HUF is one of the most effective tax saving strategies in Indian income tax law. Buddhist, Jain and Sikh families are also considered Hindu Undivided Family under the law. An HUF is usually headed by Karta, the senior most member of the family, and is composed of other members or coparceners. An Hindu Undivided Family (HUF) is treated as a separate person under the Income Tax Act. It can own property, earn income, and claim deductions like Section 80C, 80D, and capital gains exemptions, thus helping families legally split income and save tax.
Key Highlights
HUF is a separate person from the family members for tax purposes.
Income of members can be split and shown as HUF income legally, allowing more tax benefits.
Separate Rs. 2.5 lakh under the old tax regime and Rs. 4 lakh under the new tax regime.
What is an HUF?
HUF is a separate person from the family members for tax purposes.
Income of members can be split and shown as HUF income legally, allowing more tax benefits.
Separate Rs. 2.5 lakh under the old tax regime and Rs. 4 lakh under the new tax regime.
What is an HUF?
The full form of HUF is Hindu Undivided Family. It is a separate legal entity under the Income Tax Act, created for tax purposes. Buddhist, Sikh and Jain families are also covered under the ambit of HUF. This is one of the tax saving strategies legally available to joint families. An HUF can own property, earn income, and claim tax benefits independent of its members, helping families reduce their overall tax liability by legally splitting income. The head of the HUF is called the Karta, while the family members are coparceners.
Who are the Members of HUF?
The members of an HUF are common ancestor and all lineal descendants, including their wives and unmarried daughters. An HUF (Hindu Undivided Family) can be formed by a minimum of two members from the same family. The members include:
Karta: The head of the HUF, usually the senior-most male or female member, who manages the family affairs and has unlimited liability.
Coparceners: All male and female lineal descendants of a common ancestor, including daughters by birth, who have equal rights in HUF property and can demand partition.
Other Members: Wives of coparceners become members of HUF after marriage but are not coparceners themselves. They have maintenance rights but no right to demand partition.
Only coparceners can claim partition of HUF, while Karta carries unlimited liability for HUF dues, including tax obligations.
HUF Residential Status
The residential status of an Hindu Undivided Family (HUF) depends on whether it is controlled from India or not.
Resident HUF
An HUF is Resident in India if its controlled and managed from India during the previous year. Partial control ia also considered as control from India.
If the Karta of an Hindu Undivided Family (HUF) is resident and ordinarily resident in India, then the HUF is also treated as resident and ordinarily resident. However, if the Karta is resident but not ordinarily resident, then the HUF is considered resident but not ordinarily resident.
Non – Resident HUF
An HUF is Non-Resident if its control and management are wholly situated outside India during the previous year.
The Bottom Line: The residential status of HUF depends on the residential status of Karta, when it is controlled or managed from India. Otherwise, the HUF is always considered a Non-Resident.
HUF Tax Slabs
HUF income taxes are quite similar to that of individual taxation, except a few differences. The HUF tax slabs are the same as individual taxpayers under both the Old Regime and New Regime. The tax slabs are same for HUF irrespective of whether the HUF is a resident or not, under both the regimes.
New Tax Regime Slabs
FY 2025-26
Under the new regime, the tax slabs of HUF for the financial year 2025-26 are as follows:
Income Tax Slabs Income Tax Rates
Up to Rs. 4 lakhs Nil
Rs. 4 lakhs to Rs. 8 lakhs 5%
Rs. 8 lakhs to Rs. 12 lakhs 10%
Rs. 12 lakhs to Rs. 16 lakhs 15%
Rs. 16 lakhs to Rs. 20 lakhs 20%
Rs. 20 lakhs to Rs. 24 lakhs 25%
Above Rs. 24 lakhs 30%
FY 2024-25
The income tax slabs for HUFs for the financial year 2024-25 are as follows
Income Tax Slabs Income Tax Rates
Up to Rs. 3 lakh Nil
Rs. 3 lakh – Rs.7 lakh 5%
Rs. 7 lakh – Rs. 10 lakh 10%
Rs. 10 lakh – Rs. 12 lakh 15%
Rs. 12 lakh – Rs. 15 lakh 20%
Above Rs. 15 lakh 30%
Old Tax Regime Slabs
Under the old tax regime, the slab rates of the HUF are as follows.
Income Tax Slabs Income Tax Rates
Up to Rs. 2.5 lakh Nil
Rs. 2.5 lakh – Rs. 5 lakh 5%
Rs. 5 lakh – Rs. 10 lakh 20%
Above Rs. 10 lakh 30%
Note:
Relaxed slab rates applicable for resident senior and super senior citizens are not applicable for HUF.
Surcharge and cess will be applicable.
Rebate
It is popularly believed that rebate can be claimed if the taxable income of HUF is below RS. 7 lakhs under the new regime and Rs. 5 lakhs under the old regime (Rs. 12 lakhs under the new regime for FY 2025-26). But it is not true. Rebate is not available for HUFs. It can only be claimed by individuals who are resident. However, there are various tax benefits avilable to HUFs, as follows:
HUF Tax Benefits
HUFs enjoy the same income tax slabs as individuals, with a basic exemption of Rs. 2.5 lakh (old regime) and Rs. 4 lakh (new regime for FY 2025-26). As we already know, the HUF is treated as a separate person for tax purposes. Therefore, income tax slabs, deductions limit are separate for HUFs, apart from the members of HUF. Hence, a part of income can be split from the members and shown as HUF income as appropriate, reducing overall tax liability.
Key tax benefits for HUF include:
Section 80C: Up to ₹1.5 lakh deduction on PPF, ELSS, life insurance, etc.
Section 80D: Deduction for health insurance premiums paid for HUF members.
Section 80G: Deductions on eligible donations made by HUF.
Home Loan: Deduction on interest paid on housing loan.
Capital Gains: Exemptions under Sections 54, 54F, and 54EC on reinvestment of long-term capital gains.
How to Save Taxes by Forming HUF?
Let’s understand how an HUF is taxed with an example –
Mr Rajesh Chopra decides to start an HUF with his wife, son, and daughter as members. The property held by Mr. Chopra earns an annual rent of Rs. 15 lakh which was transferred to the HUF. Mr. Rajesh Chopran Has an income from salary of Rs. 20 lakh.
By creating an HUF, Mr. Chopra can save tax under the New Tax Regime for FY 2025-26 as follows:
Income from Various Sources Individual’s Return HUF’s Return
Income of Mr. Chopra before formation of HUF Income of Mr. Chopra after formation of HUF Income of HUF
A) Salary 20 lakhs 20 lakhs
B) House property rent 15 lakhs – 15 lakhs
C) Standard deduction on house property (30% of 15 lakhs) (4,50,000) – (4,50,000)
D) Income from house property (B-C) 10,50,000 – 10,50,000
Total Taxable Income (A+D) 30,50,000 20 lakhs 10,50,000
(-) Standard Deduction (75,000) (75,000) –
Net Taxable Income 29,75,000 19,25,000 10,50,000
Tax Payable 4,91,400 1,92,400 46,800
Summary comparison of taxes, with and without splitting the income to HUF:
Comparison
Total tax paid by Mr. Chopra 4,91,400
Total tax paid by Mr. Chopra & HUF 2,39,200
Tax saving due to forming an HUF 2,52,200
Due to this tax arrangement, Mr. Chopra saved Rs. 2,52,200 in taxes. The HUF paid Rs. 46,800 tax on the rental income, as the rebate u/s 87A is not available for HUF.
How to Create an HUF?
Forming an Hindu Undivided Family (HUF) is simple and involves steps like creating an HUF deed, applying for an HUF PAN card, opening a bank account, and starting the operations of the HUF.
How to register/create a HUF
One person cannot form HUF, it can only be formed by a family. An HUF can be created upon marriage. It includes the husband, wife and their children.
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HUF Advantages
The following are the advantages of forming an HUF:
Separate PAN and tax savings
Income splitting
Succession planning benefits
HUF Disadvantages
The following are the disadvantages of forming an HUF:
Partition disputes
Complex compliance
Limited applicability
HUF cannot receive salary
Dissolution of an HUF
an Hindu Undivided Family (HUF) can be dissolved through partition, where the assets are distributed among the coparceners (family members with inheritance rights). This partition may be:
Total Partition: All assets of the HUF are divided, and the HUF ceases to exist.
Partial Partition: Only some assets are divided, and the HUF continues for the remaining assets.
For the partition to be legally valid, a partition deed must be drafted, stamped, and registered. The HUF’s PAN card is surrendered to the tax authorities to complete the dissolution process.
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Frequently Asked Questions
Who is the Karta of an HUF?
The head of a HUF is called the Karta, he is the senior-most male member of the family.
Can a Woman be HUF Karta?
Yes! Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF. However, the same has not been incorporated in the Income Tax Act as yet.
If a person is survived by his wife and two daughters, can they form an HUF? Can there be an HUF with only female members?
An HUF can be formed by a Hindu widow and her unmarried daughter, even if the widow has not adopted a son, as the daughter is also considered a coparcener.
Who are HUF Coparceners?
Coparceners are members of HUF who acquire their status by birth in the family.
Can a daughter claim a share in her father’s property where her father had passed away before the amendment made in 2005, giving equal rights to daughters and sons?
No. Both the daughter and the father have to be alive on the date of the amendment for the daughter to get the benefit, irrespective of whether she has been married or not on that date. If the father has passed away before the amendment date, then she wouldn’t have been a daughter on the date of the amendment. Hence she cannot claim a share in father’s property.
Should a HUF always be a resident of India?
It is not necessary that a HUF must always be a resident of India. In case the control and management of the HUF are situated outside India, the HUF would be a non-resident. Where the affairs of the HUF are managed from outside India, the HUF would be a non-resident.
Karta of HUF sits outside India. HUF is managed by the other members residing in India. Will HUF be a non-resident?
The residential status of a HUF is determined not on the basis of where the Karta resides but on the basis of where the HUF is managed from. In this case, though the Karta resides outside India, the HUF is managed by members from India and hence the HUF will be a resident of India.
Can the members of the HUF and the HUF separately claim deduction under Section 80C?
The HUF being a separate taxable assessee, can claim a deduction under section 80C. However, the member and the HUF cannot claim a deduction in respect of the same investment made or expense incurred.
Upon the demise of the Karta, who takes over the title ‘Karta’?
Upon the demise of Karta, the eldest male member of the family becomes the Karta of the family. Even when the deceased Karta’s wife is alive, the eldest son or any other eldest male member of the family will take over that position.
What happens if the eldest male member of the family is an NRI?
A HUF is considered to be a resident of India if the control and management of its affairs happen wholly or partly in India. In some cases, the Karta of the family may be non-resident. The resident status of the family will not change to be non-resident only because the Karta is a non-resident unless the decisions concerning the family are made outside India.
Are there any incomes which are not taxed as income of HUF?
The following incomes are not taxed as income of HUF
a. If a member transfers his self-acquired property to the HUF without receiving proper sale consideration, income from such property is not taxable in the hands of the HUF.
b. Personal income of the members cannot be treated as income of HUF.
c. Income from an individual property of the daughter is not taxable in the hands of HUF even if such property is vested into HUF by the daughter.
Can a HUF get Senior Citizen Benefits?
No, HUF cannot avail of any benefit that is available to the senior citizens. For example, the Karta (senior citizen) can get a health insurance premium deduction of 50,000, but the HUF can only avail of a deduction of Rs.25,000.
Who Can Create a HUF?
A HUF can be created only by a family consisting of a common ancestor and his lineal descendants. Only Hindus, Buddhists, Sikhs, and Jains can form a HUF. The senior most male or female member is traditionally the Karta.
How to open HUF account in Bank?
A bank account in the name of HUF can be opened by submitting the HUF deed, HUF PAN, and relevant KYC documents. Opening a separate bank account in the name of the HUF is necessary for forming a HUF.
Is rebate under Section 87A available for HUF?
No, the rebate under Section 87A is available only to resident individual taxpayers whose total income does not exceed the specified limit. Hindu Undivided Families (HUFs) are not eligible for this rebate.
What is the income for HUF exempt from tax?
Is the new regime’s exemption for income up to Rs.12 lakhs also applicable to HUFs?
No, HUFs are not eligible for rebates under section 87A, which is only available to resident individuals. Therefore, income exceeding Rs.4 lakhs under the new regime and Rs.2.5 lakhs under the old regime is fully taxable for HUFs.
Can HUF earn or receive a salary?
No, HUFs are not legally eligible to receive salaries because they cannot enter into the employer-employee relationship, which is essential for receiving a salary. A salary is a payment for personal services, and an HUF, being a collective entity, cannot provide personal services.
Which ITR form is applicable for HUFs?
ITR-1 is not applicable for HUF, but ITR-2, 3, and 4 are eligible. Choosing the right ITR forms depends on the HUF’s source of income. ” Its copy of Other, Please Draft professional article without changing any meaning or object to avoid copywrite.
- How to create a Hindu Undivided Family in India
- Step-by-step process to form HUF for tax saving
- Best ways to save tax legally using HUF
- Documents required to open a HUF bank account
- How to apply for HUF PAN card
- Tax rules for Hindu Undivided Family
- Who can be the Karta of HUF
- Can women be HUF Karta?
- List of tax benefits available to a HUF
- How HUF helps in reducing income tax
- Difference between HUF and Joint Family
- How to manage HUF property effectively
- How HUF income is taxed
- Limitations of HUF in tax planning
- HUF dissolution rules
- Coparceners in HUF
- HUF inheritance rules
- Ancestral property tax
- HUF partition rules
- Hindu Succession Act
- HUF legal status
- Family wealth planning
- Joint family structure in India
- Tax planning for families
- Hindu law and family property
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