HUF

The expression “Hindu Undivided Family” has not been defined under the Income Tax Act or in any other statute.HUF stands for Hindu Undivided family governed under Hindu law board and could be formed by a married couple or by members of a joint family.

The expression “Hindu Undivided Family” has not been defined under the Income Tax Act or in any other statute.HUF stands for Hindu Undivided family governed under Hindu law board and could be formed by a married couple or by members of a joint family. HUF could be formed by two members, at least one among whom should be a male member of the family. A senior-most male member of the family would become ‘Karta’. Although it is governed by the Hindu law board, it can be formed by Jains, Sikhs and Buddhists as well.

• Every member of the family can deposit their income in the common corpus.
• Corpus can be used for investment in tax-free money instruments.

• Single person’s authority while participation from the entire family.
• The Income Tax Act and Wealth Tax Act recognize the HUF as an independent assessable or taxable entity. Hence, HUFs enjoy all deductions and exemptions under the IT Act independent of the income and tax liabilities of its members.
• Tax Saving- For example- an ancestral property that yields rental income. Under normal circumstances, the rent will be attached to a person’s income and will be taxed according to that individual’s tax slab. However, if it is transferred to a HUF, the income will be that of the HUF’s and will be taxed separately. Let’s take an example. Say, person A earnsRs.9 lakh per year and has an ancestral property, which yields Rs.3 lakh as annual rent. If A got the property from his father, while calculating his tax liability, both incomes will be clubbed and taxed in his hands. Assuming that A has no investments and does not consider education cess and surcharge, he will be subject to a tax of Rs.1.85 lakh (30% slab for the assessment year 2015-16). If the property is transferred to a HUF of which A is, say, the Karta, then under the same assumptions, A will pay Rs.1.05 lakh as individual tax and the HUF will pay Rs.5,000 as tax. So, in all, there will be a tax saving of Rs.75,000. The rent becomes tax-free in the hands of the Karta, which is A here, and for the other members as well.
• Corpus can be divided only on the agreement of every coparcener of the family.
• Gifts collected up to a worth of Rs 50,000 will be tax-free. A father who owns a HUF account can gift a property or money of higher worth to a son who owns a smaller HUF account, but he should specify that the gift is for the son’s HUF and not to him as an individual. Under sections 64(2) and 56(2) tax benefits can be enjoyed in such instances.

• Under the Income Tax Act, an HUF is a separate entity for the purpose of income tax return.
• The same tax slabs are applicable to HUF as to individual assessee.
• You can not transfer your own assets/money into HUF.
• If you have ancestral property and earning some income from this property, then it is better to transfer this asset to HUF and save tax up to exemption limit applicable to individual.
• You can transfer the money received on sale of ancestral property /assets into your HUF.

Registering a Private Limited Company is an easy process but to achieve it the mentioned below documents are required.

Identity proof of the director and nominee, it can be their aadhar card, voter card, PAN card, driving license, etc.

For More Detail about the Documentation of Private Limited Company. Contact us