Income tax returns (ITR) filing: Taxpayers may lose this benefit
Income tax returns (ITR) filing: Will taxpayers lose a legal way to save tax? The proposal to abolish this thing is to prevent tax evasion.
Income tax returns (ITR) filing: The Law Commission of India issued a consultative paper “Reform of family law” on August 31, 2018. Under the chapter on “Succession and Inheritance” it has suggested abolition of the Hindu Undivided Family (HUF) as a tax entity. Let us understand the exact proposal in detail and look at the consequences if the suggestion is accepted.
The concept of HUF applies to people of all religions except Parsis, Muslims, Christians and Jews. In the good old days HUF represented a joint family that stayed together under one roof and had joint property relationship among the members. It has also been run and recognised as a business unit for quite some time. Since the income of the HUF was supposed to belong to the family members and was meant to be used for maintenance of its members, the Britishers recognised HUF as a separate tax unit almost 100 years back under Income Tax Act, 1922. This was replaced by the present Income Tax Act, 1961. Since then, HUF has continued to be recognised as a separate tax entity.
HUF is entitled to have a separate basic tax exemption limit, as well as benefit of tax benefits under various sections like 80 C, 80 D, 80 DDB, 112A etc.
Special Saturday trading session March 2 share market LIVE: BSE, NSE to open for trade for 2 hours today; catch all details here
Assistive dogs to medical cobots: Robots set to redefine efficiency, safety, adaptability across industries
Former CJI Justice K.G. Balakrishnan inaugurates state-of-the-art Judicial Training & Coaching Centre
4% DA Hike: Gujarat govt increases 4% DA for employees; raises NPS contribution; revises LTC cash conversion calculation
FASTAG kyc update deadline extended news login last date rechage online balance check icici sbi axis bank fastag
What is the proposal
The Law Commission has observed that the status of HUF as a separate tax entity is being used for tax evasion. Its observations are based on recommendations of the Direct Taxes Enquiry Committee Report 1971, popularly known as Wanchoo Committee. The Law Commission has come to a conclusion that continuation of HUF on the ground of deep-rooted sentiments, at the cost of the country’s revenues is not justified and, therefore, has recommended that HUF as separate tax entity should be removed.
Will the proposal become law
The document, under which the proposal to remove the HUF as a tax unit, has been mooted by the Law Commission is through a “Consultation Paper”. As the name itself suggests, it is a consultation paper for discussion among various groups and stakeholders. Based on the feedback received, the Law Commission may make the ultimate recommendations to the Ministry of Law and Justice with a draft of the law. The ministry will again weigh the proposal and may decide the law to be placed before the Parliament. After the bill is passed by both the houses of Parliament, it is sent to the President for his assent and then only it becomes law. It could take years for the recommendation to become law.
If the proposal is implemented
What will happen to the existing HUFs in case the proposal of removal of HUF as a tax unit is implemented? I evaluated provisions of Kerala Joint Hindu Family System (Abolition) Act, 1975, which became effective in the Kerala from 1976. The legislation provided for de-recognition of the institution of HUF within the state of Kerala.
Typically in an HUF, members have rights over the property, but there is no fixed share. The share fluctuates as new members join the HUF.
The law of Kerala provides that all assets of any existing HUF, as on the date of passing of the law, shall be deemed to have been fully divided amongst all its members. This means that all members of the erstwhile HUF will have defined and fixed share in the property after the date of its deemed division. They will become individual owners of their share of the property.
Watch this Zee Business video
Taxpayers who have HUF as tax unit need not do anything now and may continue to enjoy tax benefits available to HUF as tax unit.
By: Balwant Jain
(The author is a tax and investment expert)
Source: DNA Money
10:06 AM IST