 "A married woman can also become karta")
While the Hindu Succession Amendment Act, 2005 gave daughters equal rights in property, a recent Delhi High Court ruling has done away with the gender discrimination that existed as the Hindu Succession Act was clear on whether a woman can be karta. Based on ancient scriptures, the Hindu Succession Act deals with the intestate succession among Hindus, Buddhists, Jains, and Sikhs.
The high court ruled that the eldest woman member of a family can be its karta. A unique position carved out by Hindu customs and ancient texts, karta means the manager of a joint family. Until now, only men were allowed to be Karta in a Hindu Undivided Family (HUF).
The position of a karta is a powerful one, for this person controls, and is also a custodian of, the finances in an HUF. The karta borrow money for and on behalf of the family. S/he can spend money for the family without being accountable. The karta also has a say in the partition of the family. He or she can even gift away the movable properties of the family.
Malhar Majumder, a certified financial planner, says that usually, an HUF is dissolved if there’s no male coparcener to take over, and there are many families at present that face this issue. This judgment will save many such HUFs, and will let women an equal opportunity to save tax. “This, however, was a case of inheritance. There’s still need clarity on whether women can now start an HUF and whether Income Tax will recognise it,” says Majumder.
According to lawyers, married women can become the Karta as marriage does not alter the right to inherit the coparcenary. But, they say it is still not clear if her children would retain the same right in the family of her father.
Before the recent Delhi High Court ruling, there have been divided opinions on women as a karta in an HUF. Courts have ruled in favour of women being a karta only under certain circumstances. For example, if a male karta passes away and there’s no adult male member in the family to take his position, the wife can assume role of a karta until a male member becomes an adult.
HUF has been a subject matter of litigation as many wealthy families transfer assets to it for taxation purpose.
Vijay Dhingra, Partner, Deloitte Haskins & Sells, explains that HUF is a good tax-saving tool as it is regarded as a separate legal entity under the tax law and also assessed to tax separately as a distinct legal person. “This implies that a person can file two income tax returns — one in a personal capacity and one in the name of the HUF,” says Dhingra. Amarpal Chadha, tax partner at Ernst & Young says that if a person has transferred a rental-yielding property to an HUF, the rent received is taxed under the HUF separately. This gives the benefits to a person of dividing his taxable income between two entities and, hence, he can claim double deductions and expenses in both capacities, thereby reducing his total taxable income and tax liability substantially.
The high court ruled that the eldest woman member of a family can be its karta. A unique position carved out by Hindu customs and ancient texts, karta means the manager of a joint family. Until now, only men were allowed to be Karta in a Hindu Undivided Family (HUF).
The position of a karta is a powerful one, for this person controls, and is also a custodian of, the finances in an HUF. The karta borrow money for and on behalf of the family. S/he can spend money for the family without being accountable. The karta also has a say in the partition of the family. He or she can even gift away the movable properties of the family.
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“The Hindu Succession Amendment Act, 2005 gave women equal rights of inheritance, making them coparceners. The karta usually is the eldest coparcener. The logical extension of the law implies that women can also assume the position of a karta,” says lawyer Mala Goel, who was part of the Delhi High Court case representing the oldest surviving female child of a Delhi business family against a younger male cousin.
Malhar Majumder, a certified financial planner, says that usually, an HUF is dissolved if there’s no male coparcener to take over, and there are many families at present that face this issue. This judgment will save many such HUFs, and will let women an equal opportunity to save tax. “This, however, was a case of inheritance. There’s still need clarity on whether women can now start an HUF and whether Income Tax will recognise it,” says Majumder.
According to lawyers, married women can become the Karta as marriage does not alter the right to inherit the coparcenary. But, they say it is still not clear if her children would retain the same right in the family of her father.
Before the recent Delhi High Court ruling, there have been divided opinions on women as a karta in an HUF. Courts have ruled in favour of women being a karta only under certain circumstances. For example, if a male karta passes away and there’s no adult male member in the family to take his position, the wife can assume role of a karta until a male member becomes an adult.
HUF has been a subject matter of litigation as many wealthy families transfer assets to it for taxation purpose.
Vijay Dhingra, Partner, Deloitte Haskins & Sells, explains that HUF is a good tax-saving tool as it is regarded as a separate legal entity under the tax law and also assessed to tax separately as a distinct legal person. “This implies that a person can file two income tax returns — one in a personal capacity and one in the name of the HUF,” says Dhingra. Amarpal Chadha, tax partner at Ernst & Young says that if a person has transferred a rental-yielding property to an HUF, the rent received is taxed under the HUF separately. This gives the benefits to a person of dividing his taxable income between two entities and, hence, he can claim double deductions and expenses in both capacities, thereby reducing his total taxable income and tax liability substantially.