UCC - Hindu Undivided Families (HUFs)

 The number of Hindu Undivided Families (HUFs) availing tax benefits under the Income Tax Act stood at almost 8.76 lakh in 2022-23, the lowest in at least five years. The impact on their tax treatment under a Uniform Civil Code (UCC) has not yet been examined, the Finance Ministry informed Parliament on July 25.26-Jul-2023

Will HUF be affected by UCC?

Hindu Undivided Family is a legal entity that allows Hindu taxpayers to claim certain benefits. If and when the Uniform Civil Code is considered, this beneficial tax treatment will be scrutinised on grounds of equality before tax law and uniformity in application across religions.

What will happen to HUF if UCC is implemented?

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

Income tax: How Uniform Civil Code (UCC) in India will impact HUF (Hindu Undivided Families) tax outgo

2 min read 30 Jun 2023, 01:09 PM IST

Sangeeta Ojha

The demand for the Uniform Civil Code (UCC) in India is increasing. If implemented, it will impact income tax laws and succession plans, particularly for Hindu Undivided Families (HUFs)

Impact of UCC on HUF: The Uniform Civil Code in India aims to formulate and implement personal laws of citizens. (iStock)

Impact of UCC on HUF: The Uniform Civil Code in India aims to formulate and implement personal laws of citizens. (iStock)

Amid news buzz in regard to UCC or Uniform Civil Code in India, various tax and investment experts are busy finding out how this will impact the income tax outgo of earning individuals. Prime Minister Narendra Modi recently talked about UCC and reports say it could be tabled in the Monsoon Session of Parliament. In addition to other implications, UCC when implemented will impact income tax laws and succession plans in India. The most direct impact is likely to be on the Hindu Undivided Family (HUF) and the income tax benefits associated with it.

What is UCC?

The Uniform Civil Code in India aims to formulate and implement personal laws of citizens which apply to all citizens equally regardless of their religion, sex, gender, and sexual orientation.

   

What is HUF?

A HUF is a family which consists of all persons lineally descended from a common male ancestor. It consists of the karta, who is typically the eldest person or head of the family, while other family members are coparceners.  Even Jain, Buddhist, and Sikh families can have HUFs.

HUF income tax rules

A HUF account is very similar to an individual account. “The HUF as a tax unit is not of recent origin. This was already there in the Income Tax Act, 1922, the predecessor of the present Income Tax Act of 1961, under which also 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 further said that once the law comes into effect, no Hindu will be entitled to claim any interest in ancestral property due to his birth in the family.

As per Balwant Jain, not only the provisions about the rights of persons taking birth after coming into force of UCC but also provisions about the existing joint family will have to be made either under the UCC or under the Income Tax Laws. 

If implemented, UCC is likely to affect crores of Hindu families. However, it remains to be seen whether the government will do away with the concept of the Hindu Undivided Family or not.

polygamy is legal according to the Muslim Personal Law (Shariat Application Act), 1937, but it is against women. However, the Muslim Personal Law is not applicable to Muslims who marry under the Special Marriage Act.

Muslim Women can demand non-BJP State governments like in Kerala to implement the UCC. Their argument against the UCC as anti-Muslim is foolish. They fail to recognise that the UCC would apply to all communities, including Hindus, Muslims, and Christians. Rather than focusing on educating Muslim women about their rights and the importance of gender equality, they become trapped in political parties’ agendas.