Meaning, Schools of Hindu Law, Treatment of fee or salary earned by coparcener as director or partner, Remuneration paid by HUF to a member for conducting its business, Incomes not treated as HUF incomes, Partition of HUF, Deductions under section 80C to 80U applicable to HUF, Computation of Total income of HUF and Tax Liability.
3. Introduction
Under Income tax Act, an HUF is treated as a separate entity. It can own property, sell property ,
earn incomes and enter into contract with others, through its Karta. Members including daughter of
an HUF are also called Coparceners.
As per Hindu Law , an HUF is a family which consists of all persons lineally descended from a
Common ancestors and include their wives and unmarried daughters.
A HUF also called Joint Hindu Family is a creature of law and not of a Contract. After marriage as
soon as child born . HUF comes into existence. HUF consists of father, sons and daughter. Wife is not
a coparcener of HUF but she is the member of HUF. Such married female has a coparcenary interest
in her father’s property.
4. Schools of Hindu Law : The concept of Hindu coparcenary is governed by
two schools of Hindu Law 1. Dayabhaga School of Hindu Law 2. Mitakshara
school of Hindu Law
1. Dayabhaga School of Hindu Law: this school of Hindu law prevails in West Bengal and
Assam. Under this school, a son does not acquire any interest in the ancestral property by
birth. However , such interest Is acquired by son only after the death of his father. The
father enjoys an absolute right to dispose of the property of the family according to his
desire.
2. Mitakshara School of Hindu Law: Mitakshara school of Hindu Law applies to whole of
India except west Bengal and Assam . According to this school pf law a son or daughter
becomes a coparcener of their father’s HUF as soon as he or she born.
3. Jain, Sikh and Buddhist families, etc. also treated as Hindu Family for IT purpose . unless
any claims.
5. Conditions to be satisfied by a HUF to be assessed as a HUF
1 . There should be a Joint family property or ancestral property .
Ancestral property may be defined as a property which a man inherits from any of his three
immediate male ancestors. Viz., father , grand father and great grand father. Property inherited in any
other relations is not treated as ancestral property.
2. Coparcenership : the member of the family should have coparcenary interest in the JHF property.
Once a JHF income assessed as HUF, it continues to be assessed as such in subsequent assessment years
till the partition of the family.
6. Important points to kept in Mind
1. Personal earnings of a members of the HUF are assessable in his individual capacity and not
included in the Total income of the HUF.
2. Income from an impartial estate is taxable in the hands of the holder of the estate for the time
being and not in the hands of the HUF.
3. If a member of an HUF carries on his personal business the income from such business shall be
assessed as individual income not a HUF income.
4. As per sec64(2), where the member of HUF after 31.12.1969
a. converts his self acquired property as the property of the HUF or
b. Transfers the self acquired property to family without adequate consideration income generated
on it shall be considered as individual income.
7. 5. If any remuneration paid to Karta of HUF as per the valid agreement it shall be considered as
allowable expenditure while computing family income.
6. Any remuneration or salary received by the member of HUF on his personal capacity it shall be
considered as individual income not as a family income.
7. Any sum received by a member of an HUF, out of the income of the family or out of income of
the impartial estate belongs to the family , is exempted in the hands of the member u/s10(2).
* impartial estate means the property which cannot be divided among the members of the family.
* complete partition : where all the properties of the family are divided amongst all the members
of the family, and the family ceases to exist as an Undivided family, it is known as total or
complete partition.
* Partial partition : if some of the members of the HUF go out of the family, others remaining joint
or some of the properties are divided and balance remain joint , it is known as partial partition.
8. Computation of Total Income and Tax payable by the HUF
Step 1: Compute the income under four heads of income
*income from House Property
* Income from business or profession.
* Capital Gains.
* income from other sources.
Step 2: Aggregate the income computed under step1. and made carry
forward and set off adjustments. And compute GTI
Step3: From GTI allow deduction under section80C to 80U as applicable to
HUF.
Step 4: compute the tax on such income as per the prescribed rate.
9. Rates of tax for the AY 20-21
Cess will be charged at the rate of 4% on total tax
Particulars of Income Rate of Tax
Winnings from lotteries , race ,
crossword puzzles etc.,
sec115BB
30%
STCG u/s111A 15%
LTCG112 20
The balance of the total income
excluding the above incomes:
a. On the first 2.5lakh
b. On the next 2.5lakh
c. On the next 5 lakh
d. On the remaining
e. Surcharges
if Total income exceeds
50lakh but not exceed 1crore
If exceeds 1 crore
NIL
5%
20%
30%
10%
15%
10. Deduction from the GTI
● sec80C maximum a 1.5lakh.
● Sec80 D health insurance premium
● sec80DD medical treatment of a dependent who is a person with disability .
Amount 75K subject to certificate .
● sec80DDB deduction in respect of medical treatment of specified disease .
● Sec 80 G : donations to certain funds , charitable institution etc.
● Sec 80 GGA : donations for scientific research or rural development .
● sec80GGC: contribution given by any person to political party .
● Sec 80IA, IB,IBA,ID,IE,JJA applicable to all assesses
11. 1.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the
taxable income for the AY20-21 .
Profit from Business (after charging 120000 salary to Karta) 400000
Salary received by a coparcener from a company 260000
Directors fee received by Karta ( his personal capacity) 10000
Rent received from the house of letout 50000
Municipal taxes paid on the let out house 5000
Professional income of a coparcener from legal profession 280000
Agricultural income of the family 10000
Donation by Karta to an approved local college 4000
Interest on SB Account 9000
Lottery income of the family (net) 24500
12. Computation of taxable income of HUF ₹ ₹
Income from House property
GAV(rent received)
Less: municipal tax paid
Annual value
Less: 30% of AV as Standard deduction u/s24
50000
5000
45000
13500 31500
Income from Business
Profit from business after salary to Karta 400000
Income from other sources
Interest on SB A/c
Winning from lottery gross up 24500X100/70
9000
35000 44000
GTI
Less : DEDUCTIONS u/s 80c to 80U
u/s80G 50%of donation to approved local
college 4000X50%
u/s 80TTA interest on SB account maximum10K
2000
9000
475500
11000
Taxable income 464500
Solution:
13. 2.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income for
the AY20-21 .
Profit from Business 290000
Salary received by a member of HUF 10000
Directors fee received by Karta 8000
Rent from let out property 20000
Municipal taxes paid on the let out house 1000
Annual municipal value of the Joint Family House 18000
Municipal tax paid on Joint family house 1000
Interest on loan for construction of Joint family House 20000
Interest 5000
Long term Capital gain from transfer of buildings 10000
Profit from an AOP(1/4th share) 10000
Dividend from company(gross) 10000
Donation to NDF 5000
Medical insurance premium on the health of the member of the family 6000
Premium paid on LIC 19000
14. Computation of taxable income of HUF ₹ ₹
Income from House property
House 1: let out
GAV (rent received)
Less : municipal value
Annual value
Less: 30%SD u/s 24
Income from House 1
House2 : self accupied
AV
Less: interest on loan taken for construction
Loss from SOP
20000
1000
19000
5700
Nil
20000
13300
-20000
Income from Business
Profit from business 290000
Income from capital gains
LTCG from sale of building 10000
Solution:
15. Income from other sources
Directors fees received by Karta
interest
8000
5000 13000
GTI 306300
Less: Deduction u/s 80C to 80U
LIP sec 80C
Medical insurance premium sec 80D
100% donation to NDF sec 80G
19000
6000
5000 30000
TOTAL INCOME 276300
16. 3.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income for
the AY20-21 .
Profit from business after charging 50000 salary to Karta for managing to business 1200000
Salary received by a member of the family 60000
Directors fees received by Karta from Z ltd. Where HUF holds 20% shares, but he
becomes director because of his qualification 40000
Rental income from HP after deduction of Municipal tax 2000 18000
Dividend from Indian company 15000
LTCG 40000
STCG 20000
Donation to a school which is an approved institution 150000
LIP paid on the life of a married member of HUF 10000
NSC VIII issue purchased on 15.03.21 30000
17. Solution :
Computation of Total income of the HUF for the AY 20-21
₹ ₹
INCOME FROM HP
AV of the let out property after municipal tax
Less: 30% SD u/s24
18000
5400 12600
Income from business
Profit from business after charging salary to Karta
1200000
Capital Gains
LTCG
STCG
40000
20000 60000
GTI 1272000
Less : Deduction u/s 80 c to 80U
LIP sec 80 c
50% donation 122260x50%
10000
61130 71130
TOTAL INCOME 1201470
18. 4.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income and
Tax liability for the AY20-21 .
LTCG 14800
STCG 15000
Profit from business 840000
Profit from a firm 44000
Rent from a let out property 36000
Municipal taxes paid on LOP 4000
Interest on securities (net) 18000
LIP on policy taken on the life of a member of the family 20000
Winning from lotteries (net) 35000
19. Solution :
Computation of Total income of the HUF for the AY 20-21
₹ ₹
INCOME FROM HP
GAV of the let out property(rent received)
Less: Municipal tax paid
AV
Less: 30% SD u/s24
36000
4000
32000
9600 22400
Income from business Profit from business 840000
Capital Gains
LTCG
STCG
14800
15000 29800
Income from other sources
Interest on securities Gross up 18000X100/90
Winning from lottery gross up 35000X100/70
20000
50000 70000
GTI 962200
Less : Deduction u/s 80 c to 80U
LIP sec 80C 20000 20000
TOTAL INCOME 942200
20. Computation of Tax liability of the firm for the AY 20-21
Tax on LTCG 14000X20%
Tax on lottery winnings 50000X30%
Tax on other incomes 877400(942200-64800)
On first 250000
On next 250000x5%
On balance 377400x20%
NIL
12500
75480
2960
15000
87980
Add: cess@4%
105940
4238
TOTAL TAX
Less : TDS on Interest on securities
TDS on lottery
2000
15000
110178
17000
Net tax
NET TAX rounded off u/s 288B
93178
93180
21. 5.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income and
Tax liability for the AY20-21 .
Profit from business of purchase and sell of shares 860000
Securities transaction tax paid on sahares 240000
STCG
LTCG
LTC loss
7500
9000
9500
Rent from HP 21000
Municipal tax on HP paid 3000
Interest received on Government securities 9000
Interest on loan taken for purchasing Government securities 6000
Interest on PO SB A/C 15000
Donation to Indira Gandhi memorial Trust 6000
Premium on life insurance policy of karta 3000
22. Solution : Computation of Total income of the HUF for the AY 20-21 ₹ ₹
INCOME FROM HP
GAV of the let out property(rent received)
Less: Municipal tax paid
AV
Less: 30% SD u/s24
21000
3000
18000
5400 12600
Income from business Profit from business
Less : security transaction tax paid
860000
240000 620000
Capital Gains
LTCG
Less: LTC loss to the extent of LTCG
STCG
9000
-9000
7500 7500
Income from other sources
Interest on Government securities
Less : interest on loan taken for purchasing Government securities
Interest on PO SB A/C ( 15000 -3500 exempt u/s 10(15))
9000
-6000
11500 14500
GTI 654600
Less : Deduction u/s 80 c to 80U
LIP sec 80C
50% donation to IGMT sec 80G 6000x50%
Interest on PO SB A/C sec 80TTA
3000
3000
10000 16000
TOTAL INCOME 638600
23. Computation of Tax liability of the firm for the AY 20-21
Total Incomes 638600
On first 250000
On next 250000x5%
On balance 138600x20%
NIL
12500
27720 40220
Add: cess@4%
40220
1609
TOTAL TAX 41829
NET TAX rounded off u/s 288B 41830
24. 6.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income and
Tax liability for the AY20-21 .
Rent received from house property P.M 6000
Municipal valuation 50000
Local tax 10%
Income form business 290000
STCG 15000
LTCG 30000
Dividend received from UTI 10000
Income from lottery (gross) 50000
25. Solution : Computation of Total income of the HUF for the AY 20-21 ₹ ₹
INCOME FROM HP
Expected Rent (municipal value)
Actual rent (rent received)
Which ever is more
Less: Municipal tax paid
AV
Less: 30% SD u/s24
50000
72000
72000
5000
67000
20100 46900
Income from business 290000
Capital Gains
LTCG
STCG
30000
15000 45000
Income from other sources
Lottery income (gross) 50000
GTI 431900
Less : Deduction u/s 80 c to 80 U NIL
TOTAL INCOME 431900
26. Computation of Tax liability of the firm for the AY 20-21
Total Incomes 431900
Tax on LTCG 30000x20%
Tax on lottery income 50000X30%
Tax on remaining (431900-80000)
On first 250000
On balance 101900@5%
6000
15000
NIL
5095
26095
Add: cess@4%
26095
1044
TOTAL TAX
TDS on lottery
27139
15000
NET TAX rounded off u/s 288B 12140
27. 7.From the following particulars furnished by the Karta of an HUF for the PY19-20. compute the taxable income and
Tax liability for the AY20-21 .
Interest on securities (gross) 500000
Rental income of a house 600000
Rental income of another house (purchased in1949 in the name of Karta out of funds of
the family )
350000
Income from family business 970000
Interest on FD in Axis Bank ltd 312000
Salary received by member of the family , from a company 600000
1/3 share from a firm in which Karta brother is a partner , representing the family 800000
28. Solution : Computation of Total income of the HUF for the AY 20-21 ₹ ₹
INCOME FROM HP
GAV of two houses( rent received)(600000+350000)
Less: Municipal tax paid
AV
Less: 30% SD u/s24
950000
NIL
950000
285000 665000
Income from business 970000
Capital Gains NIL
Income from other sources
Interest on securities
Interest on FD in Axis Bank Ltd
500000
312000
812000
GTI 2447000
Less : Deduction u/s 80 c to 80 U
u/s 80 C LIP paid on the life of Karta
u/s 80 D medical insurance premium on the medical insurance policy ( maximum
30000)
14000
30000 44000
TOTAL INCOME 2403000
29. Computation of Tax liability of the firm for the AY 20-21
Total Incomes 2403000
Tax on remaining
On first 250000
On next 250000 @5%
On next 500000@20%
On balance 1403000@30%
Nil
12500
100000
420900
533400
Add: cess@4%
533400
21336
TOTAL TAX 554736
NET TAX rounded off u/s 288B 554736
30. “You can’t tax business. Business doesn’t pay
taxes. It collects taxes ”
- From Ronald Reagan
31. 1. H.C. Mehrotra and Goyal, Direct Taxes, Sahithya
Bhavan Publication, Agra.
2.Vinod Singhania, Direct Taxes, Taxxman Publication
PrivateLtd, NewDelhi.
3. Gaur and Narang, Law and Practice of Income Tax,
Kalyani Publications, Ludhiana.
4. Bhagawathi Prasad, Direct Taxes.
5. R.G. Saha and N. Usha Devi, Income Tax (Direct Tax),
HPH.
6.Dr. C. Basavanthappa , Business Taxation ,BKP.
