What is a Hindu undivided family (HUF)?
Reviewed by Ranga & Company
HUF: A Hindu undivided family (HUF) is a family unit of persons descended from a common ancestor, with their spouses, that is taxed as a separate person with its own PAN, slab rates and deductions.
At a glance
- Who can form one
- Hindu, Jain, Sikh and Buddhist families
- Managed by
- The karta (usually the eldest member)
- Members
- Coparceners (including daughters) and other members such as spouses
- Tax status
- Separate taxpayer with its own PAN and basic exemption
- Deductions
- 80C and 80D available in the old regime; standard deduction not applicable
Why families use an HUF
Income from HUF property, such as ancestral property or a family business, is taxed in the HUF's hands, which gives the family another basic exemption limit and another set of deductions. In Jodhpur, it is common for joint family businesses and ancestral properties.
Setting one up
- Execute an HUF deed declaring the karta and members
- Apply for a PAN in the HUF's name
- Open a bank account in the HUF's name
- Bring in assets, typically through a gift or inheritance, keeping clubbing rules in mind
Common mistakes
- Members transferring their own money to the HUF without consideration, which is clubbed back to the member
- Mixing personal and HUF funds in one bank account
Frequently asked questions
Does an HUF need a separate PAN?
Yes. An HUF is a separate taxpayer and needs its own PAN and bank account.
Can a daughter be a coparcener in an HUF?
Yes. Since 2005, daughters have the same coparcenary rights as sons.
Can an HUF claim 80C?
Yes, under the old regime, for payments such as life insurance on members' lives and ELSS investments.
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