You Can't take money out from HUF except on Dissolution
Transfer of assets to HUF is one-way. You can put assets in the HUF, but these can be taken out only by dissolving the HUF. So, if some asset, such as an ancestral house, has been put into the hotchpot, you will have little control over it. The karta too can distribute the income earned by the HUF but not the assets without dissolving the HUF.
Ask people; how much difficulties Karta faced while trying to Sell HUF's property
Property is an immovable asset. It’s difficult to get a buyer at the right price and at the right time. If the property happens to be owned by an HUF, there are even fewer buyers. "Everybody wants to buy a house with a clear title. An HUF property can have several claimants, which makes the buyer wary," HUF property is usually sold at the time of partition. If this partition is acrimonious and there is a possibility of a legal dispute among co-parceners , selling the property can become virtually impossible.
Family must be unified
It is crucial for the HUF to be unified. Even if one coparcener(Son, Unmarried Daughter, Married Daughter, Kids of deseased daughter or son) decides to sever his ties with the joint family, the entire structure can collapse. "Even if one coparcener demands the partition of the HUF property, the other coparceners will have to agree even though they may not want a partition,"
Partial Partition of HUF's Assets; No more Tax Planning
Till a few decades ago, an HUF could be partially partitioned by giving the prodigal coparcener his share of the HUF property. But in 1978, the law was amended, which made it compulsory for HUFs to partition it completely. "This was done to prevent the misuse of the partitioning facility.
In order to get the partition; Karta needs to get clearance from Income Tax too! People used to split their HUFs and later reunite to save on tax. Now, if there is a demand for partition, the karta will have to sign a declaration and submit it to the tax department informing it about the dissolution of the HUF.
Splitting some assets isn’t easy
If the HUF has only financial assets (stocks, investments, fixed deposits, etc), gold and cash, it can be easily distributed among the coparceners . But if the assets include immovable property or a running business, it is not very easy to split them. Ancestral property may need to be sold to give a share to all coparceners . If some coparceners don’t want to sell ancestral property, they will have to arrange for funds to pay the coparceners who have demanded the dissolution of the HUF. Arranging a huge sum at a short notice may not be every person’s cup of tea.
Additional paperwork
The HUF is a separate legal entity as well as a taxpayer. You need to maintain books of accounts and all the paperwork that goes into the tax planning for an individual. "Most individual taxpayers find it difficult to maintain their own tax documents. How will such people manage if they are to maintain the records of another taxpayer as well?" asks a chartered accountant.
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