What is Hindu Undivided Family (HUF)?

Under Section 2(31) of the Income-Tax, 1961, a Hindu Undivided Family is recognised as a separate entity separate from the family members it consists of. Hindu Undivided Family consists of members who are descendants of the same ancestors, including wives of the male members of the family and their unmarried daughters. HUF is not created under any law, but it is recognised under the act. HUF is automatically created under Hindu culture. Jains and Sikhs are not governed by Hindu law but are recognised as HUF under the Income-Tax Act, of 1961. When any joint family is considered a HUF under the Act, they will continuously be treated as the HUF until any partition between the members of the family takes place. There should be a joint family consisting of any ancestral property.

What is Ancestral Property?

An ancestral property is a property that is passed on from the upper generation to the lower generation due to the will or death of an upper-generation member. Ancestral Property is generally any property that a male member inherits from his father, his grandfather, and his great-grandfather.

Hindu Undivided Family | HUF Full form, Meaning and Tax Benefits

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What is Hindu Undivided Family (HUF)?

Under Section 2(31) of the Income-Tax, 1961, a Hindu Undivided Family is recognised as a separate entity separate from the family members it consists of. Hindu Undivided Family consists of members who are descendants of the same ancestors, including wives of the male members of the family and their unmarried daughters. HUF is not created under any law, but it is recognised under the act. HUF is automatically created under Hindu culture. Jains and Sikhs are not governed by Hindu law but are recognised as HUF under the Income-Tax Act, of 1961. When any joint family is considered a HUF under the Act, they will continuously be treated as the HUF until any partition between the members of the family takes place. There should be a joint family consisting of any ancestral property....

Tax implications of forming a Hindu Undivided Family

HUF is taxed separately from its members. Along with Hindus, Jains, Sikhs, and Buddhists can also form HUF by creating a family unit and pooling their assets together. HUF has a separate PAN number and files tax returns separately from its members. HUF and its members, both can claim deductions under section 80C....

How is HUF taxed?

As HUF is taxed separately from its members and is treated as a separate entity, it can claim deductions under section 80C, the same as an individual. HUF has a separate PAN number and files tax returns separately. HUF is taxed the same as an individual. Investments can be made from the end of HUF. HUF can provide salaries to its members if they are working towards the functioning of the HUF. This salary will be treated as an expense from the end of HUF and will be deducted from its income in case of accounting treatment. HUF can take insurance policies for its members....

How to form a Hindu Undivided Family?

Certain conditions need to be followed to form a HUF, some of the conditions include:...

Disadvantages of Forming a Hindu Undivided Family

1. Limited Scope: HUFs are primarily recognised under the Hindu Law and certain provisions of the Income Tax Act in India. This means that only Hindu, Sikh, Jain, or Buddhist families can form HUFs. Other communities or religions do not have these options....