Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961 (herein after referred to as ‘the Act’). HUF is a separate entity for the purpose of assessment under the Act. Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract, it is created automatically in a Hindu Family. Jain and Sikh families even though are not governed by the Hindu Law, but they are treated as HUF under the Act.
In this article, I am covering some important points related to HUF, its taxability and its assessments alongwith format of HUF creation deed.
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 @5% = 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. 12,500.
- 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. 1,82,500 by creating an HUF and transferring ancestral property income and other income under HUF.
Note: An HUF is liable to pay Alternate Minimum Tax if the tax payable is less than 18.5 per cent (including cess and surcharge) of “Adjusted Total Income” subject to prescribed conditions.
12. The following incomes are not taxed as income of HUF:-
- If a member has converted or transferred without adequate considerationhis self-acquired property into join family property, income from such property is not taxable in hands of the family.
- Income of impartible estate (though it belongs to family) is taxable in the hands of holder of estate and not in hands of HUF.
- Personal income of the members cannot be treated as income of HUF.
- “Stridhan” is absolute property of a woman, hence income arising therefrom is not taxable as income of HUF.
- Income from individual property of daughter is not taxable in hands of HUF even if such property is vested into HUF by daughter.
13. An HUF is recognized as a separate assessable entity under the Act. Its income may be assessed if following two conditions are satisfied:
- There should be a coparcenership. In this connection, it is worthwhile to mention that once a joint family income is assessed as that of HUF, it continues to be assessed as such in subsequent assessment years till partition is claimed by coparceners.
- There should be a joint family property which consists of ancestral property, property acquired with the aid of ancestral property and property transferred by its members.
Please note that Property obtained by daughter from joint family property would be her absolute property. Any income therefrom is chargeable to tax in her hands in the individual status only. This will also apply to any legal heir obtaining property in the capacity of a descendent.
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
- —————————- ————————————
- —————————- ———————————–
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
Author Bio
SIR
My father,mother and me are in Govt Job. My younger brother started business with one crore rupees. Now we can make a HUF in name of my father and make business jointly along with my govt. service.
Dear Sir,
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,Please sent a format. ?
Please advise
One Question
Can gift give Anil Kumar to Anil Kumar Huf for New Huf file creating,
means self can give to self karta for new huf file.
thanks
Dear All,
I am a karta of HUF, a operation a firm under HUF in name of M/s Shree Ganesh Engineers & Cosnultants. I want to obtail TAN number in name of my firm. Kindly advice procedures for same.
Regards,
I am a salaried person & want to create HUF to run a business. However, my father is no more & there was no HUF before in my family. Can I form HUF? and how?
I have a HUF status and the family consists of self (Karta), wife and two married daughters. Married daughters are copancers as per amended act of 2005. Can the HUF continue after my death ? IF so, can my daughter be Karta ??
My husband is a salaried employee and we have one son. Can we form a HUF?. We don’t have any business income and do not have any ancestral property
Dear Sir,
Can i transfer or Gift funds from my individual income tax file to my HUF File to avoid tax. i want to make my individual file empty.
Please suggest me.
Thanks & Regards
Pavan Upadhyay
SANDEEP JI
our case is in SRUTINY in which assessee is huf shown as income commission as 500000/- apart from trading income of KEROSINE . A.O wants to add commission income 500000/- in individual capacity and taxed 30 % .PL HELP US WITH SUITABLE CASE LAWS.
Dear sir,
I want to disolve my HUF form before 25 years,benefisiary are my son and two daughter all are major.
Huf also have some agricalture land, can I as a karta dissolve ,sign and execute partition. My question,do I need signature of beneficiary or not..
Please reply on priority .
Thanks
B N Patel
Dear Sir
I have some question about My Income tax return file.
1. I take pan card No. 2009
2. Till Date i not income tax return file due to my income is not taxable up to 31.03.2011
3. I married on Jan 2007 and that time i got aproximate 28 lac cash gift and 20grm Glod items and 8-9Kg silver items. as on marrige Reseption day throw all my friends,relative more than 700-800 member and i recived blesing with my faimaly and my spouse faimly with cash gift as per Hindu marrige custom after marrige giveing by faimly and friends. when i ask to charted accountant he say marrige gift is tax free so you not requier Tax return file.
and i not file.
4. I recived Cash gift by my Uncle( Father’s brother) Rs. 951000/- on 2005.
5. I received cash gift from my mother-in-law Rs. 1100000/- on the time of my doughter brith. 6. Year 2007 i recived cash gift from my father&mother Rs. 25lac. 7. i start lease-licence base agriculture work 45Bigha land and i got 22lac loss in two year for the year 2008-09/200910 . 8. This year i start business and i pay 10lac advance tax. 9. I want to income tax return file for last 5year from 2007-08 to 2011-12 how i file pl. gide me.
Sir
My father expired on 6.11.2010 & he was having ag.land in his name.after trf. the above property in my name,can I create HUF from that date.I am married & having 1 son also.I am 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 grandfather, then to father & now to my name. Is it necessary to transfer ag. land in the name of so created HUF? if yes, how?
I am the karta of my fathers HUF. Now if i want to start an HUF of my own is it possible for one person to be karta for two HUF accounts.
Am getting varied opinions from different Chartered accountants. Thks
I’m the Kartha and have an HUF a/c.
Various deposits have been made by my parents to this a/c as gifts. I have never made an deed so far for opening or operating this a/c (HUF creation deed) nor has any ‘Declaration of gift’ ever been made as the bank never asked for same.
Kindly confirm if both these documents need to be issued for every transcation.
Can any Hindu adult Male create HUF ? Whether a Bengali Bramhin Adult Male will be able to create HUF ? Please advise.
Sir I want to create HUF of my father and my mother has a house property in her individual name. I also have a sister who is married. whether the property in my mother’s name get automatically converted into HUF property and After the death of my mother is it possible that my sister claims the partition out of the said propery, my mother also has a will to transfer the property in my name and the will is registered
Dear Sir
With due respect, I do not think that any deed is required to form an HUF. A HUF is created after marriage and one can receive gifts from anyone. In fact
how a salaried person can get benefited with HUF I am any way having tax deducted at source by 30 % Please guide???
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
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.
Dear Sir !
Can you give the complete details on Formation & running of HUF
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
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?
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
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.
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 ???
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.
purana HO GAya…………..
update karo
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.
Why dont you post your question to expert section . Where our expert reply to the questions posted to them
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.
When will the admin of this site reply?
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.
i want to creat my on huf can i creat by gifting my personnel assets into my huf assets.
a family business carried by father and a son & family consist of wives of above & grand children
can they form HUF?
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
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.
i want a loan on my huf from a bank can i have it without any collateral security for my day to day business
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.
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.
Thanks for sharing such a information
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?
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?
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.
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?
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
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.
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.
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..?
I need to download the format and the features of HUF accounts..Can I get it..?