What is HUF? | How to create HUF? | How to form HUF?

What is a HUF?

HUF means Hindu Undivided Family. You can save taxes by creating a family unit and pooling in assets to form a HUF. HUF is taxed separately from its members. A Hindu family can come together and form a HUF. Jains, Buddhists, and Sikhs can also form a HUF. HUF has its own PAN and can files tax returns independent of its members.

How is HUF taxed?

• HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.

• Deductions under section 80 and other exemptions can be claimed by the HUF in its income tax return.

• HUF can take an insurance policy on the life of its members.

• HUF can pay a salary to its members if they contribute to its functioning of the HUF. This salary expense can be deducted from the income of HUF.

• Investments can be made from HUF’s income. Any returns from these investments are taxable in the hands of the HUF.

• A HUF is taxed at the same rates as an individual.

• Let’s understand a HUF is taxed with an example – After the death of his Mother, Mr Shirish Gulati decides to start a HUF with his wife, 2 son, and 3 daughter as members. Since Mr Shirish Gulati  had no siblings, the property held by his Mother was transferred in the name of the HUF. The property held by late Mrs Gulati  earns an annual rent of Rs 17.5 lakhs. Mr Shirish Gulati  has an income from salary of Rs 25 lakh. By creating a HUF, Mr Shirish Gulati  can save tax.

How to form an HUF?

As there are tax advantages of forming an HUF, you must also meet some conditions –

• One person cannot form HUF, it can only be formed by a family.

• A HUF is automatically created at the time of marriage.

• HUF consists of a common ancestor and all of his lineal descendants, including their wives and unmarried daughters.

• Hindus, Buddhists, Jains and Sikhs can form HUFs.

• HUF usually has assets which come as a gift, a will, or ancestral property, or property acquired from the sale of joint family property or property contributed to the common pool by members of HUF.

• Once a HUF is formed it must be formally registered in its name. A HUF should have a legal deed. The deed shall contain details of HUF members and the business of the HUF. A PAN number and a bank account should be opened in the name of the HUF.

FAQ:

Is basic salary taxable?

It excludes bonuses, overtime pay or any other potential compensation from an employer. The whole amount of basic salary is part of the take-home salary. Basic salary is fully taxable. ... Other salary components like Gratuity, Provident Fund and ESIC are determined according to the basic salary.

what is hindu undivided family

What is tax free salary?

# Any cess, commission, perquisites or profits in lieu of or in addition to salary or wages. ... # Salary paid tax free - Tax free salary means the salary on which income tax is borne not by the employee but by the employer. Tax free salary is also taxable in the hands of the employee.

 hindu undivided family property division

Who comes under Hindu undivided family?

An HUF is a family which consists of all persons lineally descended from a common ancestor, and also the wives and daughters of the male descendants. It consists of the karta, who is typically the eldest person or head of the family, while other family members are coparceners.

 hindu undivided family income tax slab

What are the advantages of Hindu undivided family?

The major advantage of creating a Hindu Undivided Family Account is that the family gets an extra PAN Card and can split the family income and thereby resulting in tax saving and reducing the tax outgo. This is the major reason why CA's advise their clients to create a HUF and save taxes of upto Rs.

 hindu undivided family law in india

Can husband and wife form HUF?

A husband and wife can form an HUF but a wife can only be a member, not a co-parcener. Therefore, the HUF income will not be assessed separately. A member has equal rights but only a co-parcener can demand the partition of the HUF. ... "The HUF is not an individual, so it has no relatives.

 hindu undivided family meaning in marathi

How is HUF taxed?

Since the HUF is a separate entity, it cannot earn income from salary. Further, all income that arises on the investment of the HUF's funds and utilisation of its assets is regarded as income and is separately assessed and taxed. On the income earned, the HUF is taxed on the same slab rates applicable to an individual.

hindu undivided family property

Is HUF only for Hindus?

A Hindu undivided family or HUF is a legal term related to the Hindu Marriage Act. The female members are also given the right of share to the property in the HUF. The term finds reference in the provisions of the Income Tax Act, but the expression is not defined in the act.

 hindu undivided family

What do u mean by HUF?

Concept of HUF

The term 'Hindu Undivided Family' has not been defined under the Income Tax Act. It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters.