Residential Status of Hindu Undivided Family (HUF) [Section 6(2)]

1. Basic Rule for HUF Residency

A HUF is Resident in India if:

“Control and management of its affairs is wholly or partly situated in India during the relevant financial year.”

• Wholly in India→ Entirely Resident
• Partly in India→ Still Resident
• Wholly outside India→ Non-Resident (NR)

2. Key Differences from Individual’s Residency

3. Determining Control & Management

• Where key decisionsare made (e.g., investments, business operations)
• Location of Karta(primary decision-maker)
• Where accounts are maintained
• Place of major assets

Example:

• HUF’s Karta lives in Dubai but major properties and bank accounts are in Mumbai → Resident HUF(partial control in India)

4. Special Scenarios

1. Karta Becomes NRI
   • If entire control shifts abroad → HUF becomes NR
   • If some control remains in India → Stays Resident
2. Partitioned HUF
   • Treated as separate units for residency
3. HUF with NR Members
   • Residency depends on control location, not members’ status

5. Tax Implications

Practical Example:

• Resident HUF with:
  • ₹8L rental income from Delhi property
  • ₹5L dividends from US stocks
• Taxable Income:₹13L (global income)
• If NR HUF → Only ₹8L taxable

6. Compliance Requirements

• Resident HUFs must:
  • File ITR if income > basic exemption limit
  • Disclose foreign assets (if applicable)
  • Comply with TDS/TCS provisions
• NR HUFs:
  • File ITR only for India-sourced income
  • Higher TDS rates may apply