Direct Tax
Consulting
ESG Advisory
Indirect Tax
Growth Advisory
Internal Audit
BFSI Audit
Industry Audit
Valuation
RBI Services
SEBI Services
IRDA Registration
AML Advisory
IBC Services
NBFC Compliance
IRDA Compliance
Finance & Accounts
Payroll Compliance Services
HR Outsourcing
LPO
Fractional CFO
General Legal
Corporate Law
Debt Recovery
Select Your Location
Country people are always been encourage with a number of benefits and awards to file and pay Income tax. After all, it is a small contribution of each people in the country to uplift the basic infrastructure and make the country move towards prosperity and developed. Therefore being a responsible citizen of the country, people should pay their income taxes on time and should not avoid paying it. However, it is pertinent to note under the provision of the Income Tax Act, 1961[1] there are possible opportunities to save Income tax, and then it is prudent to claim such benefits of such provision.
Table of Contents
HUF stands for Hindu Undivided Family [HUF], is a separate unit like an Individual and assessed accordingly. It is eligible for those exemptions available to resident Indian who is not a senior citizen. HUF can own property and also have its own Business Plan.
The HUF includes those persons who, by birth, acquire an interest in some joint family property. It also includes all lineal descendants of these persons, and their wives, and children, both sons and daughters.
To understand the Save income tax benefits (we are not discussing the wealth tax benefits, as they too are available) additionally available by forming a HUF, let us take an example of a family, which is now common, the nuclear family.
Varun is married to Supriya and has two minor children, Janaki (daughter) and Bharat (son). Varun’s annual income is Rs. 10, 00,000 and Supriya Rs. 10, 00,000. Varun has inherited an ancestral property, an apartment, which is on rent (annually Rs. 3, 00,000).
If Varun forms a HUF, with him the Karta (head of the HUF), his children will be called coparceners and his wife will be a member. The first benefit Varun will have that the rent income of Rs. 3,00,000 which was hitherto assessed as part of his income and now be carved out and shown as HUF income and the HUF will be assessed separately as another entity and will have the benefit of the exemptions of IT Act similar to those received by Varun.
Also, Read: How HUF can help you in Saving Income Tax?.
This will lead to a substantial reduction of Income-tax being hitherto paid by Varun and the HUF will pay a much smaller amount of Income-tax on this income of Rs. 3, 00,000/- after enjoying the exemptions available. Also, the gifts received by the coparceners/member (beyond the exemption limit) can be shown as received by the HUF, thereby reducing the income tax burden of both Varun and Supriya.
The formation of HUF can be done as per below instruction or steps:-
It should be properly named & for the most bank account is required on its name. Rubber Stamp required carrying the name of HUF and that of Karta. To register the same in Save Income Tax Department required applying for PAN and TAN.
It is helpful to save tax but the asset transferred to it remains with it and distributed only on the full fledge partition of HUF, the property can be shared by the coparceners. The property inherent by HUF or acquired during the time the same will be termed as HUF property and that HUF property cannot be mentioned in the WILL. In the case of HUF, the ancestral property transferred to HUF will remain part of HUF and Karta later cannot transfer to his wife or son or daughter.
Any tax planning should be guided from professional dealing it regularly otherwise the same can be termed as evasion by authority hence it is as always advisable to get good tax planner, well versed in doing his/her transaction in case of HUF so that informed decision can be taken about the formation of HUF.
Our Recommendation: All Types of Income Tax Return Filing In India.
With the rising inflation rates and various other economic factors, wealthy Americans are incre...
Before approaching the new suppliers or any other third parties, you should always go for the v...
With the increasing landscape of Fintech Companies, it is increasingly vital that fintech compl...
This blog gives a detailed description through an audit report for industrial waste by examinin...
On 1st March 2024, the IRDAI came up with a notification via F. No. IRDAI/Reg/5/199/2024 for Bi...
Are you human?: 3 + 9 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Yes, Freelancer also needs to pay the tax in India. Many people don’t like doing a fixed time job and love the fl...
04 Sep, 2019
Section 44AA of the Income Tax Act, along with Rule 6F, mandates books of account for income tax. These books of ac...
13 Sep, 2022
Chat on Whatsapp
Hey I'm Suman. Let's Talk!