A Hindu Undivided Family (HUF) is composed of individuals who are lineal descendants of a shared ancestor.
This structure is not exclusive to Hindus; Jain, Buddhist, and Sikh families are also permitted to form HUFs. The recognition of the Hindu Undivided Family (HUF) as a distinct entity for taxation purposes was established in 1917. Since then, numerous families have benefited from the tax advantages associated with this classification.
Here is how you can take advantage of the various tax benefits associated with HUF Account Benefits.
Tax Advantages for Income
A HUF is distinct from a legal standpoint. In this scenario, each family member possesses their own HUF PAN card, while the HUF holds a distinct PAN card. A HUF can operate its own business for income generation. It can additionally invest in stocks and mutual funds. As an independent entity, the HUF Account Benefits from a fundamental tax exemption of Rs 2.5 lakh. Imagine establishing a HUF that includes you, your partner, and your two kids. Besides the individual income tax benefits, you receive, you can also take advantage of an extra basic income tax exemption of Rs 2.5 lakh annually.
Possessing a Home
According to existing income tax regulations, if you possess multiple self-occupied properties, you can only designate one as a self-occupied property. The others are considered ‘let out’, and you must pay tax on imaginary rent. Nevertheless, an HUF Account Benefits is allowed to possess a residential property without incurring tax obligations. Moreover, it can also take advantage of a Home Loan to buy a residential property and receive tax benefits of up to Rs 1.5 lakh under Section 80C of the Income Tax Act for loan repayment, as well as up to Rs 2 lakh for interest paid.
Life Coverage
The Income Tax Act permits individuals to receive tax advantages on specific payments made throughout the year. Comparable advantages apply to an HUF. For instance, a HUF can pay the life insurance premium for its individual members and receive tax advantages under Section 80C. The highest sum that can be claimed as a deduction under this section is Rs 1.5 lakh.
Investments
A HUF Account Benefits can invest in tax-saving Fixed Deposits and Equity Linked Savings Schemes (ELSS) to avail of tax benefits of up to Rs 1.5 lakh under Section 80C. Although a HUF cannot establish a Public Provident Fund (PPF) in its name, it is eligible to receive tax deductions for the contributions made by the HUF into the individual PPF accounts of its members.
Medical Coverage
You can take a deduction of Rs 25,000 annually for premiums paid on health insurance for your family according to Section 80D. Nevertheless, due to the increase in health insurance premiums, this cap may prove inadequate when aiming to offer adequate health coverage for your family. This is where HUF can assist you. You may assert an extra tax advantage of up to Rs 25,000 on health insurance premiums paid annually for HUF family members. If the individual is a senior citizen, the maximum increases to Rs 50,000.
Gifts received
A HUF can receive gifts worth up to Rs 50,000 without paying any tax. A father possessing a HUF account may give property or money of greater value to a son with a lesser HUF account; however, he must clearly state that the gift is intended for the son’s HUF and not for him. According to sections 64(2) and 56(2), tax advantages can be obtained in this situation.
Income Tax Return (ITR) filing
HUF’s income can be used to make investments. The HUF is responsible for paying taxes on any returns from these investments. The same taxes apply to HUF Account Benefits as they do to an individual. A HUF Here is how you can take advantage of the various tax benefits associated with HUF Account Benefits has its own unique PAN, so it can file individual income tax returns (ITR). The HUF can set up a separate joint Hindu family business, as it acts as a separate entity from its members. The same taxes apply to a HUF as they do to an individual.
Salary to HUF Members
HUF is able to pay its members a salary if they participate in the operation of the HUF. This salary cost can be subtracted from the earnings of the HUF.
Loan Facility
HUF Account Benefits is considered a separate entity under Income Tax, and a separate PAN is also issued for the HUF Account Benefits. Therefore, the HUF can earn income through business. For this, if it wants to apply for a loan, then it has the right to avail itself of it for the purpose of expanding its business. Therefore, members of the HUF unit can easily get a loan.
Banking Facility
In India, a savings account can be opened for a HUF in any nearby branch, after which the Karta can apply at the bank and avail themselves of a debit card, credit card, net banking, and a locker, etc. Today, many offers and schemes are issued by various banks in India, and HUFs can avail themselves of all of these.
GST Input Tax Credit
The Goods and Services Tax (GST) consists of a group of indirect taxes unified under a single framework. This aids in streamlining the country’s taxation services, thus integrating the economy of India. By choosing to register for GST, individuals gain a thorough insight into the taxes they pay and collect. This leads to decreased ambiguity and potential misuse within the tax sectors.
Summary
Establishing HUF Account Benefits offers an organized method for overseeing family assets and accessing additional tax advantages. According to Indian legislation, it is acknowledged as a distinct legal entity that enables families to combine resources, oversee hereditary properties, and decrease their tax obligations.