HUF CREATION DEEDS DECLARATION
I, ......................................... s/0 ..........................R/o ............................... aged 36 year Adult do hereby declare-
That I am Karta of ............HUF That I received on behalf of the H U F gift of Rs. 10,000/- ten thousand by way of CASH from my Father Sh. Yogender Pal Gupta on dt. 01-01-2000 this formed the corpus of the HUF.
That the HUF at present is consisting of the followings members-
I) Shri ...........................................
II) Smt. ...........................................
III) Sh. . ...........................................
III) Kumari . ...........................................
That the above statements are true to the best of my knowledge & belief. Declare this on _________________
WITNESS: Signature
1. _______________________________________
2. _______________________________________
FORMAT- II
DECLARATION OF GIFT MADE BY ________________________
TO THE HINDU UNDIVIDED FAMILY OF ___________________
I, _____________________________, residing at _______________________
____________________________________________________________, do hereby
declare and affirm as under:
1. That out of natural love and affection borne by me towards the Hindu Undivided
Family of ______________________________, I have made a gift of Rs.______
(Rupees _________________ only) as per the following details:
By Cheque No.________, dated __________, drawn on Bank ____________________,
________________ Branch, in favour of ________________________ HUF.
2. The above Gift has been duly accepted by ________________________, as Karta of
his Hindu Undivided Family and has been duly acknowledged hereunder.
3. This Declaration of Gift is made to record the fact that I have made this Gift in favour
of the Donee as above, who now has the absolute right, title and interest in the gifted
amount.
Date: ___________, 200__ ___________________
(Signature of the Donor)
ACKNOWLEDGEMENT OF GIFT
I, ________________________, hereby acknowledge having received the above gift
made to my Hindu Undivided Family by _________________________.Date: ___________, 200__ ___________________
(Signature of the Donee as Karta of his HUF)
SUBSEQUENT DEEDS
HUF GIFT DEED
This deed of gift is made and executed at Delhi on this 30th day of November, 2007 by
and between:
1. -------------------- W/o/S/O ------------------------- aged about ------- years resident
of .....................( hereinafter reffered to as the DONOR and the party on the FIRST
PART )
and :
2. -------------------------- HUF, ADDRESS............. comprising the family
members ....................(Karta), his wife ------------------------, his
son .....................AND...................RESIDENT..............(Hereinafter reffered to as the
DONEE and the party on the SECOND PART)
WHEREAS the Donor is the father of karta of the Donee and is highly
affectionate to him;
AND WHEREAS the Donor out of natural love and affection towards the Donee
have made a gift of Rs.........................../-- (in words...............) by way of account
payees Cheque no ................dated ............. drawn on .........................Bank
Ltd, ........................... ;
AND WHEREAS the Donee has accepted the said Cheque;
AND WHEREAS the Donor and Donee desires to deduce the covenants of this gift into
writing ;
THIS DEED NOW WITNESSETH AS UNDER
1. That the gift so made is without any material consideration and is absolute.
2. That the donee has accepted the same by his free will.
3. That the gift is irrevocable in any circumstances.
IN WITNESS WHEREOF the donor and the within mentioned donee put their respective
hands in taken of their having accepted the terms and conditions on the day, month and
year first mentioned.
Witnesses Signature
1.
DONOR
Accepted
2.
DONEE
COMPLETE PARTITION OF A HINDU JOINT FAMILY
This deed of partition is made on the ___________ day of ___________ the month
of ___________ of the year 200__. Between ___________ s/o ___________ resident
of ___________ (hereinafter called the first party) of the first part ___________
___________s/o resident of ___________ (hereinafter called the second party) of the
second part ___________ s/o ___________ resident of ___________ (hereinafter called
the third party) of the third part: and ___________ widow of ___________ resident of
(hereinafter called for fourth party) of the fourth part.
Where as the further of the second and third parties and husband of the fourth party,
namely late Shri ___________ and the first party were brothers, being the sons of late
Shri ___________.
And whereas they all constituted a Hindu joint family governed by the ___________ of
Hindu law.
And whereas the said Shri ___________ died of the year ___________ leaving him
surviving the parties and entitled to claim partition of the joint family estate.
And whereas the family has continued to remain joint and to hold and enjoy all the
properties jointly.
And whereas the parties hereto are all the members of the joint family entitled to claim
partition and also competent to contract, the other coparceners being the minor sons of
the second and third parties.
And whereas the parties hereto have mutually agreed to divided the entire joint family
properties into two equal parts and to allot one part to the first party and the other to the
second, third and fourth parties.
And whereas the second, third and fourth parties have also mutually agreed among
themselves to further divided and one-half part of the joint property allotted to them into
three equal parts and to allot a part each of the said three parts to each one of them.
NOW THIS DEED WTINESSES as follows:
(1) That the parties hereto do hereby mutually agreed and declare that they have actually
divided the hitherto joint property of the Hindu joint family of the descredants of Late
Shri ___________(here give the name of the father of the first party) among themselves
into the four Parts specified herein below, as Part I, Part II, Part III and Part IV, and
that henceforth the first party shall be the separate owner of the properties specified
and included in Part I and second party shall be the separate owner of the properties
specified and included in Part II and the third party shall be the separate owner of the
properties specified and included in Part IV and each of them shall hence forth hold and
enjoy the properties specified and included in his Part in severalty and to the exclusion
of the parties other than himself; and the parties hereto do hereby mutually release
and relinquish to the other all their respective right, title and interest in the properties
specified in the Part other than the Part allotted to himself.
(2) That the parties hereto do hereby mutually covenant with each other that:
(I) The property specified and included in the Parts allotted to each party shall be entered
upon and henceforth held and possessed in severalty by each one of them, respectively,
without any interruption or disturbance by any party other than himself.
(ii) The parties will, at the cost of one requiring the same, do every such act or thing as
may reasonably be required for further or more perfectly assuring the property hereby
allowed to each one of them.
(iii) That the parties hereto hereby declare that despite some disparity in the value given
which hare against each of the Part II, III and IV given for purposes of payment of stamp
on the said Parts, II, III and IV and the value given against Part I which is also given for
the purpose of payment stamp duty and registration charges, the partition hereby made is
fair and equitable and that while of the one hand the agreed real value of each of Parts II,
III and IV is equal on the other hand, the total of the agreed real value of Parts II, III and
IV is equal to the agreed real value of Part I.
(iv) That the expression first party, second party, third party and fourth party, shall,
unless there by anything contrary thereto in the context, mean and include, their
respective heirs, survivors, successors, representatives and assigns.
Part I
Part II
Part III
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In witness whereas the parties hereto have executed this deed on the date first
hereinabove mentioned.
Witnesses:
1.
(First Party)
2.
(Second Party)
(Third Party)
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A member of the HUF throwing his money into the common pool, or to use that overused cliché' the family hotchpot, is out of the question, thanks to Section 64(2) which would tax the income earned by the HUF on that money in the individual member's hands only.
But the clubbing provisions can be bypassed if the HUF invests the money in instruments yielding tax-free income. The tax-free income can then be reinvested to earn even taxable income--income on income is out of the clubbing provisions.
Strangers can make gifts but only up to Rs 50000 (Section 56).
A way-out is to receive gifts from members of bigger HUFs, who though your relatives, aren't members of your smaller HUF.
A father may make a gift of money to his son's newly-created HUF, clearly specifying in the Gift Deed that the gift is to his son's smaller HUF and not to the son himself. This will keep both Section 64(2)and Section 56(2) at bay.
After the HUF has a nucleus of its own and gets going, care has to be taken to keep the HUF's affairs completely distinct from the individual members' affairs. Where the members of the HUF carry on their individual businesses, as they normally do, the distinction between what constitutes the individual's income and what is HUF's income may get blurred.
Some other people, who aren't members of the HUF but are relatives in terms of Section 56(2) can also be found out.
Now every body comfortable with the question because creating a capital by transfer ,gift and all like stuff as hinted by Sanjeev we all know to some extent .
so to have capital in huf account we should take following steps
we should have opened a bank account first (not must) but it is advisable so that we can have transaction by cheques .
Apply for permanent account number (pan)
Formation of capital of huf,Transfer money by gifts etc to HUF capital keeping in view the clubbing provisions and tax on gifts under Income tax act,Remember there is no Tax on gifts in kind though they may attract clubbing provisions in some cases.
Regarding Huf an Interesting and detailed reply has been given by our group star contributor CA Sanjeev Bedi we are giving abstract of the answer.
The Hindu Undivided Family has its roots in the ancient Hindu law like the Manu Smriti, compiled by a male chauvinist Hindu "Scholar"called Manu, who lived around 200 BC; the Yajnavalikya Smriti compiled by Yajnavalikya and Narada in 100 and 200AD (it merely embellished what had already been laid down by Manu); and Mitakshara codified by a guy called Vijneshwara somewhere around the year 1100AD. Mulla, the foremost authority on Hindu law, has described the Mitakshara as "the quintessence of the Smriti law,its precepts and injunctions".
Later in the 12th century, there came along another variation of the Hindu law called the Dayabhaga written by one Jimutavahana.
The Dayabhaga challenged and deviated from the Mitakshara law in some ways, particularly in relation to succession and inheritance.
Under the Dayabhaga system,the father is the sole owner and the exclusive possessor of the joint family property. No member can enforce the partition of the HUF so long as the father lives.
But the Mitakshara law stipulates that the property vests in the HUF itself and not in any individual member of the family and therefore can be partitioned within the lifetime of the father.
The Dayabhaga law is prevalent in West Bengal and Assam.
Hindus in the rest of the country are governed by the Mitakshara law.
Manusmriti completely forbade women to have a share in the family property.
The modern Indian government embarrassed by these antediluvian,anachronistic laws has sought to bring them inline from time to time with the egalitarian values of 21st century.On 9th September 2005, the Hindu Succession Act, 1956 was amended to provide that
a daughter too could be a coparcener i.e. joint heir,like her brother to the joint family's assets and
she too could enforce the partition of the family property to claim her individual share.
She continues to be the coparcener in her father's HUF even after she gets married and forms another HUF with her husband.So gender bias has largely been taken out of the HUF laws.
A coparcener is one who has a right to demand that the family property be divided and they be handed over their share in the property (or whatever assets the HUF has) in case he or she decides to part ways with the HUF.
Not all members of the HUF are its coparceners. The coparcenery extends to four degrees down the family hierarchy in the following manner:
1st degree :Holder of ancestral property for the first time.
2nd degree : Sons and daughters(09.09.2005).
3rd degree: Grandsons.
4th degree : Great grandsons.
The most frequently asked question about HUF is: How does it come into being? To form an HUF, all you have to do is Get Married. The HUF gets created as soon as you complete the seven (or four,whatever) circles round the holy fire and become Man and Wife.
There have to be a minimum of two people to constitute a family. The husband and wife together make up a family. They don't have to wait till they have a baby to constitute their HUF.
Someone asked "Can an unmarried man create an HUF?" No, he cannot,if you mean an HUF of which he seeks to be the Karta himself. He can very well be the member of the HUF of his father or grandfather, but to create his own HUF he has to wait till he ties the nuptials.Come to think of it, "Creation of an HUF" is an oxymoron—-a contradiction in terms. Only orphan-and-unmarried Hindus don't belong to an HUF. Every Hindu becomes a member of an HUF the moment she ejects out of her mother's womb, mode of delivery--C-section or Normal--notwithstanding.
Till the time the HUF has an empty kitty,it is like a balloon that no one has yet blown air into. A balloon can rightfully be called a "ball"oon only when it swells up with air inside it. Without the air the balloon is inert,dormant. An HUF too is inert and dormant without funds.
The Karta, which in Hindi means the Doer, is usually the Father, the pater families of the family. He has immense powers over the affairs of the family, more than any other coparcener can wield.
Can a female be the Karta? The answer can't be No in the light of the amendment in the HS Act in 2005.An unmarried daughter, in the unfortunate event of her father passing away, will become the Karta of the HUF if she has no brother.
Can there be an all-female HUF? Yes, there can be. Where a couple has only one issue—-a daughter—-and the husband passes away,the mother-daughter duo can continue the HUF (although a problem may arise after she gets married and becomes a member of her husband's HUF). It has been held by the Allahabad High Court in CIT v. Sarwan Kumar 13 ITR 361 (All) that there can be an HUF consisting of female members only
The Karta can enter into partnership with a firm on behalf of the HUF. But the HUF itself, being not a legal person, can never be a partner in a firm. The fact that Income Tax law grants a PAN to itand treats it as an assessable entity does not bestow upon it the status of a person under the general laws. This has been held to be so in numerous cases. In Ram Laxman Sugar Mills v. CIT 66 ITR 613(SC), the Supreme Court said that "an HUF is undoubtedly a person within the meaning of the Indian Income Tax Act, It is however,not a juristic person for all purposes and cannot enter into an agreement of partnership either with another undivided family or individual".
So while conducting bank audit, in case you come across a loan file where the HUF is shown to be the partner, raise an objection.
There have been cases where the courts have held that businesses started by individual members after borrowing funds from the HUF were assessable in the HUF's hands, especially where the HUF is already engaged in the same business. So think twice before letting the HUF lend any money to its members and viceversa.
In CIT v. Gopal Bansilal Inani (2000) 245 ITR 2 (SC),the Supreme Court disallowed the interest paid to coparceners on the loan the HUF had taken from them as a business expenditure u/s 37(1).
Can an HUF pay remuneration to its Karta? Yes, in Jugal KishoreBaldev Sahai v. CIT 63 ITR 238 (SC), the Supreme Court held that "ifa remuneration is paid to a Karta of the family under a valid agreement which is bona fide in the interest of and expedient forthe business of the family and the payment is genuine and not excessive, such a remuneration must be held to be an expenditure laid out wholly and exclusively, for the purpose of the business and must be allowed as an expenditure under section 10(2)(xv)[corresponding to the present-day Section 37(1)] of theAct".
There is also the issue of Partition of the HUF. Al though the Mitakshara and other Hindu laws do not forbid partial partition ofthe HUF, the Income Tax law frowns upon it. Under the Hindu law, you may have eliminated the HUF by partioning the property (or what ever assets) of the HUF, but the taxation authorities have invested themselves with powers u/s 171 of the I T Act to continue to treat the defunct HUF as an assessee liable to pay tax unless the partition is effected in strict keeping with the manner laid down in that section. The law wants to dissuade assessees to smash up their bigger HUFs into smaller ones just to create more files to bring down their tax liabilities. Total partition in the context of the I T Act means partition by metes and bounds. "Metes and Bounds", anAnglo-French term, means the boundaries or limits of a tract of land. If the HUF property is physical, it isn't difficult to divide it up, delineating the share of each member. But a non-physical property will have to be divvied up amongst the members in such a manner as to comply with Explanation (b) below Section 171(9). Care must be taken that erst while coparceners don't simply end up becoming co-owners in the property. For example an FD held by the HUF being partitioned can't be converted into a joint FD of members after partition; if it is, interest on it will continue to be assessed in the HUF's hands. The FD can continue only in one member's name; he can cough up some cash to the other members to compensate them for loss of FD. What a metes and bounds partition does is deflate the balloon of the HUF. The Income Tax law will recognize its demise (for want of a better word, since a divided Hindu family can be reunited again),only when the HUF is stripped naked of each and every layer of the clothing of property—-tangible or intangible, movable or immovable--it had. It has to get back into its birthday suit again to be truly partitioned.
There is a book titled "Formation & Management of HUF along with Tax Planning" by authors S R Kharbanda and Prem Nath published by Commercial Law publishers.
HUF Formation is automatic with marriage– An HUF is automatically constituted with the marriage of a person. No formal action is required to create an HUF. The HUF being the result of birth, possession of joint property is only an appendage of the HUF and is not necessary for its constitution. So, one person cannot form an HUF. (creation deed is available here)
Property held by a single co-parcener does not lose its character of Joint Family : Family is a group of people related by blood or marriage. However, the property held by a single co-parcener does not lose its character of Joint Family property solely for the reason that there is no other male or female member at a particular point of time. Once the co-parcener marries, an HUF comes into existence as he alongwith his wife constitutes a Joint Hindu Family. This was held in the case of Prem Kumar v. CIT, 121 ITR 347 (All.)
Unmarried daughter and daughter in law is also member: Hindu Undivided Family is defined as consisting of a common ancestor and all his lineal male descendants together with their wives and unmarried daughters. Therefore, a HUF consists of all males & females in the family. Daughters born in the family are its members till their marriage and women married into the family are also members of the HUF.
Brahmo, Prathana or Arya Samaj, a Buddist, Jain or Sikh etc also covered in HUF:In this context, "Hindu" mean all the persons who are Hindus by religion. Section 2 of the Hindu Succession Act, 1956, elaborately declares that it applies to any person, who is a Hindu by religion and it includes a Virashaiva, a Lingayat or a follower of Brahmo, Prathana or Arya Samaj, a Buddist, Jain or Sikh. In CWT In the case of Smt. Champa Kumari Singh (1972) 83 ITR 720, Supreme Court held that the HUF includes Jain Undivided Family. HUF is a separate entity for taxation under the provisions of sec. 2(31) of the I. T. Act. It means that the one person can be assessed as an individual and also as a Karta / Chief of his family.
HUF continues even in the hands of females after the death of sole male member:It can be noted that, the technical status of an HUF continues even in the hands of females after the death of sole male member. Even after the death of the sole male member, the original property of the HUF remains in the hands of the widows of the members of the family and the same need not divided amongst them.
An HUF need not consist of two male members- even one male member is enough. The understanding that there must be at least two male members to form an HUF as a taxable entity is not applicable. – Gauli Buddanna v. CIT, 60 ITR 347 (SC); C. Krishna Prasad v. CIT 97 ITR 493 (SC) and Surjit Lal Chhabda v. CIT, 101 ITR 776 (SC). A father and his unmarried daughters can also form an HUF. CIT v. Harshavadan Mangladas, 194 ITR 136 (Guj.)
Nucleus of HUF – With several rulings it is now established that, nucleus or ancestral joint family property is not required for the existence of the HUF.
Karta - He is the person who manages the affairs of the family. Generally, the senior most male member of the family acts as Karta. However, any other male member can also act as Karta with the consent of the other member. Narendrakumar J. Modi v. Seth Govindram Sugar Mills 57 ITR 510 (SC).
HUF Property - The HUF property may consist of ancestral property, property allotted on partition, property acquired with the aid of joint family property, separate property of a co-parcener blended with or thrown into a common family pool. The provisions of sec. 64 (2) of the Income Tax Act, 1961 have superseded the principles of Hindu Law, in a case where a co-parcener impresses his property with the character of joint family property.
Female members cannot merge her separate property with joint family property, but she can make a gift of it to the HUF. Pushpadevi v. CIT 109 ITR 730 (SC). Female members can also bequeath their property to the HUF, CIT v. G.D. Mukim, 118 ITR 930 (P & H).
Multiple Family Structures - An HUF can consist of several branches or sub-branches. For example, a person with his wife and sons constitutes an HUF. If the sons have wives and children, they also constitute smaller HUFs. If the grandsons also have wives and children, then they also constitute HUFs. It is irrelevant whether the smaller HUFs hold any property. Nucleus property can be acquired by partition of bigger HUF or by gifts from any member of the family or even by a stranger or by will with intention of the donor or the testator that the said gift or bequest will form the HUF property of the donee. An HUF can be composed of a large number of branch families, each of the branch itself being an HUF and so also the sub-branches of more branches. CIT v. M.M.Khanna 49 ITR 232 (Bom).(gift deed format is available here)
Tax planning through HUF -
(i) Increase the number of assessable units through the device of partition of the HUF.
(ii) Create separate taxable units of HUF through will in favour of HUF or gift to HUF.
(iii) Enter into family settlement / arrangement.
(iv) Payment of remuneration to the Karta and also to other members.
(v) Providing loans to the members of the HUF.
(vi) Gift to members.
Partition of HUF - The tax liability can be reduced by partition of the HUF. This can be easily done in a case where the partition results in separate independent taxable units. Suppose an HUF consists of father and two sons and there are two business establishments, a house property and other sources of income with the HUF. If the members of the HUF have no other sources of income then partition of the HUF can be done by giving one business establishment to each of the sons, house property to the father and dividing the other sources in such a manner so as to make the partition equitable. Such a partition of HUF will reduce the tax liability considerably. The position may, however, be different in a case where the members of the HUF have got high individual incomes. In such a case it is not advisable to break or partition the HUF. The HUF should be allowed to continue as a separate taxable unit.(partition deed is available Here)
In case, where the HUF has only one business establishment, which can not be physically divided, it may be converted into a partnership firm or a company. At present, rate of firm's tax and the rate of tax in case of a company, is 30% flat, therefore conversion of HUF business into a partnership or a company is not advantageous. The incidence of, in such a case, can be better reduced by payment of remuneration to the members of the HUF. Partial partition of HUF is also a very effective device for reducing its tax liability. Partial partition is recognized under the Hindu Law. However partial partition of an HUF is no more recognised by the Income Tax Act. The provisions of sec. 171 partial partitions can still be used as a device for tax planning in certain cases. An HUF not hitherto assessed as undivided family can still be subjected to partial partition because it is recognized under the Hindu Law and such partial partition does not require recognition u/s. 171 of the Income Tax Act, 1961. Thus a bigger HUF already assessed as such, can be partitioned into smaller HUFs and such smaller HUFs may further be partitioned partially before being assessed as HUFs. Besides any HUF not yet assessed to tax can be partitioned partially and thereafter assessed to tax.
Legal aspects and partition of HUF –
(i) Assets distribution in the course of partition would not attract any capital gains tax.
(ii) No gift tax liability.
(iii) No clubbing of incomes u/s. 64.
Create Separate Taxable Units - It is now well settled law that there can be a gift or will for the benefit of a Joint Hindu Family .It is immaterial whether the giver is male or female, whether he or she is a member of the family or an outsider. What matters is the intention of the donor that the property given is for the benefit of the family as a whole. Suppose there is an HUF consisting of Karta, his wife, his two sons, daughter-in-law and grand children. A gift or will can be made for the benefit of the two smaller HUFs of the sons. The bigger HUF will continue as a separate taxable unit even after the death of the Karta. There may also be a case where the father or mother has self acquired properties. They have a son and his family but there is no ancestral property as a corpus of their family. Then, father & mother or both can leave their property for the benefit of their son's family, through their respective wills.
Loan to the Members - If the business, capital or investment of the HUF is expanding then such expansion can be done in the individual names of the members of HUF by giving loans to the members from the HUF. The HUF may or may not charge interest on the loans given. Where after partition of an HUF, two members became partners in three firms on behalf of their respective HUFs and they also became partners in a fourth firm, the funds were obtained by means of loans from other three firms, the share incomes of the members from the fourth firm was assessable as their individual income only. CIT v. Champaklal Dalsukhbhai, 81 ITR 293 (Bom.).
Other Tax Planning –
(i) Transfer of individual property to the family.
(ii) Family reunion after partition.
(iii) Inheritance by succession
Partnership Firm & HUF - An HUF cannot become a partner in a firm. The Karta or a member of the HUF can represent the HUF in a firm. A female member can also represent HUF in a partnership firm, CIT v. Banaik Industries 119 ITR 282 (Pat.). Where remuneration was received by a member of HUF from a firm, where he was partner on behalf of HUF for managing firms business such remuneration was his individual income, CIT v. G. V. Dhakappa 72 ITR 192 (SC); Premnath v. CIT 78 ITR 319 (SC). However, income received by a member of HUF from a firm or company is taxable as the income of the HUF, if it is earned detriment to or with the aid of family funds, otherwise it is taxable as the separate income of the member, P.N. Krishna v. CIT 73 ITR 539 (SC).
Read more: HUF CREATION TAX BENEFITS TAX IMPLICATIONS HINDU UNDIVIDED FAMILY | SIMPLE TAX INDIA-ITR FORM -TDS RATE 11-12 http://www.simpletaxindia.org/2011/05/huf-creation-tax-benefits-tax.html#ixzz1XAlWWlDQ
