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DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

NAME OF THE STUDENT-Anamika Singh.

TOPIC OF THE PEOJECT-Taxation of Hindu Undivided family-A tool to misuse the tax
structure -A critical study & Case Analysis.

SEMESTER-VIIth

ROLL NO.-2013021

SUBJECT-Tax Law

RESEARCH METHODOLOGY-The research methodology is doctrinal.

RESEARCH SUBTOPICS-

1. General Introduction
2. HUF: A separate legal entity under Indian tax law
3. Tax savings through HUF
4. Non-resident HUF
5. Resident but not-ordinarily resident HUF
6. Separate Tax Status & Progressive Tax Rates
7. Deductions from gross total income
8. Simultaneous existence of multiple HUF
9. HUF and Hindu Coparcenary
10. Income of HUF and Karta
11. Assets of HUF
12. Tax benefits to HUF
13. Effective tax planning through HUF

LITERATURE REVIEW:-
1. THE LEGAL AND INSTITUTIONAL FRAMEWORK OF TAX
ADMINISTRATION IN DEVELOPING COUNTRIES, Alan D. Liker, Associate
Professor of Law, University of New Mexico, Citation: 14 UCLA L. Rev. 240 1966-
1967
2. TAXATION OF HOUSEHOLDS: A COMPARATIVE STUDY, JOEL S. NEWMAN,
Professor of Law, Wake Forest University School of Law, Citation: 55 St. Louis U.
L.J. 129 2010-2011

HYPOTHEISIS

As regards bank account of a HUF, it should be either in the name of the HUF or in the name
of the Karta of the HUF with a specific declaration that the account is that of the HUF. The
members should also be careful and not deposit their personal funds in the HUF bank account
as only funds belonging to the HUF can be kept in it. Normally, only the Karta is authorized
to sign all cheques and operate the account on behalf of the HUF. However, he may also
authorize any other member of the HUF to operate the same on behalf of the HUF. A person,
who desires to bequeath some property to his son or sons, may also provide a specific
instruction in his will to transfer the assets on his demise to the HUF or his son or sons. This
will result in effective tax savings in the hands of the beneficiary sons.

ABSTRACT

Amid all the wide diversity there is a philosophy of underlying unity in India. Yet, at the dawn
of freedom, the founding fathers of our nation chose to continue separate personal laws for
its citizens based on their religious identities. This was despite the fact that the new
constitution embraced secularism. While Hindus continue to be governed by the Hindu laws,
Muslims follow the Mohammedan laws and so on. Personal laws are set of laws relating to
marriage, divorce, guardianship, adoption, maintenance, succession to estate and such other
family related matters.
This paper attempts to understand the unique tax saving opportunity available for Hindus in
the form of Hindu Undivided Family (HUF) concept. Firstly, let us analyze how HUF is a tax
saving tool. Next we will understand certain anti-abuse provisions relating to HUF in the tax
laws due to which certain aspects of HUF vary significantly from the principles under civil
laws. Finally we will identify the actual avenues of tax saving available currently given that
most of the loop holes in the tax laws have been plugged. All references, in this paper, to tax
laws are to be read as Income Tax Act, 1961 and the rules thereof. While under the civil laws,
the term Joint Hindu Family (JHF) is frequently used, the tax laws use the term Hindu
Undivided Family (HUF). In this paper, HUF and JHF are interchangeably used.

HUF as a tax saving tool, under the income tax laws, chiefly stems from the following
advantages it enjoys which are discussed in detail:

1. Separate tax status coupled with progressive tax rates


2. Deductions from gross total income
3. Simultaneous existence of multiple HUFs