Preferential Treatment of Hindus Under Indian Tax Law: Emphasizing on Grant of Tax Benefit to Hindu Undivided Family

Abstract

This paper is an attempt to understand the preferential treatment granted to Hindus under the Income Tax Act, 1961. The pertinent question involved is whether preferential treatment granted to Hindu under Income Tax Law is justifiable. Hindu Law defines HUF as a family comprising males lineally descended from a common ancestor and includes their wives and daughters. It is an independent taxable entity under the Tax Law and assessed to tax separately as a distinct legal person. Moreover, References of Sec. 80C, 80D, 80G, 80L, 54 of ITA, 1961 are advanced to elucidate HUF as tax saving opportunity granted to Hindu in the form of HUF concept. Deduction and exemption of tax under the act is repeatedly witnessing malpractice under the sheath of “Tax Benefit of Hindu Undivided Family”. The area of concern involved is whether such deduction or exemption would amount to colourable tax evasion in certain cases. Tax Planning under HUF is legitimate and within the framework of law. However, it cannot be denied that use of tax planning in existing sense is colourable and also encourages avoidance of payment of tax as laid down in catena of judgments.