My client received money from his family HUF during the year. The Assessing Officer wants to tax it in his hands. Is it exempt, and if so is there anything that can take the exemption away?
Section 10(2) exempts, in computing the total income of a previous year of any person, "any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Two qualifications sit on the face of the Act and both are routinely missed. The clause opens with the words "subject to the provisions of sub-section (2) of section 64", so where the family's income is itself income the individual is deemed to derive under the conversion rules of s.64(2), the exemption gives him nothing. And s.171(4)(b) imposes joint and several liability on members for tax on the family's income up to the date of a recorded partition expressly "notwithstanding anything contained in clause (2) of section 10".
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 1962-04-01, reported as Income-tax Act, 1961, s.10(2), as printed on the departmental Year 2024 (No. 2) and Year 2007 pages. It bears on section 10(2), section 10, section 64(2), section 171(4) of the Income Tax Act 1961, in Capital Gains Exemptions, Assessment & Scrutiny and How Tax Law Is Read matters.
The exemption is narrower than practitioners treat it. Its own words require three things: the recipient must be an individual, he must receive as a MEMBER of the family, and the sum must have been paid OUT OF THE INCOME of the family (or, for an impartible estate, out of the income of the estate belonging to the family). Nothing in the clause exempts a sum paid out of the family's capital or corpus, and nothing in it exempts a receipt by someone who is not a member. The two cross-references matter more still. The opening words make the exemption subordinate to s.64(2): if an individual converted his separate property into family property and the family's income from that property is deemed by s.64(2)(b) to arise to him and not to the family, he cannot then take a distribution of that same income and call it exempt under s.10(2). Section 171(4)(b) works the other way round — it is drafted to override s.10(2) — so a member who has taken money out of the family cannot use the exemption as a shield against the joint and several liability for the family's tax up to the date of partition. The library already carries the Tribunal authorities on the receipt side of this clause (Vinitkumar Raghavjibhai Bhalodia, Pankil Garg, Gyanchand M. Bardia); what it did not carry was the statutory text and its two express qualifications.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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As printed on both departmental pages read, section 10 opens: "In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—", and clause (2) reads: "subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Section 171(4)(b), as printed on the departmental s.171 pages, provides that on a recorded partition taking place during the previous year "each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed".
A sum received by an individual as a member of a Hindu undivided family out of the income of the family — or, for an impartible estate, out of the income of the estate belonging to the family — is not to be included in computing his total income. The exemption is expressly subject to s.64(2), and it is expressly overridden by s.171(4)(b) so far as the member's joint and several liability for the family's tax up to the date of a recorded partition is concerned.
Not applicable — this is a statement of statutory text taken from departmental pages. No judicial reasoning is involved.
subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family
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Handle my notice → Ask a CA on WhatsAppSection 10(2) exempts, in computing the total income of a previous year of any person, "any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Two qualifications sit on the face of the Act and both are routinely missed. The clause opens with the words "subject to the provisions of sub-section (2) of section 64", so where the family's income is itself income the individual is deemed to derive under the conversion rules of s.64(2), the exemption gives him nothing. And s.171(4)(b) imposes joint and several liability on members for tax on the family's income up to the date of a recorded partition expressly "notwithstanding anything contained in clause (2) of section 10". This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10(2), section 10, section 64(2), section 171(4) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.10(2), as printed on the departmental Year 2024 (No. 2) and Year 2007 pages. The exemption is narrower than practitioners treat it. Its own words require three things: the recipient must be an individual, he must receive as a MEMBER of the family, and the sum must have been paid OUT OF THE INCOME of the family (or, for an impartible estate, out of the income of the estate belonging to the family). Nothing in the clause exempts a sum paid out of the family's capital or corpus, and nothing in it exempts a receipt by someone who is not a member. The two cross-references matter more still. The opening words make the exemption subordinate to s.64(2): if an individual converted his separate property into family property and the family's income from that property is deemed by s.64(2)(b) to arise to him and not to the family, he cannot then take a distribution of that same income and call it exempt under s.10(2). Section 171(4)(b) works the other way round — it is drafted to override s.10(2) — so a member who has taken money out of the family cannot use the exemption as a shield against the joint and several liability for the family's tax up to the date of partition. The library already carries the Tribunal authorities on the receipt side of this clause (Vinitkumar Raghavjibhai Bhalodia, Pankil Garg, Gyanchand M. Bardia); what it did not carry was the statutory text and its two express qualifications. If it applies to you, the first step is this: Check that all three conditions in the clause are satisfied before claiming it: an individual, receiving as a member of the family, out of the family's INCOME.
As printed on both departmental pages read, section 10 opens: "In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—", and clause (2) reads: "subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family". Section 171(4)(b), as printed on the departmental s.171 pages, provides that on a recorded partition taking place during the previous year "each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed". The matter was decided on 1962-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. A sum received by an individual as a member of a Hindu undivided family out of the income of the family — or, for an impartible estate, out of the income of the estate belonging to the family — is not to be included in computing his total income. The exemption is expressly subject to s.64(2), and it is expressly overridden by s.171(4)(b) so far as the member's joint and several liability for the family's tax up to the date of a recorded partition is concerned.
Not applicable — this is a statement of statutory text taken from departmental pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "subject to the provisions of sub-section (2) of section 64, any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family"
It was decided by the CBDT Circulars & Instructions on 1962-04-01 and is reported as Income-tax Act, 1961, s.10(2), as printed on the departmental Year 2024 (No. 2) and Year 2007 pages. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10(2), section 10, section 64(2), section 171(4), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. A sum received by an individual as a member of a Hindu undivided family out of the income of the family — or, for an impartible estate, out of the income of the estate belonging to the family — is not to be included in computing his total income. The exemption is expressly subject to s.64(2), and it is expressly overridden by s.171(4)(b) so far as the member's joint and several liability for the family's tax up to the date of a recorded partition is concerned. It arises in Capital Gains Exemptions, Assessment & Scrutiny and How Tax Law Is Read matters, on section 10(2), section 10, section 64(2), section 171(4) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the sum came out of corpus rather than income, do not claim s.10(2) on those words; find another footing or concede the point. Where any part of the family's income is caught by s.64(2), do not offer s.10(2) as an answer. The clause is expressly subject to that sub-section. In a recovery proceeding after a recorded partition, do not run s.10(2) against a s.171(4)(b) demand. Sub-section (4)(b) applies notwithstanding clause (2) of section 10. For an impartible estate, note that the clause has its own limb and requires the sum to have been paid out of the income of the estate belonging to the family.
Still good law. Two departmental editions (Year 2007 and Year 2024 (No. 2)) print clause (2) in identical words, differing only in a closing semicolon. No amendment footnote for the clause was read, so no commencement date is asserted. I did not carry out a check of judicial treatment of s.10(2) on this pass; the library already holds three Tribunal decisions tagged to it and this entry states the statutory text and its two express cross-references only. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Clause (2) of s.10 was transcribed this pass from two departmental pages, each printing the Act name "Income-tax Act, 1961" and the section heading "Incomes not included in total income" alongside a "Year:" stamp: https://www.incometaxindia.gov.in/w/section-10-19 (Year: 2007) and /w/section-10-64 (Year: 2024 (No. 2)). Both print clause (2) in identical words, including the opening "subject to the provisions of sub-section (2) of section 64"; the Year 2024 (No. 2) page prints a closing semicolon that the Year 2007 page does not, which is the only difference. Both pages also print the opening words of the section in identical terms. I asked for clause (2) and clause (2A) in sequence, each under its own label, so as to guard against the failure recorded in the brief where a page asked for one clause returned another clause's words; the two came back distinct and correctly labelled. LIMIT: I did NOT read any amendment footnote for clause (2) and I make no statement about when it was last amended; and I did not locate a Year 2025 or 2026 edition of s.10. The cross-reference to s.171(4)(b) was read on the departmental s.171 pages, not inferred. 'decided_on' is the commencement date of section 10, namely 1 April 1962, the date on which the Income-tax Act, 1961 came into force under s.1(3) of that Act as printed on https://www.incometaxindia.gov.in/w/section-1-62 (Year: 2023). I did NOT establish when the opening words "subject to the provisions of sub-section (2) of section 64" were inserted into clause (2) and I assert no date for them. It is not a decision date. 'bench' and 'favours' are inapplicable to a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
A sum received by an individual as a member of a Hindu undivided family out of the income of the family — or, for an impartible estate, out of the income of the estate belonging to the family — is not to be included in computing his total income. The exemption is expressly subject to s.64(2), and it is expressly overridden by s.171(4)(b) so far as the member's joint and several liability for the family's tax up to the date of a recorded partition is concerned.
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