Business turnover > ₹10 lakh
- Profession receipts > ₹50 lakh
6. Practical Example: HUF Tax Calculation
Scenario:
- HUF earns ₹15 lakh (₹8L business profit + ₹5L property income + ₹2L FD interest)
- Invests ₹1.5L in PPF (80C)
Old Regime Calculation:
Gross Income: 15,00,000
(-) 80C: 1,50,000
Taxable Income: 13,50,000
Tax: 2,12,500 + 4% cess = ₹2,21,000
New Regime Calculation:
Taxable Income: 15,00,000
Tax: 2,62,500 + 4% cess = ₹2,73,000
Verdict: Old regime saves ₹52,000 in this case
7. Recent Changes (Budget 2025)
- New regime made default(must opt-out for old regime)
- Higher standard deduction(₹75,000) for HUFs with business income
- Stricter AMT provisionsfor HUFs claiming deductions
Key Takeaways
- HUF is taxed separatelyfrom members
- Can save tax via deductionsin old regime
- Must comply with partition/clubbing rules
- New regime beneficialonly if claiming minimal deductions
1. Partition of Hindu Undivided Family (HUF) – Tax & Legal Implications
1. Types of Partition
(A) Total Partition
- Complete dissolutionof HUF
- All assets divided among members → HUF ceases to exist
- Requires registered partition deed
(B) Partial Partition
- Only specific assetsdivided (e.g., one property)
- HUF continues to existwith remaining assets
- Must be recorded in HUF books
2. Legal Process for Partition
Step 1: Family Agreement
- All coparceners (members with birthright)must consent
- Unanimous decision required (unless court-ordered)
Step 2: Partition Deed
- Mandatory for total partition(recommended for partial)
- Must include:
✔ List of all HUF assets & liabilities
✔ Allocation details to each member
✔ Signatures of all adult members
Step 3: Intimation to IT Department
- File Form 49B(for PAN cancellation if total partition)
- Submit deed copywith ITR for that year
3. Tax Implications
(A) Capital Gains Tax
- No taxon asset distribution (not considered ‘transfer’)
- Exception: If asset sold within 2 years of partition, original HUF’s holding period considered
(B) Clubbing of Income (Section 64)
- If partition is sham/fraudulent, income may be clubbed back with HUF
(C) Tax on Future Income
- After partition:
- Total partition→ Income taxable in individual hands
- Partial partition→ HUF continues to pay tax on retained assets
4. Key Judicial Principles
- Lakshmi Narayan vs CIT: Physical division not mandatory if intention clear
- Kalloomal Tapeshwari Prasad vs CIT: Unequal division allowed if agreed
- ITO vs N.K. Sarada Thampatty: Partial partition must be genuine
5. Compliance Checklist
| DOCUMENT | PURPOSE | FILING DEADLINE |
| Partition Deed | Legal proof | Before ITR filing |
| Form 49B | PAN cancellation (if total partition) | Within 1 year |
| ITR (with deed copy) | Inform ITD | July 31 (unless audit) |
| Updated Will | Avoid disputes | After partition |
Penalties:
- Invalid partition→ HUF status continues + penalties
- Non-disclosure→ Reassessment risk (up to 10 years)
6. Practical Example
Scenario:
- HUF with ₹2 crore assets (1 property + ₹50L FD) undergoes partial partition
- Property divided among 4 members (₹50L share each)
- FD remains with HUF
Tax Impact:
- No capital gainson property distribution
- FD intereststill taxable to HUF
- Each member inherits cost basisof ₹50L for future sales
2. Assessment after Partition of HUF [Section 171]
1. Overview
- Purpose: Governs tax assessment when a Hindu Undivided Family (HUF)undergoes total or partial partition.
- Key Objective: Ensures proper tax treatment of divided assets and prevents tax evasion through sham partitions.
2. Conditions for Recognizing Partition
The Income Tax Department will recognize a partition only if:
- Total Partition: All HUF properties are divided among members, and the HUF ceases to exist.
- Partial Partition: Only some assets are divided, but the HUF continues with remaining properties.
- Proof Required: A registered partition deedor court decree must substantiate the claim.
3. Procedure for Tax Assessment
(A) Intimation to Assessing Officer (AO)
- The HUF or its membersmust notify the AO about the partition.
- Submission of Form 49B(for PAN cancellation in case of total partition).
(B) Inquiry by AO
- The AO conducts an inquiryto verify:
- Whether the partition is genuine.
- Whether it was effected before the end of the financial year.
- Whether all tax liabilities are settled.
(C) Assessment Order
- If satisfied, the AO records the partitionand assesses:
- HUF (if partial partition)→ Continues to be taxed on retained assets.
- Members (if total partition)→ Individual tax liability begins.
4. Tax Implications
(A) No Capital Gains on Distribution
- Asset division is not a “transfer”→ No capital gains tax.
- Exception: If a member sells the asset within 2 years, the HUF’s holding periodis considered.
(B) Clubbing of Income (Section 64)
- If the partition is fraudulent or incomplete, the AO may club income back with the HUF.
(C) Liability for Past Taxes
- The HUF remains liable for pending taxesup to the partition date.
- Members become jointly liableif the HUF cannot pay.
5. Judicial Precedents
- Lakshmi Narayan vs CIT: Physical division not mandatory if intention is clear.
- Kalloomal Tapeshwari Prasad vs CIT: Unequal division allowed if agreed by all.
- ITO vs N.K. Sarada Thampatty: Partial partitions must be genuine and properly documented.
6. Compliance Checklist
| REQUIREMENT | DETAILS |
| Partition Deed | Must be registered & signed by all coparceners |
| Form 49B | For PAN cancellation (total partition) |
| ITR Filing | Submit deed copy with ITR |
| Tax Clearance | Ensure no pending HUF dues |
7. Practical Example
Scenario:
- HUF with ₹1.5 crore assets undergoes total partition(3 members, ₹50L each).
- Tax Impact:
- No capital gains on distribution.
- Each member inherits cost basis of ₹50Lfor future sales.
- HUF’s PAN is cancelledpost-partition.
8. Key Takeaways
✔ Legal documentation is crucial (deed/court order).
✔ Notify IT Dept. to avoid reassessment.
✔ No capital gains on asset division.
✔ Beware of clubbing provisions if partition is disputed.
