Dissolution of HUF and distribution of its assets
2 min read . Updated: 24 Jan 2022, 06:03 PM IST
Premium- HUF dissolution: The law to succession to HUF property has also been amended in 2005
In my HUF account I have various assets including listed shares of Rs.25 lakhs market value, 2 lakhs in bank account and 10 lakhs as advances given to a firm. I have two married sons and one married daughter. After My death how the shares get transferred to my sons’ account, and what about the other assets? Or will it be better if I dissolve my HUF now itself and distribute all the assets among my sons.
Answer: HUF is a distinct legal entity and can own property in its name. Thus the property in HUF does not belong to you absolutely but belongs to all the members of the HUF collectively. Prior to change in Hindu Succession Act in 2005 the daughters were not treated as coparcener. However, with the amendment of Section 6 of Hindu Succession Act, a daughter now has equal rights as that of a son in the HUF property. So in case you want to distribute the assets of your HUF, your married daughter will have equal right as that of your sons and she is entitled to equal shares in the HUF property if it is partitioned. The share which all coparceners get on partition of the HUF should be equal, however with the consent of all the coparcener the distribution can be unequal or even some of the coparceners can forgo their claim in the HUF property.
The law to succession to HUF property has also been amended in 2005. Earlier the HUF property would devolve by survivorship but now the share of individual coparcener will pass on to the legal heirs of the deceased after his death. After your death, your share in the HUF property will go to your legal heirs as per order prescribed in Schedule to of the Hindu Succession Act. You can decide to bequeath your share in the HUF property by a will but cannot gift away your shares in the property while you are alive. The remaining property shall continue to remain in HUF. Your HUF can continue even after your death and your elder son will become Karta of the HUF.
So under different scenario as to how the HUF property would devolve on the death of a coparcener, you can decide which course of actions suits you. If you want to partition the property of the HUF, you will have to make a full partition and get an order from the income tax officer for such partition. Partial partition is not recognized under the income tax laws. The assets received on partition is not treated as income and is exempt under Section 10 of the Act.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.
