HUF, a Way to Save Income Tax (Under Hindu Undivided Family Act)
1. What is a HUF? HUF means Hindu Undivided Family . You can save taxes by creating a family unit and pooling in assets to form a HUF. HUF is taxed separately from its members. A Hindu family can come together and form a HUF. Buddhists, Jains, and Sikhs can also form a HUF. HUF has its own PAN and files tax returns independent of its members. 2. Tax implications of forming a HUF How to save tax by forming an HUF? A HUF is taxed separately from its members, therefore, deductions (such as under Section 80) or exemptions allowed under the tax laws can be claimed by it separately. For example, if you and your spouse along with your 2 children decide to create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C. HUF is usually used by families as a means to build assets. Let’s understand in detail. How is HUF taxed? HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate