What is HUF & Its Benefits?

HUF stands for Hindu Undivided Family. Under Indian law, a HUF is recognised as a distinct or separate legal entity, just like a person. Families can form a Hindu Undivided Family (HUF) by pooling their resources. The HUF is then taxed separately from the individual members.

This article discusses what HUF meaning is, what its benefits are and how HUF can save tax.

What is the HUF Definition?

The HUF meaning is Hindu Undivided Family. Hindus, Jains, Sikhs, and Buddhists who descend from a common ancestor can form a Hindu Undivided Family (HUF). HUF is treated as a separate entity or person under the Indian law.

HUF definition includes the following:

• Karta: Karta is the head of the HUF.
• Members: These include all individuals in the family, such as grandparents, fathers, sons, grandsons, and wives, among others.
• Coparcener: This is a subset formed by members who acquire their status in the HUF by birth, including both sons and daughters.

What are the Benefits of HUF?

The benefits of forming a HUF include:

1. HUF tax benefits: As a HUF is a separate taxable entity (with deductions and exemptions), the overall tax paid by the members and the HUF can be reduced.

2. Estate Planning: A HUF facilitates a smooth transfer of property and wealth to future generations.

How HUF can Save Tax?

The following HUF features allow you to avail of HUF tax benefits:

1. Tax exemption: HUF enjoys the same tax exemption up to INR 2.5 Lakhs. This is in addition to the tax exemption enjoyed by the individual members.

2. Tax exclusion: For a HUF, income from the property transferred by a member to the HUF, income from women's personal property vested into HUF, and income from the impartible estate are not taxable.

Hindu Undivided Family, meaning HUF, is a unique formulation under Indian law for Hindu, Jain, Sikh and Buddhist families. By forming a HUF, a family can take advantage of various HUF tax benefits on their investments.

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