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Hindu Undivided Family (HUF) – Meaning & Features

A business structure unique to India – where family IS the business!

What is HUF?

Definition: A business organization where family members inherited from a common ancestor jointly own and manage the business.

Governed by: Hindu Law (not any modern Act!)

Who can form:

  • Hindus
  • Jains
  • Sikhs
  • Buddhists

Examples in India:

  • Traditional family businesses (jewelers, traders)
  • Birla family businesses
  • Many old Indian business houses

Key Concepts

1. Karta (करत्ता)

  • Head of the family
  • Usually eldest male member
  • Manages the business
  • Has unlimited liability

2. Coparceners

  • Members having rights in HUF property
  • Males born in the family
  • Females (after Hindu Succession Amendment Act, 2005)
  • Share profits

3. HUF Property

  • Ancestral property (inherited from forefathers)
  • Business profits added to HUF
  • Cannot be individually sold

Features of HUF

1. Formation by Birth

  • Automatic – Born into HUF
  • No registration needed
  • Example: Sharma family has shop → Son born → Automatically coparcener!

2. Karta's Control

  • Karta makes all decisions
  • Other members have no say in management
  • Example: Father (Karta) runs business, sons just get profit share

3. Liability

  • Karta: Unlimited liability
  • Coparceners: Limited to share in HUF property
  • Example: Business fails → Karta's personal assets at risk, not sons'!

4. Membership

  • Minimum: 2 members (Karta + 1 coparcener)
  • Maximum: No limit (entire family!)
  • Example: 10 family members = 10 coparceners

5. Continuity

  • Continues across generations
  • Death of Karta → Eldest son becomes new Karta
  • Example: Father dies → Elder son takes over

6. Profit Sharing

  • As per Hindu Law or family agreement
  • Usually equal among coparceners
  • Example: 4 coparceners → 25% each

7. Tax Benefits

  • Separate tax entity (files own IT return)
  • Can claim additional exemptions
  • Example:
    • Individual: ₹2.5L exemption
    • HUF: ₹2.5L exemption
    • Total family: ₹5L exemption!

Structure

KARTA (Father – Unlimited Liability)
        ↓
COPARCENERS (Sons, Daughters, Grandsons)
        ↓
HUF PROPERTY (Ancestral + Business Profits)

Real-Life Example

Birla Family HUF (Simplified)

1857: Sh. Shiv Narayan Birla starts trading business
Inheritance: Sons inherit → Becomes HUF property
Expansion: Each generation adds to HUF
Modern times: Multiple Birla HUFs managing different businesses!

Quiz

Test Your Knowledge

Question 1 of 4

1. The head of HUF is called:

Manager
Karta
Director
Partner

💡 Final Wisdom: "HUF is like a relay race – each generation passes the baton, the race continues forever!"

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