Hello Buddies, HUF is Tax Planning tool which includes advantages and disadvantages of HUF. Let’s discuss some of the key important insights on HUF. From basic to advance level of tax planning which ultimately makes you save taxes just by planning is wisely.
What is the meaning of HUF?
HUF means Hindu Undivided Family. Unlike Hindu; Buddhists, Jains, and Sikhs can also form an HUF.
How HUF is created? / Can Husband and wife create HUF?
HUF is formed eventually after marriage of Husband and Wife as Family. You simply execute the HUF deed. Also apply for PAN. Open up Bank Account. You are ready to Go..!!!
HUF is have simple form of Families pooled all assets and investment pool together and run separate entity called HUF. Head of the family has the post of ‘ Karta’ means managing person. Karta if HUF has all executer rights and runs HUF and manages monetary transaction. All the person of the family is either member or coparcener in HUF.
Who manages the HUF?
After the death of HUF Karta, senior most member of Family will becomes Karta of HUF, even woman is senior most member of HUF than she will become Karta as well.
HUF is runs up to 4th generation by default and every member in HUF of first generation has equal rights in HUF. On partition of HUF’s every legitimate legal hire will get their part of wealth.
Is income from HUF is Taxable?
HUF is separate legal entity and having separate PAN No. as well. As HUF is executed the deed as key policy document and opened up separate bank account.
HUF have Business Income and also became partner in Firm.
HUF have Capital gain Income, such income may from Sale of Property, Sale of Investment. So as an HUF you can Invest in Stock market and Mutual Fund.
HUF have Rental Income as well.
HUF is never earn salary or remuneration Income.
As discussed above if any or all of the above income from HUF is more than Rs.250000/- ( means more than basic exemption limit) than HUF is need to pay taxes on income above basic exemption limit.
HUF is also have option to Invest in Section 80C like LIC etc. , Section 80D Mediclaim.
Main advantages of HUF?
- Main advantages of HUF is, HUF is separate legal entity and taxed separately so reduce income taxes.
- Key importance in Joint family succession as HUF structure the Assets and wealth of the Family.
- Key Importance in GST as well, if you operates in business incomes otherwise HUF than plan your Income structures as HUF as to Plan better and simplified compliance.
- No need to execute will.
- Best option for Complex family structures.
- Plan Share Market Investment as separate entity.
Key Disadvantages of HUF?
- HUF property is hard to sell or transfer as any of the member may claim their right in future so people avoid to buy property which is hold by HUF.
- Business are gets impacted if any one of the member ask for partition.
Many more discussion points are still pending in this topics which will be updated timely manner on our Blogs.
Upcoming Topics :
How to execute and create HUF?
How to Apply for HUF PAN Card?
How much money require to set up HUF?
How to register HUF Business?
Thank you for Reading…
Having read this I thought it was very informative. I appreciate you taking the time and effort to put this article together. I once again find myself spending way to much time both reading and commenting. But so what, it was still worth it!