Huf Income Tax Filing

The expression Hindu Undivided Family (HUF) means a group of individuals consisting of persons lineally descended from a common ancestor. HUFs include the wives and unmarried daughters of the eldest male member of the family, who are living together under the same household. As per Hindu law, a daughter, on her marriage, ceases to be a member of her father’s HUF and becomes a member of her husband’s HUF. However, with effect from 1-9-2005, a daughter, married or unmarried, is a co-parcener like a son. In this article, the taxability of income earned by HUFs is discussed. The procedure for Huf Income Tax Filing is also mentioned.

HUF Vs. Hindu Coparcenary

A Hindu Coparcenary is a much narrower body within a Hindu Undivided Family. Generally speaking, it is a body of individuals who acquires interest by birth in the joint family property. The coparceners of a family are the son, grandson, and great-grandsons of the holder of the joint property. Since 1-9-2005, daughters married or unmarried are now included within the definition of a HUF. The coparcenary, therefore, consists of a common male ancestor and his lineal descendants in the male line within 4 degrees, running from and including the last common ancestor. No coparcenary can commence without a common male ancestor though, after his death, it may consist of collaterals such as brothers, uncles, nephews and so on. The essence of coparcenary is a community of interest and unity of possession.

Taxability of HUF

In order to compute the income of a HUF, the taxpayer should ascertain its income under the different heads of income (ignoring incomes exempted under Sections 10 to 13A of the Act). The following points should be kept in mind while computing income of HUF:

If funds of a HUF are invested in a company or a firm, the fees or remuneration received by the member as a director or a partner in the company or firm may be treated as income of the family. The inclusion should be made exclusively if the fees or remuneration is earned essentially as a result of the investment of funds.
However, if fees or remuneration is earned for services rendered by the member in his personal capacity, it will be treated as the personal income of the member.
If any remuneration is paid by the HUF to the Karta or any other member for services rendered by him, remuneration is deductible from the income of HUF if such payment is genuine and not excessive and paid under a valid and bona fide agreement.
ITR-2 is the form that should be used by HUFs which file a return under the Income Tax Act.

IT Return Filing

Applicability

Every HUF has to file the return of income if the total income (including income of any other person in respect of which the HUF is assessable) without giving effect to the provisions of section 10A, 10B and 10BA or Chapter VIA exceeds the maximum amount which is not chargeable to tax or in other words exceeds the exemption limit.

Documents Required

As per the most recent guidelines for furnishing the Return of Income, ITR return forms are attachment-less forms. Hence, the taxpayer is not required to attach any document (including proof of investment, TDS certificates, and so on) along with the return of income (whether filed manually or filed electronically) for Huf Income Tax Filing. However, these documents should be retained by the taxpayer and should be produced before the tax authorities when demanded in situations like assessment, inquiry, and so on. The relevant guidelines from the Income Tax department are given below for reference:

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Frequently Asked Questions

Common questions about HUF Income Tax Filing.

A Hindu Undivided Family (HUF) is a group of individuals consisting of persons lineally descended from a common ancestor, including the wives and unmarried daughters of the eldest male member living together under the same household. It is considered a separate tax entity for income tax purposes in India.

A Hindu Coparcenary is a narrower body within a Hindu Undivided Family. It consists of the common male ancestor and his lineal male descendants within four degrees, including sons, grandsons, and great-grandsons. Since September 1, 2005, daughters (married or unmarried) are also included as members of a Hindu Coparcenary.

While computing the income of an HUF, all income under different heads (except those exempted under Sections 10 to 13A of the Income Tax Act) should be considered. This includes fees or remuneration earned by a member as a result of the investment of HUF funds in a company or firm.

Yes, remuneration paid by an HUF to the Karta (head of the family) or any other member for services rendered can be deducted from the HUF's income, provided that the payment is genuine, not excessive, and made under a valid and bona fide agreement.

HUFs are required to file their income tax returns using ITR-2, which is the form prescribed for filing returns under the Income Tax Act.

Every HUF must file a return of income if its total income (including income of any other person in respect of which the HUF is assessable), without considering certain deductions and exemptions, exceeds the maximum amount that is not chargeable to tax (i.e., the exemption limit).

No, as per the most recent guidelines from the Income Tax department, ITR forms are attachment-less. HUFs are not required to attach any supporting documents (such as proof of investment, TDS certificates, etc.) along with the return of income, whether filed manually or electronically. However, these documents should be retained and produced when demanded by the tax authorities.

From September 1, 2005, the definition of a Hindu Undivided Family was amended to include daughters (married or unmarried) as co-parceners, along with sons. This means that daughters also acquire an interest by birth in the joint family property, similar to sons.

Income earned by an HUF, such as fees or remuneration earned by a member as a result of the investment of HUF funds, is considered income of the HUF. However, income earned by a member in their personal capacity, not related to the HUF's investments, is treated as their personal income and taxed separately.

Yes, while computing the total income of an HUF, deductions and exemptions available under various sections of the Income Tax Act, such as Sections 10A, 10B, 10BA, and Chapter VIA, can be claimed, subject to fulfilling the prescribed conditions.