Save Tax by Creating HUF - Advantages and Limitations. Save Tax by Forming HUF - Taxability, Advantages, Limitations, More Exemptions by Creating HUF, If you know it, you can save it. There are various legal ways to save the tax, out of which one of them is by creating a Hindu Undivided Family (HUF). This way of saving tax is highly beneficial as the HUF is considered to be a separate entity in the eyes of law and so it enjoys the additional limit for taxation. In this article, I have briefly discussed about the HUF, how it is formed, its tax planning, when it is useful to create and many other relevant facts.
Creating HUF
What is known by HUF ?
HUF is an entity which formed under the Hindu Law Board, which can be formed by married couple. There should be at least 2 members in it which may include Husband, Spouse and there children as well. There should be at least 1 male member in HUF. The most Senior person in HUF would be regarded as “Karta”, other will be regarded as members of HUF.How to form a HUF ?
- First of all you need to open a bank account in the name of HUF.
- You should now apply for the PAN card, which would give its legal identity.
- The next thing you need to to do is to generate the capital in the HUF by transferring the ancestral property or any asset which would give HUF to earn income.
Taxability of HUF:
The taxability of HUF depends on what you are carrying out in the name of HUF. The main person in HUF would be Karta. SO his decision would be the final one. The one point you should note that the HUF is an artificial person so you should not have any income as salary to it, as the salary in payable to individuals. HUF can be having the property which can be letted out and receiving some rentals from it and it can also be running the business in its name which would yield him more profit by allowing the deductions. As HUF is having a separate legal entity, it has its own PAN card, which would yield him another basic exemption limit of Rs. 2,50,000. One thing is for sure clear that if the HUF is having the other income except rentals or business profit than it would be clubbed with the income of karta. Now we would see how the tax benefits of creating HUF actually works. Recommended Articles- Tax Treatment of Gifts Received By an Individual or HUF
- Download Affidavit Format for PAN Application of HUF
- Download Latest Income Tax Return Forms – ITR Forms