The Hindu Undivided Family (HUF) is one of the longest standing family institutions in the history of India. It evolved from the patriarchal institutions of collective land holdings and property rights by family units since ancient times and gained legal recognition somewhere in the 19th century. Simply put, it is another name for ‘Joint Hindu Family’ introduced in the Tax laws of India.[i] Although the HUF has existed since a long time, its nature has been evolving due to the changes in the Hindu Personal law and perhaps the time has come to do away with this archaic concept altogether.
The concept of HUF arose in law when it was decided to give HUF a legal status, a trading entity which led to it ultimately being incorporated as a separate tax entity as well in the Income Tax Act.[ii] This basically has led to huge tax exemptions being granted to HUFs which is a substantial loss of revenue for the Government. What is problematic is the extremely wide interpretation given to the term “Hindu Undivided Family” by Courts who tend to grant HUF status to almost all parties,[iii] thereby creating the problem of excessive loss of revenue. Essentially, the HUF has become a method for people to evade taxes.[iv] Courts also tend to allow for various units within the same coparcenary to apply as separate HUFs for tax purposes which further aggravates the problem. Abolishing HUF would pave the way for simpler tax filing where complexities of clubbing incomes and expenses of all family members would not have to be looked into for instance. This would lead to a more equitable and efficacious tax structure in our country which would not be bogged down by redundant concepts like that of the HUF.
Another reason to do away with, concept of HUF is that is plays a critical role in the circuits of capital accumulation in India[v] which lead to blocking of funds within this antiquated structure instead of being used to increase the nation’s economic flow. Since the HUF includes consolidation of family holdings which are then controlled by the karta and the select few others with whom he decides to operate, this leads to a ‘freezing of assets’. Also, it is more difficult to sell Joint Family property than it is to sell individual property which further makes it harder to liquidate these frozen assets. Even colonial rulers had recognised this problem and had tried to do away with it by way of the ‘Hindu Gains of Learning Act, 1931’.
Lastly, institution of HUF should be abolished in order for our nation to take another step towards the ultimate Utopian dream of a Uniform Civil Code (UCC). Once this institution is abolished, we can look further ahead towards harmonizing other areas like the institution of marriage, inheritance, etc. so as to eventually realize the goal of having a UCC. Though true that we are not yet ready to introduce a UCC right this moment, we surely are nearing the threshold that will make it possible. We therefore need to start working towards making uniform laws wherever possible for we need to start somewhere. Abolishing the otherwise superfluous institution of the HUF is but a step in that direction which ought to be viewed in totality with the bigger picture.
In conclusion, we ought to realise that HUF (and subsequently the coparcenary system) is riddled with gender inequities as well which the law has pretended to solve without much change.[vi] Women continue to be disadvantaged by this patriarchal institution which seldom gives them the same equal rights as their male counterparts. This coupled with the reality that the HUF is economically devastating the state of affairs of the nation by eroding the revenue and impeding the economic flow of the country ought to be a “tryst with reality” for everyone, especially the law makers of India, to finally take a step in the right direction and do away with this antediluvian concept.
[i] The Commissioner Of Income-Tax vs Gomedalli Lakshminarayan, (1935) 37 BOMLR 692
[ii] Section 2, Income Tax Act 1961; Chirashree Das Gupta and Mohit Gupta, “The Hindu Undivided Family in Independent India‘s Corporate Governance and Tax Regime” South Asia Multi-Dscplry Acad. Jrnl available at: http://journals.openedition.org/samaj/4300
[iii] N. V. Narendranath vs Commissioner Of Wealth Tax, 1969 SCR (3) 882
[iv] Law Commission of India, ‘Consultation Paper On Reform of Family Law’ (2018).
[v] Chirashree Das Gupta and Mohit Gupta, “The Hindu Undivided Family in Independent India‘s Corporate Governance and Tax Regime” South Asia Multi-Dscplry Acad. Jrnl available at: http://journals.openedition.org/samaj/4300
[vi] Hindu Succession (Amendment) Act, 2005
This article is written by Chahat Gupta of O.P. Jindal Global Law School
Disclaimer: This article is an original submission of the Author. Lex Insight does not hold any liability arising out of this article. Kindly refer to our Terms of use or write to us in case of any concerns.