A HUF is a legal expression, which has been employed in taxation laws as a separate taxable entity. HUF can constitute large, small or nuclear families. Although only one member or co-parcener cannot form a HUF, 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 the time. Once the co-parcener marries, a HUF comes into existence as he along with his wife constitute a joint Hindu family. A HUF need not have two male members, one male member is sufficient. For example, a father and his unmarried daughters may form a HUF.
The person who manages the affairs of the family, usually the senior most male member of the family is KARTA in a HUF, even if he is aged or incapacitated. However, a junior male member can also act as the KARTA with the assent of the other members. The KARTA can claim remuneration and other benefits from HUF.
The KARTA administers the affairs of HUF, controls and becomes the custodian of the finances, can borrow money for and on behalf of HUF, spend money for the family, can make partitions of the family. However, a HUF cannot enter into contracts, or form a partnership firm, or represent the family except through the KARTA. On his part, the Karta may allow others to represent the HUF, can gift assets of HUF to family, but all those should be within reasonable limits. The KARTA can alienate the joint family property with the consent of the co-parceners who are adult. The alienation is binding on the entire joint family.
Investments are Carried Out Under the HUF Structure
Investment by a HUF are made by KARTA either in his own name or of the HUF. The HUF as an entity cannot invest in government small savings schemes, such as PPF, NSC, monthly income schemes and other time deposits. A HUF account cannot be opened with joint holders and no nominee can be appointed for a HUF account.
Some recent amendments made by the Hindu succession (Amendment) Act 2005, with regard to females of a HUF:
- Daughter shall be a co-parcener of Hindu family property.
- If a female co-parcener dies before partition, then children of such co-parcener would be eligible for allotment assuming a partition had taken place immediately before her demise.
- If a Hindu dies, the co-parceners property shall be allotted to the daughter as is allotted to sons.
- A widow of a pre-deceased son, even though remarried is now eligible for share in property as legal heir of the pre-deceased son of the family.
- A female member can also seek partition of the dwelling house where the family resides.
- A female can also dispose of her share in co-parcenary property at her own will.