DYK: Women can be the karta of an HUF

Here is a look at what an HUF is, who is a karta and who are the coparceners of an HUF

In a landmark judgment on 22 December 2015, Justice Najmi Waziri of the Delhi High Court said that the eldest female member of a Hindu Undivided Family (HUF) can become its karta. The judgment brought clarity on the otherwise general belief that only a male member can become the karta of an HUF.

This judgment was concluded taking note of section 6 of the Hindu Succession Act, 1956 (which was amended in 2005), giving equal rights to a daughter in her father’s property. In his decision, Waziri stated, “Now that this disqualification has been removed by the 2005 Amendment, there is no reason why Hindu women should be denied the position of a Karta."

Further, he stated, “If a male member of an HUF, by virtue of his being the first born eldest, can be a Karta, so can a female member. The Court finds no restriction in the law preventing the eldest female coparcener of an HUF, from being its Karta."

Here is a look at what an HUF is, who is a karta and who are the coparceners of an HUF.

What is HUF?

An HUF is a family which consists of all persons lineally descended from a common ancestor, including their wives and daughters. Under section 2(31) of the Income-tax Act, 1961, an HUF is considered a ‘person’, and therefore, as a separate entity for the purpose of tax assessment.

Often families that own ancestral properties and businesses obtain a separate Permanent Account Number (PAN) in the name of the HUF. This is done so that the incomes earned from the assets and businesses owned by the HUF are assessed separately, which will also bring down the family’s tax liability.

Let’s take an example. Say, there is a family made up of a husband, wife and their two minor children, and they own an ancestral property from which they earn an annual rent of 5 lakh. If a separate PAN has not been acquired for the HUF, this rental income will get clubbed with either the income of the husband or the wife, and will be taxed according to the slab rate applicable to them. If they fall under the highest tax bracket of 30.9%, they will have to pay a tax of 1,54,500 on the rental income. However, in the case of an HUF, the tax liability will 25,750 (no tax till 2.5 lakh, and 10.3% on the remaining 2.5 lakh). An HUF is taxed on the same slab rates that are applicable to an individual income tax assessee. However, do keep in mind that once the family income is assessed as an HUF, it will continue to be assessed as such in subsequent assessment years as well till partition is claimed by the coparceners.

Even Jain, Buddhist and Sikh families can have HUFs.

Karta and coparceners of HUF

An HUF consists of the karta, who is typically the eldest person or head of the family, while the other family members are considered as coparceners. The karta manages the day-to-day affairs of the HUF. Children are coparceners of their father’s HUF. Once a daughter gets married, she becomes a member of her husband’s HUF, while continuing to be a coparcener of her father’s HUF.