Son can create HUF within father’s HUF ESTATE PLANNING

Can a son (who is a co-parcener in his father’s Hindu Undivided Family or HUF), who has his own HUF after getting married, continue to be a member of his father’s HUF? If he does, do his wife and children automatically become members of the original HUF? If he cannot continue as a member of the father’s HUF, do we have to inform the banker to the HUF about the change in co-parceners of the HUF? If he continues to be a member of his father’s HUF, can he (or for that matter any co-parcener of the HUF) give monetary gifts to the father’s HUF? Will these be tax-exempt up to ₹50,000 or up to the non taxable limit of income for tax purposes?

—Name withheld on request Co-parceners of an HUF will continue as co-parceners until the HUF is partitioned or until the co-parcener releases all his/her undivided right, interest and share in the HUF in favour of the other co-parceners under a duly executed deed of Release, unless the co-parcener marries a

non-Hindu under the provisions of the Special Marriage Act, 1954, in which case there is a deemed severance by such co-parcener from the HUF (as Section 19 read with Section 21A of the Special Marriage Act, 1954). Upon the marriage of a male co-parcener, his wife also becomes a member of the HUF (though the wife of a co-parcener is not a co-parcener but is a member of the HUF). The children of a co-parcener automatically become co-parceners at birth. Under Hindu law, there can be an HUF within an HUF. Therefore, a son can establish his own independent HUF (with his wife and children and further lineal descendants) while he continues to be a member of his father’s HUF. With regard to your query on informing the bank of a change in the co-parceners, usually, the bank would only have to be informed of a change in the name of the karta or signatories for the operation of the bank account, which are recorded with the bank.

A co-parcener can make gifts to the HUF. It is preferable that the gift is implemented by a deed of gift or other writing, which clearly indicates the intention to transfer the title of the property covered by the gift from the individual co-parcener to the HUF. The stamp duty and tax implications on the deed of gift would need to be considered. We recommend that you seek independent advice on the tax implications of such gifts.