Page 42 - Banking Finance August 2023

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citizens Rs 1 lakh); and 80TTA (Rs 10,000 — and Rs 50,000
for senior citizens).

HUF also enjoys the basic tax exemption of Rs 2.5 lakh. In
addition, HUF can also own a “residential property” without
having to pay tax for it. It is crucial to note that if an
individual has more than one property, then as per the Act,
the second property is “deemed to be let out” and tax will
be levied based on the “notional rent”. However, if the
second property is in the name of the HUF, tax can be
avoided. HUF also gets benefits for a “home loan” for the
purpose of buying a residential property wherein it receives
tax benefits of up to Rs 1.5 lakh under Section 80C for the
principal amount repaid and a benefit of up to Rs 2 lakh for
the interest paid on the loan. management of business assets and allows the seamless
transfer of ownership to the next generation in the family.
According to the Income Tax Return Statistics report by the Removing HUF and its benefits would create superfluous
Income Tax department, an increase in the number of HUFs challenges for these business families.
is visible. There were 8,40,720 “HUF assessees” in FY 2012-
13, 9,40,061 “HUF assessees” in FY 2014-15 and in FY 2018- Third, HUF tax benefits encourage and support the joint
19, it increased to 11,30,554 assesses. The implementation family system and foster familial harmony and unity. With
of UCC should not subvert the benefits availed by them. the supplemented tax advantages, it recognises the
significance of “collective economic activities” in the family.
If UCC is implemented, eventually, its endeavour to attain Phasing out the HUF tax structure or the available benefits
“uniformity in personal laws” would result in one of two will be a disincentive to the joint family system. Without tax
situations for HUF tax beneficiaries — (i) Removal of HUF benefits, families may be more inclined to opt for individual
alongwith its tax benefits; or (ii) Introduction of a “HUF-like taxation, resulting in the fragmentation of family assets and
framework” for each religion, which is highly unlikely. weakened family bonds.
Removing the present HUF tax benefits could substantially
increase revenue for the state and end the preferential tax While drafting the UCC, the government must not strike out
structure. But the removal of the HUF structure and its the HUF concept or its supplemental tax benefits. Rather,
benefits needs to be assessed in the larger context of its it should create a structure similar to the HUF so as to
impact on financial planning, tax efficiency and the social benefit all religions. In order to extend the benefits of a HUF
cohesion of Indian Hindu households. structure to every religion, the government among other
modifications, should make a “linguistic amendment” to the
First, the HUF enables family members to pool their financial terminology of the “Hindu Undivided Family” by simplifying
resources in their common family property, which provides a it to “Undivided Family”, transcending the religion-centric
safety net during financial hardships. It also facilitates effective connotation.
risk mitigation and promises investment options. HUF is an
invaluable instrument to plan for inheritance and a support Treating HUF as a non-religious-centric beneficial family
system for family members with any bereaved male member. structure, UCC may ensure social welfare and economic
Furthermore, the HUF tax benefits foster investments and stability to all regardless of religion. Simultaneously, it will
savings, providing long-term financial security. also dispel the arguments of the Right to Equality embodied
under Articles 14-16 against the preferential treatment to
Second, it is a boon to small businesses. While ownership HUF by guaranteeing equality before the law to all within
remains with the family and the corpus can be utilised for the territory of India. UCC should culminate the favourable
business expansion, HUF offers a propitious legal framework tax structure into a welfare tax structure. (Source: The
to small businesses. Simultaneously, it facilitates optimal Indian Express)

42 | 2023 | AUGUST | BANKING FINANCE