How is HUF taxed in India?

The income tax slab for HUF is same as that of an individual, with an exemption limit of Rs 2.5 lakh and qualifies for all the tax benefits under Section 80C, 80D, 80G and so on. It also enjoys exemptions under Section 54 and 54F with respect to capital gains.

How is tax calculated on HUF?

Step 1: The Gross Total Income of a HUF, like any other individual, shall be computed under the four heads of income, with their residential status as the basis.

Computing Income of HUF.

Serial Number Section Nature of Deductions
16 80TTA Deduction in respect of interest on deposits in saving account

How much is tax free for HUF?

And being a separate entity, the HUF enjoys a basic tax exemption of Rs 2.5 lakh. So, imagine that you create an HUF consisting of you, your spouse and two children. In addition to income tax benefits you enjoy individually, you can also avail of an additional basic income tax exemption of Rs 2.5 lakh each year.

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What are the disadvantages of HUF?

Disadvantages of the HUF

  • No outside members other than family members can be introduced to the HUF. …
  • While the Karta has all the power he also has the burden of unlimited liability. …
  • Also, the absolute dominance of the Karta overall business and financial decisions make cause conflict among the HUF.

Who pays HUF tax?

Just like other individuals, even HUF members are liable to pay taxes every year. If the turn over of the business of a HUF member exceeds over Rs. 25 lakhs or Rs. 1 crore, s/he needs to perform tax audit under the guidance of a certified Chartered Accountant as mentioned in the Section 44AB of the Income Tax Act.

Can HUF receive commission income?

So as the property is owned by the Karta, the income cannot be taken in the HUF. As far as commission income earned is concerned it can be shown as the HUF income if the business of commission is carried on in an organized way with a proper business set up.

How HUF can save tax?

Basically the logic behind forming an HUF to save tax is to avail the benefit of an extra PAN Card legally. As the Income of the Family is not taxed in the hands of any specific Individual, a new PAN Card is allotted to the HUF and Tax would be paid by the Family using this PAN Card.

Can HUF claim LIC deduction?

Apart from several other items provided under section 80C, a taxpayer, being an individual or a Hindu Undivided Family (HUF), can claim deduction under section 80C in respect of premium on life insurance policy paid by him/it during the year.

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Can HUF opt for new tax regime?

From FY 2020-21, you can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and fewer deductions/exemptions. We will discuss the features of the new tax regime and how you can benefit from it.

Can HUF claim 80D deduction?

HUF can claim a deduction under Section 80D for a mediclaim taken for any of the members of the HUF. This deduction will be Rs 25,000 if the member insured is less than 60 years, and will be Rs 50,000 if the insured is 60 years of age or more.

How do you earn income from HUF?

Capital added through Income Generation:

It can engage in business, investing in real estate and market linked investment options such as shares, earn income through rent etc. The HUF should file for ITR (Income Tax Returns) and income earned would be taxed as per the slabs.

Can HUF buy car?

Who is eligible for a car loan? A salaried individual, self-employed whether in business or profession are eligible to apply. One can even apply on the name of the HUF, firm, company, etc. to avail of the depreciation (a deductible expense) benefit, under the Income-tax Act.

Can I show my rental income in HUF?

In real life this rent is shown as income of one individual and he pays the tax on it, however a HUF can be formed and the rent can be shown as the whole family income (HUF) and it can be taxed separately.

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Can HUF pay school fees?

Only an individual taxpayer can apply for income tax deductions for tuition fees for his /her school or college going children, provided the school is located in India. HUF is not eligible to apply for income tax deduction on tuition fees. The income tax deduction for tuition fees is applicable for up to two children.

How can I use my HUF money?

The money transferred by the Karta of the HUF may either be treated as loan if the same is intended to be repaid or it can be treated as gift if the money is not intended to repaid. As per Section 56(2) any gift received from specified relatives is tax free in the hands of the recipient.

Can HUF do consultancy business?

It requires a personal “touch” to carry on Consultancy or Commission Income. However, a business establishment can be shown in the name of HUF and it may be shown as carrying on the above said business.