Sage-Tips

How can HUF help individuals save income tax?

Tax benefits on a HUF account According to IT act, tax rebates and deductions can be availed under sections 80C for HUF account. Gifts collected up to a worth of Rs 50,000 will be tax free. Corpus can be used for investment in tax free money instruments.

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.

What are the advantages and disadvantages of Hindu undivided family?

You can form different taxable units of HUF. Any asset or savings made or insurance premium disbursed by the HUF will be subtracted from the net Income for the tax purpose. One of the major reason most family forms HUF is because they can create two PAN cards and file taxes separately.

What is Hindu undivided family in income tax?

Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under section 2(31)​ of the Income-tax Act, 1961 (herein after referred to as ‘the Act’). 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.

What are the features and advantages of HUF?

Advantages of Creating HUF:

• Just like other individuals, even HUF members are liable to pay taxes every year.
• The head of a HUF has all the power to sign the relevant documents on behalf of other members in her/his family.
• An adopted child may also become a member of the HUF.

How can I get HUF benefits?

However, an HUF can own a residential house without having to pay tax. In addition, it can also avail of a Home Loan to purchase a residential property and get tax benefits up to Rs 1.5 lakh under Section 80C of the Income Tax Act for loan repayment and up to Rs 2 lakh for interest thereon.

What are the two important features of an HUF?

Features of a HUF

• Formation: To begin a Hindu Undivided Family there must be a minimum of two related family members.
• Liability: The liability of all the various co-parceners is only up to their share of the property or business.
• Control: The entire control of the entity lies with the Karta.

Can husband and wife create HUF?

To create HUF, at least two coparceners are required either son or daughter. Therefore only husband and wife cannot create an HUF, unless the property has been received by a coparcener on partition or otherwise. However, there is no impediment to starting a new HUF by gift from family members.

Can HUF show professional income?

Further, a HUF cannot have salary income. Salary income will always be in the name of members. Even if you create a HUF, professional income, and the rental income would be taxable in your individuals’ name only. And also a HUF cannot have salary income.

What is a Hindu Undivided Family (HUF)?

Hindu Undivided Family (HUF) is a distinct legal entity and consists of individuals who have lineally descended from a common ancestor, including their wives and children. Let us see how a HUF is formed and what are its various tax benefits.

What are the tax benefits of rent of land under Hindu Undivided Family?

Furthermore, under the Hindu Undivided Family act, you can enjoy additional tax benefits on the rent of the land. For a HUF member, you can get tax benefit up to Rs. 60,000 to Rs. 70,000. If you are paying 30 per cent of the tax then you can save tax around Rs. 1,80,000 – Rs. 60,000 = Rs. 1,20,000.

How to save tax on HUF in India?

One way of saving tax is by transferring the money received from strangers or family are taken as gifts in name of HUF. So if Ajay starts his HUF called “Ajay HUF” and he is getting some gifts from his father, friends or anyone else, he can ask them to give it to “Ajay HUF” and not Ajay itself.

How a HUF is formed and what are its tax benefits?

Let us see how a HUF is formed and what are its various tax benefits. A HUF is automatically created at the time of marriage i.e. the start of a new family. However, to take benefit of the HUF structure, it needs to be registered via a legal deed containing details of its members & co-parceners.