This is Part 2 of a three-part series on the Hindu Undivided Family. Part 1 covered who the members and coparceners are and why the Income-tax Act treats the HUF as a separate person. Part 3, tomorrow, deals with how the deceased's share actually devolves.

In Part 1 we established that the HUF exists by operation of law and is assessed as a separate person under section 2(31)(ii). Everything that follows in this instalment turns on that single fact.

When the Karta dies

First, the reassurance: the HUF does not come to an end. Only a partition ends it. The family continues, and so does its PAN.

Who becomes Karta. The eldest surviving coparcener becomes Karta automatically, by operation of law — no election, no appointment, no family resolution. And after the 2005 amendment, the Delhi High Court in Sujata Sharma v. Manu Gupta (2016) held that the eldest coparcener may well be a daughter. Families still write to me proposing to "appoint" a younger son because he lives in the same city. That is not a choice open to them. What they can do is have the eldest coparcener authorise another member to operate specific accounts — a delegation, not a substitution.

What the family must actually do:

• Obtain the death certificate, plus a legal heir certificate where an institution insists.
• Execute a declaration signed by all adult coparceners recording the death and identifying the new Karta.
• On the income-tax portal, replace the Principal Contact / authorised signatory with the new Karta and obtain a fresh DSC in his or her name. The deceased Karta's DSC dies with him. The HUF's PAN does not change.
• Bank: revised HUF letter, fresh KYC and a new signature mandate.
• Mutual funds and demat: "Change of Karta" form with the RTA or depository, death certificate, new Karta's KYC, banker's attestation, and signatures of the surviving coparceners.
• GST: amend the authorised signatory in Form REG-14. Also update TAN records, trade licence, and any firm where the HUF's Karta signs as partner.

Do all of this within weeks, not months. Every one of these institutions freezes operations pending the update, and a frozen HUF account in the middle of a tax year creates its own defaults.

Two returns, not one

This is where families slip. Two separate filings arise in the year of death:

1. The HUF's return for the full year, signed by the new Karta under section 140(b).
2. The deceased Karta's individual return for income up to the date of death, filed by the legal representative under section 159. The heir must first register as Legal Heir on the e-filing portal, then file in the name of "Late … through legal heir …".

Skipping the second is costly. TDS in Form 26AS goes unrefunded, section 234F fees accumulate, and notices under section 148 land on the legal representative, who is personally liable to the extent of the estate received. Banks, insurers and probate courts also want the last filed returns before settling claims.

What happens if the HUF's return is simply not filed

Bereavement is the most common explanation offered, and the department accepts none of it. The HUF is a separate assessee and its obligation under section 139(1) is unaffected by the Karta's death. The consequences stack:

• Fee and interest. A section 234F fee of ₹5,000 (₹1,000 where total income does not exceed ₹5 lakh), plus interest under sections 234A, 234B and 234C on unpaid tax.
• Losses lost permanently. Under section 80, business loss, speculation loss and capital loss cannot be carried forward unless the return is filed by the section 139(1) due date. The year of a Karta's death is precisely when families liquidate shares or property to meet obligations. I have watched a ₹40 lakh capital loss extinguish itself this way.
• Refunds forfeited. TDS on the HUF's deposits and rent sits in Form 26AS and returns to the family only against a filed return.
• The second chance is narrow. A belated return under section 139(4) runs only to 31 December of the assessment year. After that, only an updated return under section 139(8A) — with additional tax of 25% to 70% depending on delay — and an updated return cannot be used to claim a refund or to declare a loss.
• Assessment on the department's terms. A notice under section 142(1) followed by best-judgment assessment under section 144, or a reassessment notice under section 148, leaves the family disputing figures it never disclosed. Penalty under section 270A is 50% of tax on under-reported income and 200% where it is treated as misreported.
• Prosecution. Section 276CC provides for rigorous imprisonment, and the person answerable is the Karta — meaning the new Karta, personally, for a default that began under his predecessor.
• The existential risk. A gap in the HUF's filing record is the easiest handle for an Assessing Officer to contend that the family is no longer joint, and to assess its income in the new Karta's individual hands. Under section 171 a partition is not recognised until the officer records a finding; the burden sits with the family. Banks, RTAs and lenders equally want an unbroken run of returns before releasing anything.

If the new Karta genuinely cannot act — abroad, unwell, or a guardian yet to be appointed — section 140(b) permits any other adult member to sign. There is no legal vacuum here. There is only inaction.

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Part 3, tomorrow: what actually happens to the deceased's share. Notional partition, why the widow's position is not what families assume, and what changes when a son dies before the Karta — with worked illustrations.