How Uniform Civil Code in India will influence HUF tax outgo

Amid information buzz in regard to UCC or Uniform Civil Code in India, varied tax and funding specialists are busy discovering out how this can influence the earnings tax outgo of incomes people. Prime Minister Narendra Modi just lately talked about UCC and reviews say it might be tabled within the Monsoon Session of Parliament. In addition to different implications, UCC when applied will influence earnings tax legal guidelines and succession plans in India. The most direct influence is prone to be on the Hindu Undivided Family (HUF) and the earnings tax advantages related to it.

The Uniform Civil Code in India goals to formulate and implement private legal guidelines of residents which apply to all residents equally no matter their faith, intercourse, gender, and sexual orientation.

What is HUF?

A HUF is a household which consists of all individuals lineally descended from a typical male ancestor. It consists of the karta, who is often the eldest individual or head of the household, whereas different members of the family are coparceners.  Even Jain, Buddhist, and Sikh households can have HUFs.

HUF earnings tax guidelines

A HUF account is similar to a person account. “The HUF as a tax unit isn’t of current origin. This was already there within the Income Tax Act, 1922, the predecessor of the current Income Tax Act of 1961, underneath which additionally it has been continued,” said Tax and investment expert Balwant Jain.

Being a separate tax unit, it enjoys a separate tax exemption limit in addition to the various tax breaks under Sections like 80 C, 80 D, 80 DDB, 112A, etc, Jain added.

The income tax slab for HUF is the same as that for an individual, with an exemption limit of ₹2.5 lakh, in the case of the old tax regime. The HUF also qualifies for all the tax benefits under relevant sections of the Income Tax Act and enjoys exemptions with respect to capital gains. However, in the case of the new income tax regime, the exemption limit for HUF is ₹3 lakh.

Impact on HUF after implementation of UCC

If the UCC is ultimately implemented, the concept of HUF will go. According to Balwant Jain, this may need an amendment in the Income Tax Act if no specific provisions in the UCC on the similar line as contained in the “Kerala Joint Hindu Family System (Abolition) Act, 1975″ is made. 

He additional mentioned that when the regulation comes into impact, no Hindu will likely be entitled to assert any curiosity in ancestral property because of his beginning within the household.

As per Balwant Jain, not solely the provisions in regards to the rights of individuals taking beginning after coming into power of UCC but in addition provisions in regards to the present joint household should be made both underneath the UCC or underneath the Income Tax Laws. 

If applied, UCC is prone to have an effect on crores of Hindu households. However, it stays to be seen whether or not the federal government will dispose of the idea of the Hindu Undivided Family or not.

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Updated: 30 Jun 2023, 02:04 PM IST