KEY POINTS IN CREATION OF HUF AND FORMAT OF DEED FOR CREATION OF HUF

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
FORMAT OF HUF CREATION DEEDS

FORMAT-I

DECLARATION

 

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

—————————————————————————————————-

—————————————————————————————————————-

FORMAT- II

[To be executed on Rs. 200 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)

(Republished with Amendments)

Also Read-  Creation of HUF – Tax Planning Advantage

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101 responses to “Create HUF to save tax & Format of HUF Creation Deed”

  1. Abusufiyan Daud Shaikh says:

    hi send me PDF format

  2. samrat says:

    100 RS stamp paper

  3. Nayi Ravi says:

    how to huf name creation deed format only
    plz
    reply…….ans

  4. Ajitesh Ranjan says:

    hi i can assist you in this matter , please contact me on my
    e-mail efillingajitesh@gmail.com

  5. Rajesh G says:

    We have four floor in a single building and want to gift two floor out of those to HUF,its an ancestry property.

    Which format we should use to form an HUF and to gift property in HUF from individual ?

    Would it be legal as per Income Tax ?

  6. sandeep mankani says:

    Is it neccessary to make a deed everytime one makes a deposit into HUF.

    For examples,

    If my mother gives my HUF account a cheque of eg 2 lacs , Can I deposit it as is or do I need to make a deed to show a proper legitimate transaction.

    Again if I have some amount in FD’S which I want to withdraw and deposit into my HUF account , do I need a to make a deed for that OR can i deposit cheque from mine to my HUF ACCOUNT AS IS.

    Someone was saying with deed the transaction becomes permanent and we give up rights to that money , which cannot be taken back by us . Without deed it is a temporary transaction where one can take back the money any time and there is no legitimacy in transaction.This is then applicable for tax authorities .

    PLEASE ADVISE AS DO NOT UNDERSTAND HOW TO PROCEED.

    • sandeep mankani says:

      Is it neccessary to make a deed everytime one makes a deposit into HUF.

      For examples,

      If my mother gives my HUF account a cheque of eg 2 lacs , Can I deposit it as is or do I need to make a deed to show a proper legitimate transaction.

      Again if I have some amount in FD’S which I want to withdraw and deposit into my HUF account , do I need a to make a deed for that OR can i deposit cheque from mine to my HUF ACCOUNT AS IS.

      Someone was saying with deed the transaction becomes permanent and we give up rights to that money , which cannot be taken back by us . Without deed it is a temporary transaction where one can take back the money any time and there is no legitimacy in transaction.This is then applicable for tax authorities .

      PLEASE ADVISE AS DO NOT UNDERSTAND HOW TO PROCEED.

  7. JANAVI says:

    if income was cross the limit of rs.10,00,000.00 then huf account apply service tax or not?

  8. shefali says:

    hi on wat value of stamp paper should a declaration deed be formed for an huf in new delhi 2) can a woman be a karta even if male is alive 3)if male is karta can it be provided in deed that the woman members also have the authority to manage funds, 4)is huf fd is made in name of karta huf or can be done in name of all adult members, 5)who can an huf make a nominee in its bank fds,6)after an huf is made after wat period can the karta relinquesh his right to management in favour of another member say his spouse who is the senior most after him

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