KEY POINTS IN CREATION OF HUF AND FORMAT OF DEED FOR CREATION OF HUF
- Under the Income Tax Act, an HUF is a separate entity for the purposeof 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 propertyand earning some income from this property, then it is better to transfer this asset to HUF and savetax 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. 1.8 lakh. HUF will also gain from the tax slab structure of computing income tax.
- Apart from basic exemption of Rs. 1.8lakh, section 80C deduction up to Rs.1 lakh is also available.
- For example, if you are in 30% tax bracket or you are earning 10lakh and you are transferring your above 5 lakh in huf , then approx tax saving by creating an HUF will be as follows:
- Basic exemption up to Rs. 1,80,000 = nil
- Rs. 1,80,000-4,00,000 @10% = Rs. 22,000
- 80C deductions Rs. 1,00,000
- Therefore total tax payable for HUF on income of Rs. 5,00,000 is only Rs. 22,000. And in individual hand on 5lakh tax will be Rs. 22,000
- If this income of Rs. 10,00,000 is taxed in individual hand @ 30% tax due is Rs. 122000.
- Hence, you can save a total of Rs. 78,000 by creating an HUF and transferring ancestral property income and other income under HUF.
We provide facility to our client on his door step for investment to save taxes for regular investment Our services are :-
- Mutual Funds
- Tax Saving Instruments
- PPF (Public Provident Fund)
- Post Office Saving Scheme
- Life Insurance