Income tax implications in case of partition of an HUF

Question: I’ve an HUF consisting of me, my spouse, an single son. My daughter bought married in 2010. I want to distribute a number of the belongings amongst the three members. Can I do it and what are the tax implications for belongings acquired within the palms of the members?

Answer: After modification of the Hindu Succession Act in 2005, a daughter whether or not married or single is handled on par with a son and due to this fact she can be a coparcener. Since a daughter is a coparcener, she is due to this fact entitled to equal share within the HUF property as and when it’s partitioned/distributed. So on partition of an HUF daughter and sons will get equal share within the belongings of the HUF. The mom and the daddy will even get an equal share that of the son and daughter. Let me level out that she will surrender her share in favour of different members.

Before modification of Section 171 of the Income Tax Act in 1978, an HUF could possibly be partitioned in partly with respect to a few of its members and likewise with respect to a few of its belongings. However, after this modification, a partial partition just isn’t recognised by the revenue tax legal guidelines. So the partition of an HUF is legitimate provided that it’s a full partition with respect to all of the belongings and with respect to all of the members. In order to make the partition totally efficient for the aim of revenue tax, you must receive an order out of your assessing officer recognising such whole partition for which you must make an utility to the assessing officer. The belongings acquired by the members on the complete partition of the HUF are totally tax-free within the palms of the members as the identical just isn’t handled as switch below the tax legal guidelines.

Since you might be planning to distribute solely a few of your belongings, this won’t be recognised below the tax legal guidelines and revenue from the distributed belongings shall proceed to be taxed within the palms of the HUF regardless that such revenue may very well be acquired by the member involved.

Balwant Jain is a tax and funding professional and will be reached on jainbalwant@gmail and @jainbalwant on Twitter

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