As per the Income Tax Act, 1961 (“the Act”), Hindu Undivided Family (HUF) is a separate legal entity and has an identity as an artificial person which is managed and controlled by its Karta & other Coparcener. HUF can be used as a means of effective tax planning. The HUF status for a Hindu, assumes importance because of the tax benefits associated with the income tax and wealth tax laws.

Though it has a separate identity, the income of the HUF is eligible to the same slabs and basic exemption limit as available to an individual. The HUF is also eligible for deductions under Section 80C. If an individual has personal income and also HUF income, then both the income would be assessed separately. He would be entitled to have basic exemption limit both for himself as well as for his HUF. Besides, he would also be eligible for further deduction of Rs. 100,000 u/s 80C.

The individual wealth of an individual is eligible to a general exemption of Rs. 30 lakhs under the wealth tax act; the HUF’s wealth is also eligible to get separate general exemption of Rs. 30 lakhs. Hence, persons having immovable property and other assets under HUF status would enjoy separate exemption under Wealth Tax Act as well.

Any income received by an individual as a member of the HUF out of the income of the family or out of the income of the estate of the family, is not taxable and exempt u/s 10(2) of the act.

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