What is HUF?
HUF signifies Hindu Undivided Family. Save taxes by creating a family unit and pooling in assets to form a HUF. HUF is the tax charged separately from its members. A family can come together and Create a HUF. any other may form a HUF like Buddhists, Jains, and Sikhs, etc. HUF has its PAN number and file tax return independent of its members.
Tax implications of forming a HUF
How is HUF taxed?
- HUF has its PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.
- Claim Deductions under section 80 and other exemptions by the HUF in its income tax return.
- Also take an insurance policy on the life of its members.
- And also pay a salary to its members if they help to its functioning of the HUF and this salary expense can be deducted from the income of HUF.
- Investments can be made from HUF’s revenue.
- A HUF is taxed at the same rates as an individual.
How to form a HUF?
While there are tax advantages of forming a HUF, you must also meet some conditions –
- A-One person cannot create HUF; it can only be formed by a family.
- A HUF is voluntarily formed at the time of marriage.
- It consists of a common ancestor and all of his lineal descendants, including their wives and unmarried daughters.
- HUF usually has assets which come as a gift, a will, or property acquired from the sale of joint family property or property contributed to the common pool by members of HUF.