Minister of State for Finance Pankaj Choudhary. File

The number of Hindu Undivided Families (HUFs) availing tax benefits under the Income Tax Act stood at almost 8.76 lakh in 2022-23, the lowest in at least five years. The impact on their tax treatment under a Uniform Civil Code (UCC) has not yet been examined, the Finance Ministry informed Parliament on July 25.

Responding to a query on whether the Government has assessed the impact of Uniform Civil Code on tax benefits to HUFs in the country from Janata Dal MP Ram Nath Thakur, Minister of State for Finance Pankaj Choudhary said there has been no such assessment “as there is no such Code at present.”

Under the Income Tax Act, an HUF is treated as a ‘person’ and is assigned a separate entity for the purpose of assessment. Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. Jain and Sikh families, even though they are not governed by the Hindu Law, are also treated as HUFs under the Act.

While there were more than 9.25 lakh HUFs who availed tax benefits in 2020-21, this number dropped to around 8.77 lakh in 2021-22 and further to a little under 8.76 lakh families last year.

A salesman watches TV screens during the live telecast of Union Budget 2023 by Finance Minister Nirmala Sitharaman in Ahmedabad on Wednesday.
| Photo Credit: VIJAY SONEJI

The Union Budget 2023-24 has proposed certain changes to the Income Tax search and seizure provisions in view of the increased use of technology and digitisation in the management and maintenance of accounts, digitisation of data, cloud storage and other associated aspects.

Section 132 of the Income-Tax Act pertains to the procedure for the search and seizure to be followed by the agency.

The document said: “In the recent past, due to the increased use of technology and digitisation in every aspect including management and maintenance of accounts, digitisation of data, cloud storage etc., the procedure for search and seizure has become complex, requiring the use of data forensics, advanced technologies for decoding data etc., for complete and proper analysis of accounts.”

Similarly, “there is an increasing trend of undisclosed income being held in a vast variety of forms of assets or investments in addition to immovable property. Valuation of such assets and decryption of information often require specific domain experts like digital forensic professionals, valuers, archive experts etc. In addition to this, services of other professionals like locksmiths, carpenters etc., are also required in most of the cases, due to typical nature of the operations”.

Accordingly, the government has proposed to amend the relevant provisions of the section to ensure that during the course of I-T searches, the authorised officer may be able to requisition the services of any other person or entity, as approved by the Principal Chief Commissioner or the Chief Commissioner, the Principal Director General or the Director-General, in accordance with the procedure prescribed by the Board in this regard, for assistance during the search.

It has also been proposed that during or post search, the officer may make a reference to any person, entity or authorised valuer to estimate the fair market value of the property in the manner prescribed and submit a report within 60 days from the receipt of reference.

If approved, the amendment will take effect from April 1.

“Consequent to the changes in 2021, the assessment or reassessment in consequence to search is now performed under Section 147 of the Act and provisions of Sections 153A and 153B are no longer applicable. The timelines for completing assessment or reassessment in search cases are linked to the execution of the last of the authorisations during such procedure, in order to establish the day of conclusion of search proceedings, and what constitutes as last authorisation is provided in Section 153B,” it said.

As the provisions of Section 153B are no longer applicable, the government has proposed to provide the meaning of execution of last authorisation under Section 132 itself. “This amendment will take effect retrospectively from the April 1, 2022,” it said.