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What is HUF?
HUF means Hindu Undivided Family. A Hindu family can come together and form a HUF. Buddhists, Jains and Sikhs can also form a HUF.
The Hindu Undivided Family is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961, for the purpose of assessment under the Act. HUF has its own PAN and files tax returns independent of its members. HUF is taxed separately from its members. It has a separate tax presence.
HUF is governed under Hindu law board and could be formed by a married couple or by members of a joint family.
Who are the members of HUF?
HUF could be formed by two members and at least one among them should be a male member of the family. The Senior most male member of the family would become ‘Karta’. The other person in the HUF are coparceners/Members.
How to create HUF?
HUF could be created keeping in mind the legal and financial requirements. A HUF is created through executing a deed, getting HUF PAN and opening a bank A/c in the name of HUF.
How to introduce capital in HUF?
Ancestral property: The Ancestral property can be transferred to the HUF to create capital of the HUF.
Gifts received from non- relatives: Gifts received from non-relatives up to the limit of Rs. 50,000 is exempted from levy of any tax.
Gifts received at the time of marriage: Gifts received at the time of marriage of any member of the HUF are fully exempted from the levy of Income Tax. However, gifts received at the time of marriage of daughter are not exempted and are taxable.
• Gifts received from members of the HUF: If a gift is received from members of the HUF, then the income generated from these funds would get clubbed and taxed in the hands of the member making the gift. However, if this income is invested in tax-free instruments, the members making the gift will not have to bear an extra tax burden as the income is already tax free.

How can we get tax benefit from HUF?
Since the account is equivalent to an individual’s account, there are various HUF tax benefits:
• Income tax benefits: The income tax slab for HUF is same as that of an individual, with an exemption limit of Rs 2.5 lakh which implies that an individual can take an extra benefit of Rs. 2.5 Lakh.
• Rental income from property: Rental income from a property could be received on behalf of a HUF instead of an individual account. HUF can avail an extra benefit of Standard deduction.
• Business Income: Profits generated out of the family business, in the name of a HUF, shall be taxed accordingly and exemptions will give more leverage on tax saving.
• Remuneration to Karta and members: Remuneration to Karta and other family members is an allowable deduction from the income of an HUF.
• Life Insurance: HUF can pay Life Insurance premium for individual members and claim tax benefits under Section 80C. The maximum amount that can be claimed as a deduction under this section is Rs 1.5 lakh.
• Investments: An HUF is allowed to make investments in the tax-saving Fixed Deposits and Equity Linked Savings Scheme (ELSS) to earn tax benefits of up to Rs 1.5 lakh under Section 80C.
• Health Insurance: HUF can claim additional tax benefit of up to Rs 25,000 on Health Insurance premiums paid during the year for family members of the HUF. If the person is a senior citizen, the limit goes up to Rs 50,000.
HUF is not a separate legal entity, but it is a separate tax entity in viewpoint of income tax. By creating an HUF, we can maximize our tax benefits in the long run.