Got Married; create HUF to save tax & format of deed for creation of HUF

Tuesday, May 5, 2009, 5:17
Income Tax
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KEY POINTS IN CREATION OF HUF AND FORMAT OF DEED FOR CREATION OF HUF

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

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

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

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.

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

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

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.

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

The HUF is taxable as separate person under income tax hence one can save tax from basic exemption of Rs. 1.5 lakh. HUF will also gain from the tax slab structure of computing income tax.

Apart from basic exemption of Rs. 1.5 lakh, section 80C deduction up to Rs.1 lakh is also available.

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. 1,50,000 = nil

Rs. 1,50,000-3,00,000 @10% = Rs. 15,000

Rs. 3,00,000-5,00,000 @20% = Rs. 20,000

80C deductions Rs. 1,00,000

Therefore total tax payable for HUF on income of Rs. 5,00,000 is only Rs. 35,000.

If this income of Rs. 5,00,000 is taxed in individual hand @ 30% tax due is Rs. 1,50,000.

Hence, you can save a total of Rs. 1,15,000 by creating an HUF and transferring ancestral property income and other income under HUF.

FORMAT OF HUF CREATION DEEDS

FORMAT-I

DECLARATION

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

That I am Karta of ____________________________________________

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.

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 ___________________

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

WITNESS:                                                                              Signature

1. ————————————–

                                                                                  ————————————

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

—————————————————————————————————-

FORMAT- II

[To be executed on Rs. 100 Stamp Paper in Maharashtra]

DECLARATION OF GIFT MADE BY ________________________

TO THE HINDU UNDIVIDED FAMILY OF ___________________

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)

ACKNOWLEDGEMENT OF GIFT

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)

Tags: exemption limit, hindu, how to create HUF, HUF, income tax act, marriage, tax bracket

44 Comments on “Got Married; create HUF to save tax & format of deed for creation of HUF”

naraynan sethurao wrote on 5 May, 2009, 14:39
I need to download the format and the features of HUF accounts..Can I get it..?
naraynan sethurao wrote on 5 May, 2009, 14:44
HUF accounts provide additional tax saving for those families with income from ancestral properties…I would like to downlowad these articles/formats..can I get it..?
Sandeep Kanoi wrote on 6 May, 2009, 1:21
I am not been able to understand what actually you need. Do u need some more info on HUF?
Umesh wrote on 12 May, 2009, 13:07
Dear sir,

I want to creat HUF A/c. I do not have anyone to gift for my HUF. Can I (karta) give Interest Free loan to my HUF A/c ? If yes, then the bank interest earned by huf will only taxable, if there is no other income/business ? Also what will be effect on my individual IT return ?

Pl reply.
Thanks in advance.
sandeep_kan6931 wrote on 12 May, 2009, 13:41
If you give Loan as Interest Free then it should be out of your interest free fund. Although clubbing provisions not applicable in respect of Loan by Individual to Huf but ITO is surely add the same to income of Individual.

Instead of giving loan you gift the amount to HUF and it will not have any effect on your Income Tax Return.

HUF being a group of Individuals can not have any blood relations , however the existance of HUF is based on existence of Individuals. Without Individuals there cannot be any HUF . As such , in my view the word Relative used in section is also in relation with HUF and gift received from any relative of any member of HUF should not be taxable .
Umesh wrote on 5 June, 2009, 11:03
Hi Sandeep,

Thanks for reply. What is the limit of Gift that i or my any relative can give to my huf ?

Thanks in advance.
Sandeep Kanoi wrote on 5 June, 2009, 18:26
Dear Umesh ,
Please read our article on gift from relative available at following link :- GOT A GIFT FROM A RELATIVE ? NO TAX ON IT
Sunil Mohta wrote on 14 June, 2009, 6:09
Dear sir,
my father died on august 2006,
my three sisters were married before the year 2001,are they still the co parcenors in my fathers h.u.f property,as per the new amendment of 9.9.2005
B.K.ARORA wrote on 24 June, 2009, 4:45
I purchased a flat in Delhi through bank loan, which is now fully paid. The flat is on rent, the income is added with my salary income and taxed. Now I want to create HUF and want to gift this flat to my HUF. Is it possible and how?
saurabh jain wrote on 16 July, 2009, 2:28
I am a married man ,i did not hve any child yet can i make huf for my self. please let me know about the rules how to make huf firm so that zi can tell to my c.a ,as he says that I can not make my huf firm if I did not have any child.
Sandeep Kanoi wrote on 16 July, 2009, 2:31
Child Not Required to create huf:- As per Guwahati High court in the case of Arjun Kumar Jhunjhunwalla & Sons(1997) a Single male member, after marriage can form HUF.

Even with daughter you can form huf:- Even in SC in Surjit Lal Chhabda case has ruled that Male member with wife and unmarried daughter can form HUF.

Also in Madras High Court in the case of R. Subramania Iyer opined that “…Creation of Hindu Undivided Family is a God Gifted phenomenon. As soon as a married Hindu gets a Child, a new HUF, undisputadely comes into existence.
YASHPAL wrote on 3 December, 2009, 3:48
hi thanks for info.can karta and head of huf gift to huf from hid assests.thanks
suman doshi wrote on 29 December, 2009, 15:09
Thanks for detailed information on HUF. May I know one thing ? My father’s HUF is going to be dissolved & partitioned. He has three major sons, their wives, gransons, their wives. Will all these members get the share ? Father really wants to distribute HUF’s assets in above manner.
Anbu wrote on 11 February, 2010, 6:15
I am creating a HUF with my wife, son and daughter. My wife and her grand mother are legal heirs for my in-law properties and shares. In law has immovable property and shares. Both mother-in law and father-in law were passed away. My question is, can i attach/take the assets from in-laws into the newly created HUF?
T.K.Kumar wrote on 17 February, 2010, 3:32
whether Declaration, Declaration of gift made, Acknowledgement are required to be executed on non-judicial stamp paper and what values at Noida (U.P.)? Till HUF is formed, can Karta open savings a/c in a bank anf have PAN?
suresh wrote on 13 May, 2010, 9:28
Thanks for sharing such a information
Mohan wrote on 16 May, 2010, 14:19
I want to know where can a HUF save in regards to section 80c (1 lakh) tax savings. i know we can take NSC but what other can be taken.
Paresh Ravaya wrote on 20 May, 2010, 13:03
my friend father expired on 2/3/2010 & he was having ag.land in his name.after trf. the above property in my friends name,can he create HUF from that date.He is married & having 2 sons also.He is today only individual assessee only & want to create HUF after father death.Please answer ,its urgent.The ag. land was priveously in name of my friends grandfather, then to father & now to his name.
vivekanand wrote on 5 August, 2010, 21:29
i want a loan on my huf from a bank can i have it without any collateral security for my day to day business
HIREN PANDYA wrote on 23 September, 2010, 12:45
In my family, have myself, my wife and one daughter. So, can I create HUF ? There are only three members including karta. Out of one is only daughter.
Himanshu wrote on 17 October, 2010, 12:47
In HUF if Karta is senior citizen then what will be slab?
Is it same as senior citizen, i.e. Exempted upto 2.4 lakh
reply
Himanshu wrote on 17 October, 2010, 13:03
a family business carried by father and a son & family consist of wives of above & grand children
can they form HUF?
mahendra joshi wrote on 20 October, 2010, 18:16
i want to creat my on huf can i creat by gifting my personnel assets into my huf assets.
Hema wrote on 3 December, 2010, 20:48
Can an Individual give personal Asset to his own HUF and create HUF? For Ex: Mr. X gives say 1 lac Re. as Gift to Mr. X’s HUF. X’s HUF consists of Mr.X, Mrs. X, Daughter.
Pl advice.
Hema wrote on 16 December, 2010, 14:07
When will the admin of this site reply?
admin wrote on 16 December, 2010, 15:08
Hi- Maintaining such a big site with no profit motive takes a lots of time so its not possible for me to reply all the questions. Kindly bare with me.
Hema wrote on 16 December, 2010, 17:49
I appreciate your motive and understand your difficulty Sir! Just wanted to know the time frame to expect the answer.
All the Best! Thank You.
admin wrote on 16 December, 2010, 21:56
Why dont you post your question to expert section . Where our expert reply to the questions posted to them
MANOJ wrote on 4 January, 2011, 12:01
cab karta or head of family gift any amount to HUF and in the gift deed what he will write for HUF name. suppose mr. ram is married and wants to create HUF. ram wants to gift rs. 10,00,000 to huf. now in the gift deed what ram will write.
rahul wrote on 20 January, 2011, 10:45
purana HO GAya…………..
update karo
Aman Gupta wrote on 22 January, 2011, 19:29
I have existing H.U.F account formed in 2006.I want to know can my mother who is also member of HUF can gift to
my HUf account what would be the tax implications.
Kiran wrote on 3 February, 2011, 18:30
Dear Sir,

I am getting Income by commission on sale. Can I split the same income in HUF and Indiviual returns ????

Is any problem on spliting income from Income tax point of view ???
Kuashal wrote on 28 March, 2011, 11:10
Dear Mr. Sandeep,

i am having my single and HUF account in HDFC Bank. i would like to have internet banking which include my both account. Now can i transfer my HUF money into my individual account legally. Please guide urgently.
admin wrote on 28 March, 2011, 13:18
To avoid future litigation’s its better to pay from individual account only.
Nitaj wrote on 28 March, 2011, 17:36
Hi,

I already have a HUF, pan card and an account but never got the deed. Can i still get the deed done? Do i need to get the deed?
* Do I need to get it done on Stamp Paper or on a plain paper as shown in the format. Please advise me how to execute it ?
* I dont live in Maharashtra, do i still need to get the DECLARATION OF GIFT MADE?
The ammount was gifted two years back.

Please advise
Sonal wrote on 8 April, 2011, 18:07
Sir,
I would like to ask, if suppose a person doesnot have a son, can he not create an HUF? If answer is in affirmative, then what are the basics requirements that need to be fulfilled?
muralidhar wrote on 17 May, 2011, 18:22
I am married with two sons. if i want to have HUF Status. need i have to register with any regulatory or are there any formats , how do i open abank Account and register myself as an asseesse under IT act as HUf
Rajeshwar Datt wrote on 7 June, 2011, 12:44
Dear Sir !
Can you give the complete details on Formation & running of HUF
mallikarjun wrote on 4 July, 2011, 22:33
sir,
I have a huf account and given interest free loan to my huf account. which my huf has fixed deposit in bank. will there be interest clubbing provision for me in future. also my huf income is less than tax slab so i have not return file for it. pls advice.
Narendra teli wrote on 26 July, 2011, 17:12
dear,
you have given loan to your huf account. Further HUF diposited it into FD or Bank account. It is clear that you transfer your fund/assets to HUF without any or sufician considration so it is your own fund. Subsequently section 64(2) will apply to you. and interest income will be included to you. you self liable to pay tax on interest if your net income is more than limite.
furthe you asked that if HUF has not taxable income than it is essential or not to file return. the section 139(1) says that any indivisual, HUF has net income more than exemption limite is lible to file Income Tax Return. in your case HUF has income not more than exemption limite so you not lible to file return.
Mukund Surana wrote on 26 July, 2011, 18:02
Sir,
That my friend had no parents this time.i want to know than how can he creats huf. they are total 4 members infamily 2+2.
kindly reply
Mukund Surana wrote on 26 July, 2011, 18:05
You can invest 1 Lac in Mutual Fund Tax Plan & enjoy 80 cc benifit
mallikarjun wrote on 28 July, 2011, 9:31
I have taken tax free loan from my dad from his retirement benfits by cheque which i have not paid back. I have put my funds in my huf as tax free loans which can be clubbed under section 64(2) so can i make adeed by my father saying my dad has given the loan amount paid to me as gift to my HUF from date of huf formation. and the rest money which i have given to huf can i make a gift deed by myself karta to my huf and avoid clubbing provision.Give me ur email id or contact no for any further consultancy.
himanshu shah wrote on 1 August, 2011, 16:25
how a salaried person can get benefited with HUF I am any way having tax deducted at source by 30 % Please guide???