• Mar
  • 25
  • 2015

Create HUF to save tax & Format of HUF Creation Deed

Article ID 7309 | Posted In Income Tax | , | 95 Comments » Print Friendly and PDF

1. Under the Income Tax Act, an HUF is a separate entity for the purpose of income tax return.

2. The same tax slabs are applicable to HUF as to individual assessee.

3. You can not transfer your own assets/money into HUF.

4. 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.

5. You can transfer the money received on sale of ancestral property /assets into your HUF.

6. The income from property of HUF can be further invested in instruments such as shares, mutual funds, etc. and will be assessed under HUF.

7. Existence of property or multiple members is not a pre-requisite to create HUF. A family which does not own any property may still have the character of Hindu joint family. This jointness is understood in terms of faith and food. This is because as a Hindu is born as a member of the joint family.

8. Any gifts received by the members of HUF (birthday, marriage, etc.) can be treated as assets of HUF.

9. The HUF is taxable as separate person under income tax hence one can save tax from basic exemption of Rs. 2.5 lakh. HUF will also gain from the tax slab structure of computing income tax.

10. Apart from basic exemption of Rs. 2.50  lakh, section 80C deduction up to Rs. 1.50 lakh is also available.

11. For example, if you are in 30% tax bracket, then approx tax saving by creating an HUF will be as follows:

  • Basic exemption up to Rs. 2,50,000 = nil
  • Rs. 2,50,000-5,00,000 @10% = Rs. 25,000
  • Rs. 5,00,000-10,00,000 @20% = Rs. 1,00,000
  • 80C deductions Rs. 1,50,000
  • Therefore total tax payable for HUF on income of Rs. 6,50,000 is only Rs. 25,000.
  • If this income of Rs. 6,50,000 is taxed in individual hand @ 30% tax due is Rs. 1,95,000.
  • Hence, you can save a total of Rs. 1,70,000 by creating an HUF and transferring ancestral property income and other income under HUF.
12. We should also keep in mins the latest amendment vide Finance Bill 2012 by which it proposed to tax all unexplained Income in Return of Income @ 30% without giving basic Exemption limit from A.Y. 2012-13 – Read More – Budget 2012 – No Basic Exemption on Unexplained Income – To be taxed at 30 percent




I, ____________________________ son Of ___________________________________ Residing at ____________________________________________ aged ___Adult do hereby declare-


  1. That I am Karta of ____________________________________________


  1. That I received on behalf of the H U F gift of Rs. ___________ by way of CASH/CHEAUE from my FATHER ________________________________(name of relative of karta of HUF)   on  dt. _______________ this formed the corpus of the HUF.


  1. That the HUF at present is consisting of the followings members-



I)                   Shri _____________________, Adult, Residing at _________________

II)                 Smt. _____________________, Adult, Residing at _________________

III)              Kumari _________________-Minor, Residing at ___________________


  1. That the above statements are true to the best of my knowledge & belief. Declare this on  _________________


WITNESS:                                                                              Signature



1. ————————————–


2. ————————————–                                   (_____________________)




[To be executed on Rs. 200 Stamp Paper in Maharashtra]

 DECLARATION OF GIFT MADE BY ________________________


I, _____________________________, residing at _______________________ ____________________________________________________________, do hereby declare and affirm as under:

1.       That out of natural love and affection borne by me towards the Hindu Undivided Family of ______________________________,  I have made a gift of Rs.______ (Rupees _________________ only) as per the following details:


By Cheque No.________, dated __________, drawn on Bank ____________________,  ________________ Branch, in favour of ________________________ HUF.

2.       The above Gift has been duly accepted by ________________________,  as Karta of his Hindu Undivided Family and has been duly acknowledged hereunder.


3.       This Declaration of Gift is made to record the fact that I have made this Gift in favour of the Donee as above, who now has the absolute right, title and interest in the gifted amount.


Date: ___________, 200__                                 ___________________


                                                                        (Signature of the Donor)



 I, ________________________, hereby acknowledge having received the above gift made to my Hindu Undivided Family by _________________________.


Date: ___________, 200__                                 ___________________

                                                                        (Signature of the Donee
                                                                        as Karta of his HUF)

(Republished with Amendments)

Also Read-  Creation of HUF – Tax Planning Advantage