HUF – Way to Save Income Tax

HUF( Hindu Undivided Family)

HUF means Hindu Undivided Family. You can save taxes by combining assets to create a family association and create a HUF. HUF members are taxed separately. A Hindu family can come together and create a HUF. Buddhists, Jains and Sikhs can also organize HUF. HUF has its own PAN and tax returns regarding its members.

Tax effect of the formation of a HUF

How to maintain tax by creating a HUF



It is subject to separate tax from HUF members. Therefore, the privileges provided under tax legislation (eg Section 80) may be claimed individually. For example, if you and your spouse decide to create HUF with your 2 children, you may be required to pay for all 4, as well as the HUF 80C section. HUF is used as a tool for families to create assets.

How is HUF tax?

  • HUF has its own PAN and returns a separate tax return. A separate Hindu family business organization is created because it has a separate structure from its members.
  • Other exemptions under Section 80 may be claimed by the TFP on income tax.
  • HUF can make an insurance policy related to its members’ lives.
  • HUF can pay its members to their members if they contribute to the work and work of the Indian family business. These salaries can be deducted from HUF income.
  • Investment can be gained from HUF. Revenues from these investments are taxable in the hands of HUF.
  • HUF is taxed individually.

Let’s take HUF to tax with one example – After his father’s death Mr Rachel Çopra decided to become a HUF member with his wife, son and daughter. Since Mr. Chopra was not brothers, his father’s property was transferred to HUF. Property captured by Mr Chopra earns Rs 7.5 lakhs annual rental. Rajesh Chopra earned income from Rs 20 lakh. By creating a HUF, Mr. Chopra can keep the tax, see below.

Want to Form an HUF?

For more information, call  9880052923  or email [email protected].

HUF Form


How to Save Tax by Forming a HUF?

Income from various sources Income of Mr. Chopra before formation of HUF Income of Mr. Chopra after formation of HUF Income of HUF
Salary 20,00,000 20,00,000
House property rent 7,50,000 7,50,000
Standard deduction on house property 2,25,000 2,25,000
Income from house property 5,25,000 5,25,000
Total taxable income 25,25,000 20,00,000 5,25,000
Section 80C 1,50,000 1,50,000 1,50,000
Net taxable income 23,75,000 18,50,000 3,75,000
Tax payable 5,53,625 3,91,400 7,725
Total tax paid by Mr. Chopra & HUF 3,99,125
Tax saving due to forming an HUF 1,54,500

How to Form a HUF?

Although there are tax advantages for creating a TUF, you must meet some conditions –

  • One person can not make HUF. HUF is formed by a family.
  • A HUF is automatically created during the marriage.
  • HUF consists of a common ancestor and all his spouses, including their wives and unmarried daughters.
  • Hindus, Buddhists, Jains and Sikhs can create HUFs.
  • HUF has assets that are usually generated by HUF members, such as gift, will, or parent property or property derived from the joint family property or property acquired in the common pool.
  • Once a HUF has been formed, its name must be officially registered. A HUF should be a legitimate act. Here are the HUF members and information about HUF’s work. A PAN number and bank account must be opened on behalf of HUF.

Disadvantages of a HUF formation

Although HUF seems to be a perfect family tax solution, it comes with its own shortcomings.

  1. Equal rights of members
  2. Section
  3. The joint family system lost their attitude
  4. HUF continues to be evaluated in such a way until division.

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