| An individual governed by the Mitakshara school of Hindu law is entitled to convert his self-acquired property through his unilateral action of impressing such self-acquired property or separate property with the character of property belonging to an HUF or throw it to the common pot of the HUF. But such an action is not viewed favourably by the Income Tax Law. It is provided in Section 64(2) that when any individual, who is a member of a Hindu undivided family convert his self-acquired property at any time after 31.12.1969 into HUF property, for the proposes of computation of the total income of such individual the income from the converted property is to be deemed to arise to the individual and not to the family. Because of the clubbing provision it is generally not advantageous for a Hindu to convert his self-acquired property into FIUF property. Rather, the HUF may receive gifts from non- members of the HUF. In the latter case, the clubbing provision would not apply. However, where a full partition is desired and several Hindu undivided families are to be formed by the full partition, it may be effected amongst the members of the family. Then each unit, headed by the major eldest male member with his own wife, and children, will be deemed to constitute a separate HUF. The individual who converts his self-acquired property into HUF property is deemed to have transferred indirectly his property to his spouse or minor child. The property allotted on partition to the major members of the family is not considered to be indirectly transferred by him to them and hence, the clubbing provision after partition does not apply in respect of such partition of the converted assets. A non-resident Indian can take advantage of this aspect of tax planning in those cases where he has grown up children who are in turn married and have their separate branches of HUF and where there is no separate HUF file for them. |
