Meaning of HUF for Tax Purposes

• A Hindu Undivided Family (HUF) is a separate legal entity for income tax purposes.
  
• It consists of individuals who are lineally descended from a common ancestor, including their wives and unmarried daughters.
  
• An HUF is recognized as a ‘person’ under Section 2(31) of the Income Tax Act.
  
• It must have at least two members and a coparcener to be treated as a taxable unit.
  
• HUF status is commonly used to manage joint family wealth and reduce tax liability.
  

Formation and PAN Requirement

• An HUF is formed automatically at the time of marriage and birth of children in a Hindu family.
  
• It must obtain a Permanent Account Number (PAN) to file income tax returns.
  
• A separate bank account and legal identity must be maintained for the HUF.
  
• Income earned from ancestral property or received as gifts can be treated as HUF income.
  
• A Karta (head of the family) manages the affairs and signs tax documents on behalf of the HUF.
  

Taxable Income of HUF

• HUF can earn income under heads such as house property, business, capital gains, and other sources.
  
• Salaries received by HUF members in their individual capacity are not treated as HUF income.
  
• Rental income from jointly owned family property is treated as HUF income.
  
• Business income from ancestral or family-run enterprises can be taxed under the HUF.
  
• Capital gains from HUF-held investments are taxed similarly to individuals.
  

Tax Rates Applicable

• HUF is taxed at the same slab rates as an individual taxpayer.
  
• It is eligible for basic exemption limits, rebate under Section 87A, and surcharges as per income level.
  
• HUF is also liable to pay advance tax if tax liability exceeds ₹10,000 in a financial year.
  
• Income tax return must be filed using Form ITR-2 or ITR-3, based on the nature of income.
  
• Proper books of accounts must be maintained if HUF runs a business.
  

Deductions and Exemptions Available

• HUF can claim deductions under Section 80C to 80U, including for LIC premiums, PPF, and tuition fees.
  
• HUF can invest in instruments like NSC, ELSS, and fixed deposits in its own name.
  
• It can also own insurance policies and property in the name of the HUF.
  
• Interest paid on home loans and donations under Section 80G can be claimed by HUF.
  
• Effective tax planning through HUF can reduce the overall family tax burden legally.