What is the process of dissolving an HUF (Hindu Undivided Family)?

economictimes.indiatimes.com:

I am the karta of an HUF, which has investments in mutual funds as well as equity, all in demat format. If I hold these accounts in this format, after my death what would be the process of transfer of assets and holdings to the surviving members of the HUF? Would there be tax liability on the gains after transfer? If I want to dissolve this HUF during my lifetime, what is the process? What will be the tax liability on the portfolio holding gains? Will these holdings be transferred, or can these be transmitted?

Rajat Dutta, Founder & Initiator, Inheritance Needs Services: Karta is just a signatory (usually the oldest surviving male coparcener) of an HUF. On the demise of the karta, there is no case of transmission as the next seniormost male coparcener becomes the karta.

As there is no transfer, so no incidence of tax would arise. Under the Hindu law, only a coparcener can become a karta of an HUF. After an amendment in 2005, daughters are also considered coparceners and, hence, can become a karta, if there are no male coparceners or if the male members are not desirable or ready to be the karta.

Partial partition is not recognised under the Income-tax Act, so the karta will have to carry out partition/distribution of all the movable and immovable assets owned by the HUF. So, all the assets and investments would need to be distributed among the coparceners by either selling the assets, whereby the incidence of capital gains would arise at the HUF level (which is pre-distribution), payable by the HUF. After this, the distribution of the proceeds, net of tax, would be carried out among all eligible members.