In India, Hindu Undivided Family (HUF) is a unique concept of joint family business. The HUF is recognized as a separate entity under the Income Tax Act, and its members enjoy tax benefits. In this article, we will discuss the HUF full form, meaning, its features, and tax benefits.
HUF Full Form & Meaning
HUF stands for Hindu Undivided Family, and it is a legal entity consisting of a head or karta, and other members who are lineal descendants or married into the family. HUF is governed by the Hindu law and has its own set of rights and liabilities.
Features of HUF
HUF has the following features:
The assets of HUF are jointly owned by all its members. Each member has an undivided share in the property.
The members of HUF are lineal descendants of the common ancestor, i.e., the grandfather, great-grandfather, etc.
HUF is managed by a head or karta, who is the eldest male member of the family. The karta has the power to manage the assets of HUF and make decisions on behalf of the family.
No limit on members
There is no limit on the number of members in HUF. The HUF can continue for generations with the addition of new members.
HUF enjoys tax benefits under the Income Tax Act. It is treated as a separate entity for tax purposes, and its members can avail tax benefits on their share of income.
Formation of HUF
HUF is created automatically at the time of marriage or birth of a child in a Hindu family. It can also be created by a gift, will, or partition of ancestral property. The HUF can be created with a minimum of two members.
Tax Benefits of HUF
HUF enjoys the following tax benefits:
HUF is treated as a separate entity for tax purposes. It has its own Permanent Account Number (PAN) and files its own tax return.
HUF has a separate exemption limit for income tax. In the financial year 2022-23, the exemption limit for HUF is Rs. 2.5 lakhs.
HUF can claim deductions under various sections of the Income Tax Act, such as Section 80C, 80D, etc.
The income of HUF is taxed separately from the income of its members. However, the income of the minor child of the HUF is clubbed with the income of the parent who earns more.
Hindu Undivided Family is a unique concept of joint family business in India. It is governed by the Hindu law and has its own set of rights and liabilities.
HUF enjoys tax benefits under the Income Tax Act, and its members can avail tax benefits on their share of income. HUF is a good option for those who want to do business or manage their assets jointly with their family members.
FAQs on HUF
- Who can be a member of HUF?
- Any lineal descendant or married into the family can be a member of HUF.
- What is the role of karta in HUF?
- The karta is the head of HUF and manages its assets.
- Can a HUF have a female member as karta?
- Yes, a female member can be a karta of HUF if she is the eldest surviving coparcener.
- Can a HUF be created with a single member?
- No, a HUF requires a minimum of two members to be created.
- Is it mandatory to have a separate PAN for HUF?
- Yes, HUF is treated as a separate entity for tax purposes, and therefore, it is mandatory to have a separate PAN for HUF.
- Can HUF own property?
- Yes, HUF can own property, and its members have an undivided share in the property.
- How is the income of HUF taxed?
- The income of HUF is taxed separately from the income of its members, but the income of a minor child is clubbed with the income of the parent who earns more.
- What are the advantages of HUF?
- HUF provides a unique way of joint family business and asset management, and it also offers tax benefits to its members.
- Can a HUF be dissolved?
- Yes, HUF can be dissolved by a partition of the property or by the death of all its members.
- How can one create a HUF?
- HUF can be created automatically at the time of marriage or birth of a child in a Hindu family, or it can be created by a gift, will, or partition of ancestral property.
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