WHAT IS HINDU UNDIVIDED FAMILY (HUF) BUSINESS? It is one of the oldest forms of business organisation found only in India. Business is owned and carried on by the members of the Hindu Undivided Family (HUF). It is governed by the Hindu Law. There are two conditions for existence of Joint Hindu Family Business: 1. Minimum two members must be there in the family. 2. Existence of some ancestral property. Membership: Membership of the Joint Hindu Family Business is automatic by birth. All members have equal ownership right over the ancestral property and they are known as ‘Co-parceners’. There are two systems which govern membership: Dayabhaga system – It prevails in West Bengal and allows both the male and female members to be co-parceners. Mitakashara system – It prevails all over India except West Bengal and allows only the male members to be co-parceners. There is no restriction on the number of co-parceners of the HUF business. However, only three successive generations can be members in the business. Formation: There should be at least two members and ancestral property to form a Joint Hindu Family Business. It is not created by an agreement between persons. Control: The business is controlled by the head of the family, who is the eldest member and is called ‘Karta’. He takes all the decisions to manage the business. Continuity: The business continues even after the death of the Karta as the next eldest member takes up the position of Karta. The business is stable. Minor Members: Since membership is by birth, minors can also be members of the business. Advantages 1. Ease of formation 2. Continuity of operations Disadvantages 1. Confined to Joint Hindu families 2. Relatively limited capital 3. Limited managerial talents 4. Unlimited liability of the Karta TAXATION OF HUF’s Up to Rs. 2, 00,000 No Tax Rs. 2, 00,001 – 5, 00,000 10% Rs. 5, 00,001 – 10, 00,000 20% Above 10, 00,000 30% Educational Cess is Payable at 3% on Tax Calculated. Surcharge at 10% if total Income Exceeds Rs. 1 Crore.
Posted on: Sat, 24 Aug 2013 05:54:18 +0000
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