The HUF is an account which acknowledges that the particular hindu family is undivided in terms of property, profit or loss in the business etc. It implies for everyone in the family who were at the time of creation of the account and also who were not i.e, people who get married to the family. It does not end with a particular generation and continues forever. It can be brought to an end only when every member of the HUF wants to do that.
Just open a bank account in the name of the kartha (Husband) adding HUF at the end. (xyz huf). Obtain a PAN card. That is all. The HUF is ready..
Key points:
* Under the Income Tax Act, an HUF is a separate entity for the purpose of income tax return.
* The same tax slabs are applicable to HUF as to individual assessee.
* You can not transfer your own assets/money into HUF.
* If you have ancestral property and earning some income from this property, then it is better to transfer this asset to HUF and save tax up to exemption limit applicable to individual.
* You can transfer the money received on sale of ancestral property /assets into your HUF.
* The income from property of HUF can be further invested in instruments such as shares, mutual funds, etc. and will be assessed under HUF.
* Existence of property or multiple members is not a pre-requisite to create HUF. A family which does not own any property may still have the character of Hindu joint family. This jointness is understood in terms of faith and food. This is because as a Hindu is born as a member of the joint family.
* Any gifts received by the members of HUF (birthday, marriage, etc.) can be treated as assets of HUF.
* The HUF is taxable as separate person under income tax hence one can save tax from basic exemption of Rs. 1.5 lakh. HUF will also gain from the tax slab structure of computing income tax.
* Apart from basic exemption of Rs. 1.5 lakh, section 80C deduction up to Rs.1 lakh is also available.
The tax slabs for the FY: 2009-10 for HUF is just like for a Male.
00% Till 1.5 lakhs
10% between 1.5 to 3 Lakhs
20% between 3 lakhs to 5 lakhs
30% over and above Rs.5 lakhs income.
