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HUF is best tax saving tool for Hindu families
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HUF Deed Formation
HUF is a separate legal status recognized in Income tax Act, which recognize it as a separate taxable entity. In past when most of businesses were controlled by family and passed generation to generation, HUF was the legal vehicle to carry it to next generation. As the businesses were not under ownership of a single member but the family as a whole used to own it.
Even todays era, HUF formation makes a lots of sense if you are planning to run a business but don’t want to add that income with our own income, HUF makes more sense, If you planning to own a property or business which can support your family after you. Further even in case you have inherited property but don’t want to add it to your personal income, you can own that property by forming a separate HUF and transfer income into that.
HUF basically can be used in two ways during tax planning
Who can form a Hindu Undivided Family (HUF)?
Any Indian Hindu male with another member of family can form an HUF to either run his own HUF or to carry on Proceeds of divided HUF from his father or forefathers.
Who manages the HUF?
Generally the eldest of family known as Karta manages the HUF
Should there be two males to form HUF?
No, Even one male with other members of family can form HUF.
Can a member of HUF form another HUF of himself?
Yes, suppose in a family a son is member in his fathers HUF, Further he can form his own HUF with his wife and other family member.
What is coparcener? Can they demand for HUF partition?
Male members of an HUF are coparcener, recently even daughters are also equaled as coparceners however wives of son are member and can’t demand dissolution. So Coparceners are special members of HUF who can demand partition. However only Member can’t demand partition.
What is procedure to form/register HUF?
Make an HUF deed, Get signature of every member and Karta, Apply for PAN Card, Open a Bank A/c and operate HUF.
Can a coparcener blend his self-acquired property with that of HUF?
Yes, a coparcener can throw his self-earned property with that of HUF by throwing his individual or self-acquired property into family HUF or by impressing such property with the character of HUF property.
Is it necessary for the HUF to have any ancestral property prior to receiving the property from one of the coparceners?
No, it is not necessary for the HUF. Even an empty HUF can receive and hold any property that is thrown into it by the coparcener [As per Madras High Court Judgments)
Can a female member of HUF mix her own property into HUF Property?
No ,This power is only given to coparceners.
Can HUF have 80C deductions?
Yes like individual HUF can have 80C deductions.
Can HUF own property on loan and get deduction for interest paid?
Yes HUF can behave like an individual taxpayer and get all tax benefits including deduction under section 80C, 80D and home loan interest.
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