The Income Tax Act provides taxpayers with several ways to reduce their tax liability in an organized and legal way. One such aspect is the creation of the HUF or Hindu undivided family. In this article, you will get to know more about HUF income tax slab. Read on.
A HUF is governed by the Hindu Law Council. It formed by a married couple or members of a joint family. A HUF may be formed by two family members, of whom at least one must be a family man.
However, most people are unaware of the benefits given to the HUF. There are still many undivided Hindu families in India and the accumulated Income is considered joint income.
The most interesting aspect of this fact is that these joint incomes are not imposed on individuals, but on the whole family collectively.
How Is HUF Income Calculated
Here are some steps to calculate income tax from HUF:
- A HUF’s total gross income is calculated based on the status of residence in the four income brackets, just like the general public. For HUF, income may not be reported under the Salary Income heading.
- Articles 60 to 63 regarding the income of another person included in the total income of the beneficiary apply in the case of a HUF, whereas Article 64 only applies in the case of a single beneficiary, Not applicable for HUF.
- Loss offsetting is permitted by aggregating income under different heads of incomes.
- Prior years’ losses can be carried forward and set off to the extent permitted.
- Income calculated in steps 1 to 4 is called Gross Income, from which deductibles u/ss 80C, 80D, 80DD, 80DDB, 80G, 80GGA, 80GGC, 80-IA, 80-IB, 80-IBA, 80 -IC, 80-ID, 80-IE, 80JJA, 80JJAA, 80TTA are allowed.
- Calculate the tax on this gross income at the given tax rate that is at special rates and normal slab rates.
- The remaining income after considering deductions is called Gross Income rounded to the nearest Rupee Ten.
- A surcharge of 10% will be added to total income over Rs. 50,00,000 to 1 crore rupees and 15% of this income tax for persons whose gross income exceeds 1 crore rupees.
- Education tax of 2% plus SHEC @ 1% on the tax plus surcharge if any, will be charged.
- Deduct the TDS and advance tax paid for the relevant assessment year and double taxation relief under sections 90, 90A, or 91. The balance is the net tax payable that will be rounded off to the nearest Rs. 10 and can be paid as self-assessment tax before you submit the return of income.
What Is Basic Exemption Limit for HUF
HUF being an independent entity is specified to a basic tax exemption of Rs 2.5 lakh.
HUF is a legally independent unit. Here, each family has a PAN card and HUF has its own PAN card. HUF can run its own business and generate income. You can also invest in shares and mutual funds.
When calculating income under Capital Income, HUF is also entitled to the following exemptions:
| Section 54 | Capital gains from the sale of residential properties. |
| Section 54B | Capital gains from transfer of farmland. |
| Section 54D | On the compulsory acquisition of lands and buildings. |
| Section 54EC | On the transfer of long-term capital assets |
| Section 54F | On the transfer of certain capital assets where investment is made in a residential house. |
| Section 54G | On the transfer of assets on shifting of an industrial undertaking from an urban area. |
No capital gains increase to an undivided Hindu family (HUF) from the distribution of assets on the division of the undivided Hindu family (HUF) as stated in Section 47 of the Income Tax Act.
What Is TDS Rate for HUF
TDS (Tax Deducted at Source) is income tax that is deducted from amounts paid by individuals who make certain payments such as rent, fees, charges, salaries, interest, etc. when making such payments.
A person making certain payments under the Income Tax Act is required to deduct TDS at the time certain payments are made. However, if the payer is an individual or HUF who does not require an audit of their books, there is no need to deduct TDS.
However, for rent payments exceeding Rs 50,000 per month by an individual or HUF, TDS @ 5% must be deducted even if the individual or HUF is not responsible for the tax audit. Also, the person who needs to deduct TDS@5% and HUF does not need to apply for TAN. The employer will deduct her TDS at the applicable income tax rate. Bank will deduct TDS @ 10%. Alternatively, 20% can be deducted if there is no PAN information.
What Are the 2 Conditions for Claiming HUF Status
A HUF is recognized as a separate taxable unit under the income tax law if the following two conditions are met:
There should be mutual assistance.
Coparcenary is the inheritance of shared heritage or property. Mutual aid is considered to exist in a Hindu undivided family if the right to shared enjoyment, the right to division, and the right to survive in mutual aid are held.
There should be a common family estate consisting of ancestral property, property acquired through the ancestral property, and property transferred by its members.
Ancestral property is the wealth a man has gained from his three immediate male ancestors. it is inherited from fathers, grandfathers, and great-grandfathers.
Finally, it is important to note that family shared income, once assessed in HUF, it continues to be assessed as such in subsequent assessment years till partition is claimed by coparceners.
Which Income Are Not Chargeable to HUF
The following income is not taxed as income from HUF:
- If members convert or transfer their assets into common family assets without reasonable consideration, the family income from these assets is not taxed.
- Indivisible income from property (although it belongs to the family) is taxed in the hands of the property owner, not the HUF.
- A member’s personal income cannot be treated as HUF income.
- Since “Stridhan” is a woman’s absolute property, her income is not taxed as her HUF income.
- The daughter’s personal property income is tax exempt on HUF, even if it is transferred from the daughter to HUF.
What are HUF tax benefits?
- HUF is exempt from taxes up to 2.5 lahks. Therefore, HUF members are entitled to double benefits if they are able to claim income tax exemption on an individual basis and an additional exemption of Rs 25 lakh per annum under HUF.
- According to Section 80C of the Income Tax Act, the HUF can deduct the cost of premiums paid on the life insurance policy of the participant. The maximum deduction allowed under this clause he is Rs 1.5 lakh.
- HUF members are entitled to an additional tax credit of up to INR 50,000 for seniors and INR 25,000 annually for HUF members on health insurance premiums.
Frequently Asked Questions (FAQs):-
Can we claim 80C in HUF?
A HUF has the same income tax slab as an individual with a deductible limit of Rs 2.5 lakh and is entitled to all tax benefits under Sections 80C, 80D, 80G, etc. It also enjoys Section 54 and Section 54F exceptions regarding capital gains.
Is 87A applicable to HUF?
Only residents can apply for a u/s 87A tax refund. This means that HUF and corporations cannot claim this relief.
Is audit compulsory for HUF?
In addition, if the income of the HUF Assessor is alleged to be less than that provided for Sections 44AE or 44BB, an audit must also be conducted under Section 44AB of the Income Tax Act 1961
Is it compulsory to file ITR for HUF?
Each HUF is entitled to taxable income if its gross income (including the income of other persons on which the HUF is taxable) exceeds the maximum non-taxable amount, not applying the provisions of Sections 10A, 10B, and 10BA.
Conclusion
Now as you know about huf Income Tax Slab. You can save tax by forming a family unit and consolidating your assets into one HUF. HUF is taxed separately from membership.