In the case of a bequest of a minor child to the future HUF or in the case of the inheritance of a minor child by legal succession, there are potential tax advantages. Since the beneficiary is a natural person, income from assets is taxed on the income of the beneficiary, first at the level of income tax of his parents (since the parents have control while the child is a minor) and after reaching the age of majority as the child`s individual patrimony. However, upon marriage, at least according to the majority opinion of the high courts, property is treated as Hindu joint family property in the name of the prospective family. Income earned thereafter is taxed in the hands of the HUF, separately from the natural person. HUFs are allowed to open a savings account even if it is a non-individual. 18In 1956, the Companies Act recognized the HUF as an independent legal entity of India that could be part of the ownership and control structures of companies, i.e. private companies and joint-stock companies. The Indian Partnership Act of 1932 had already granted the HUF similar recognition in the holding structures of partnership companies. The articulation of the HUF with corporate governance structures is conveyed by Karta`s role in its dual role – as a single legal entity and as the HUF`s karta. For example, a HUF cannot enter into a partnership with other persons because it is not a legal person, but the carta of a HUF (Sachdeva 1987). Similarly, as a legal entity, Karta and other members of an HUF are entitled to salary and compensation.
An HUF may also own one or more companies using names distinct from the HUF as a business entity. In addition, the HUF can own various types of assets, including factories, land, real estate, and trade. This legal integration of HUF with companies and companies is at the heart of the holding asset structures of Hindu family business groups in India. The “old” and “new” capitalist trading houses of Hindu origin use the provision of HUF to consolidate family ownership and ensure control of capital within the family through transactions between the HUF and individuals within the HUF, with these individuals occupying key positions in the participation and business models within the commercial house. through interlocking directors and shareholdings. If the HUF is not treated as a separate entity but as the property of a U.S. donor or carton, the carta must include the HUF`s income on its tax return if it is a U.S. tax resident. In this case, the taxes paid by HUF to India should be considered to have been paid by the US donor or carton, and therefore the donor or carta should be able to claim a US income tax credit for the income tax paid to India.
This situation can be compared to that of the settlor of a constituent trust, who receives a tax credit for non-U.S. citizens. taxes paid by the Trust. In this case, the settlor can still obtain the loan, although, from the perspective of non-U.S. citizens, the trust paid the foreign taxes and not the settlor. An HUF is treated as a separate taxpayer from the family or Karta and is entitled to its own tax exemption, separate from Karta`s personal income tax exemption for Indian income tax purposes. The income exemption for individual taxpayers is Rs.2.5O, OOO per annum and Rs.3.0O, OOO for older taxpayers (between 60-80 years old) or Rs.5.00,000/- (super seniors (over 80 years old). In addition, HUFs, which are a separate entity for tax purposes, can claim a basic exemption of Rs.2, 5O, OOO. A HUF may also apply for other specific exemptions such as sections 80C, 80D, etc., rebates and exemptions related to capital gains. By creating HUF, you can save taxes by creating a family unit and pooling assets, as HUF is taxed separately. The income of an HUF is valued solely in the hands of the HUF and not in the hands of its coparceners or members. 6More recently, the study of the legal institution of the “family” has fallen into the field of specialized reading of “personal laws” concerning the relationship between religious code and property rights (Agnès 1990, 2011; Parashar, 1992).
But it does not examine the interface between family and business. While the entity of the “enterprise group” has found its conceptual space in institutional economics and in the broader social science literature, the family basis of ownership and control of corporate structures remains a very little studied area. The relationship between the two and accumulation regimes in independent India is to be found in the otherwise growing body of business studies and business literature on the relationship between family business group, corporate governance and public policy not only in India, but also in the United States, Canada, Europe, Hong Kong, Taiwan, Japan, South Korea, China and Pakistan (Gulzar and Wang 2010). The particular form of HUF as an independent form of real property ownership for corporate governance and tax purposes has only recently been recognized in the literature (Dewan 2009; The Gupta 2013; Le Gupta, 2016). A fundamental question in determining the United States The tax consequences of an HUF are whether a HUF is treated as a separate entity or whether it would be comparable to a constituent trust, when the person considered to be the settlor of the property or the person controlling the property (in this case, the Karta) would be considered the owner of the property for U.S. income tax purposes.