Computation Of Total Income Of HUF

A Hindu Undivided Family (HUF) could be a joint family which can or might not be following the faith of Hinduism. Contrary to the apparent impression which may be gleaned from the term HUF, even families which don’t seem to be practising Hinduism are often categorised as HUFs.

The term Hindu Undivided Family should be construed consistent with the Hindu Succession Act, 1956. As per the Act, a HUF may be a joint family that consists of all individuals lineally descended from a typical ancestor, whether or not they’re following Hinduism as their religion. The relation of a HUF doesn’t arise from a contract but from status. HUFs are treated as separate entities for assessment under the tax Act. during this article, we glance at the procedure for the Computation of the Total Income of HUF.

Computation Of Total Income Of HUF

HUF Means Under The Hindu Succession Act, 1956

According to the Act, the subsequent sorts of persons are governed by the concept of a HUF:

Hindus, Jains, Sikhs, Virashaivas, Lingayats, Brahmo Samajists, Prarthana Samajists, and Arya Samajists

A person who is conveniently converted or reconverted into another of the above religions

Any other one that isn’t a Musli, Parsi, Jew or Christian

An individual whose one parent or both parents comprise one amongst the above categories

An individual who was referred to by a family or community which falls under one of the above categories

Hence, we see that although the common understanding implies that HUFs are Hindu families, the definition given by the Act is far broader in nature.

Specifics of Computation

Below mentioned are the particulars of computing the whole income of a Hindu Undivided Family.

Income from the transfer of a self-acquired asset, without adequate consideration or conversion of the identical into a joint family property, shall not be treated because of the income of the HUF. It shall still be taxed under the transferor who may be a member of the HUF.

The income from an impartible estate is taxable under the holder of the estate and not within the hands of the HUF.

Any remuneration or fee received by a member of the HUF as a director or a partner of an organization or firm as a result of an investment made within the concerned place of business from the funds of the HUF shall be treated as income of the identical. However, if a member earns such an amount as a director or a partner for the services rendered purely in a very personal capacity because of their own aptitude to the business of the priority, it shall be treated because of the income of the individual and not the HUF. Judicial pronouncements possess stated that the income and commissions obtained by the Karta of HUF on account of his qualifications and exertions and not on the report of investments of the family funds within the company can’t be treated as an income of HUF.

If the remuneration is paid to a Karta of a HUF satisfies the subsequent conditions, the remuneration paid entirely and exclusively for the business past the family, shall be allowable as an expenditure while computing the income of the HUF and therefore the remuneration shall be taxable within the hands of the Karta as salary income:

(a) under a legitimate agreement that has been registered by paying the relevant amount of stamp duty,

(b) is within the interest of, and expedient for, the business of the family, and

(c) the payment is genuine and not in more than the quantity allowable under an analogous arms’ length transaction conducted within the open market.

If the daddy doesn’t have a son or a brother who are coparceners, the income arising from ancestral propertied is taxable.

Computation Of Total Income Of HUF

A Karta, in his private capacity and representing a HUF, are two distinct entities. Hence, HUFs can sublet a contract to a Karta in his own capacity. Income earned by a Karta in his individual capacity from a registered commercial agreement can not be assessed as a part of the taxable income of the particular Hindu Undivided Family.

Computing Income of HUF

The following steps are followed to calculate the overall tax of a Hindu Undivided Family.

Serial Number Section Nature of Deductions

1. 80C Deduction concerning life assurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shared or debentures, etc.

2. 80D Payment of medical insurance premia

3. 80DD Medical treatment of disabled dependents and deposits made for the upkeep of handicapped dependents.

4. 80DDB Deduction in regard of medical treatment, etc.

5. 80G Donations to specific funds/ charitable institutions etc.

6. 80GGA Specific donations made for research or rural development.

7. 80GGC A contribution is given by anyone to political parties.

8. 80-IA Gains and profits of latest industrial undertakings or enterprises engaged in infrastructure development, etc.

9. 80-IB Profits and benefits of latest industrial ventures apart from infrastructure development undertakings.

10. 80-IBA Deduction in respect of profits and gains from housing projects provided the project fulfils certain conditions

11. 80-IC Deductions in respect of specific tasks of enterprises in certain special category states.

12. 80-ID Deduction concerning profits and gains from the business of hotels and convention centres in an exceedingly specified area.

13 80-IE Special provision in respect of certain undertakings within the North-Eastern States.

14. 80JJA Deduction relating profits and gains from the company of collecting processing of bio-degradable waste.

15. 80JJAA Deduction in relevance to the use of the latest workmen

16. 80TTA Deduction in respect of interest on deposits in saving account.