No son, two daughters abroad: Should I continue my HUF or close it?

With daughters now having the same coparcenary rights as sons under Hindu succession law, many HUF holders are reassessing their succession plans. For senior taxpayers, deciding whether to continue an HUF or distribute its assets requires understanding both legal rights and income tax rules.

Today's Q&A explains such details in response to a query by a reader.

In case the elder daughter does not wish to become Karta, the younger one can become Karta of the HUF. There is no restriction on a non-resident becoming Karta of an HUF. Please note that the children of your daughter are not treated as coparceners of your HUF.

I feel your daughters would not be interested in continuing with the HUF and therefore it is advisable to fully partition your HUF now itself as the income tax law does not recognise partial partition.

Since the HUF does not own any immovable property and only owns shares, it will not be very difficult for you to effect a full partition of the HUF.

Under a partition, you don't need to distribute the assets of the HUF equally amongst all the coparceners, and the distribution can be uneven. Even all the assets of the HUF can be given to a single coparcener to the exclusion of all the other with the consent of all the coparceners.

There are no income tax implications for the coparceners in respect of assets received on full partition as the same are exempt under the income tax laws.

To make the full partition recognised under the income tax laws, you have to make an application to your assessing officer to take the full partition on record.