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 thisproperty, 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. 1.5 lakh. HUF will also gain from the tax slab structure of computing income tax.
- Apart from basic exemption of Rs. 1.5 lakh, section 80C deduction up to Rs.1 lakh is also available.
- For example, if you are in 30% tax bracket, then approx tax saving by creating an HUF will be as follows:
- Basic exemption up to Rs. 1,50,000 = nil
- Rs. 1,50,000-3,00,000 @10% = Rs. 15,000
- Rs. 3,00,000-5,00,000 @20% = Rs. 20,000
- 80C deductions Rs. 1,00,000
- Therefore total tax payable for HUF on income of Rs. 5,00,000 is only Rs. 35,000.
- If this income of Rs. 5,00,000 is taxed in individual hand @ 30% tax due is Rs. 1,50,000.
- Hence, you can save a total of Rs. 1,15,000 by creating an HUF and transferring ancestral property income and other income under HUF.
FORMAT OF HUF CREATION DEEDS FORMAT-I
DECLARATION
I, ________________ son Of __________________ Residing at ______________________ aged ___Adult do hereby declare-
1. That I am Karta of ___________________________________________ .
2.That I received on behalf of the H U F gift of Rs. ___________ by way of CASH/CHEAUE from my FATHER ___________________________(name of relative of karta of HUF) on dt. _______________ this formed the corpus of the HUF.
3. That the HUF at present is consisting of the followings members- I) Shri _____________________, Adult, Residing at _________________ II) Smt. _____________________, Adult, Residing at _________________ III) Kumari _________________-Minor, Residing at ___________________
4. That the above statements are true to the best of my knowledge & belief. Declare this on _________________
WITNESS: Signature 1. ————————————–
——————————— 2. ————————————– (_____________________)
FORMAT- II
[To be executed on Rs. 100 Stamp Paper in Maharashtra] DECLARATION OF
GIFT MADE BY ________________________ TO THE HINDU UNDIVIDED FAMILY OF ___________________ I,_____________________________, residing at_________________________________________________, do hereby declare and affirm as under:
1. That out of natural love and affection borne by me towards the Hindu Undivided Family of_______________, I have made a gift of Rs.______ (Rupees _________________ only) as per the following details: By Cheque No.________, dated __________, drawn on Bank ____________________, ________________ Branch, in favour of ________________________ HUF.
2. The above Gift has been duly accepted by ________________________, as Karta of his Hindu Undivided Family and has been duly acknowledged hereunder.
3. This Declaration of Gift is made to record the fact that I have made this Gift in favour of the Donee as above, who now has the absolute right, title and interest in the gifted amount. Date: ___________, 200__
___________________ (Signature of the Donor)
ACKNOWLEDGEMENT OF GIFT I, ________________________, hereby acknowledge having received the above gift made to my Hindu Undivided Family by _________________________. Date: ___________, 200__
___________________ (Signature of the Donee as Karta of his HUF) •
19 responses so far ↓
CA. Rakesh Gupta // August 13, 2009 at 3:53 pm |
Sir,
This detailed topic on HUF gave me great knowledge on creation of HUF. I m practicing CA here in jammu.
kishoree // August 21, 2009 at 5:16 pm |
sir
this is grateful ifo………….
thanks
Siddharth Kapoor // September 5, 2009 at 10:47 am |
Dear Mukesh,
Thanks for sharing this. I was looking for the HUF deed draft for some time and this is definitely very useful
I have read a number of articles around the benefits of setting up a private discretionary trust if the beneficiaries are minors. In such a case too, the trust is treated as a separate tax identity and one can avail of the Rs. 1.5 lakh basic exemption etc. But the difference compared to HUF is that you can transfer your own assets/money into the trust which would not be allowed in the case of an HUF. But there are some questions which remain open for which I am not able to get answers. Specifically
1. Is it possible to set up a private discretionary trust if there is only one minor beneficiary? Logically, it doesnt seem possible as there wouldnt be any ‘discretion’ in the way the benefits are distributed as there is only one beneficiary. But I still want to check.
2. Is it possible to set up a private discretionary trust with one minor and one unborn child as beneficiaries?
3. If answer to Q2 above is Yes, then suppose the unborn child does not exist at the point of dissolution of the trust, how do we get affected from taxation point of view.
I spoke to a few CAs but no one could give me any concrete information about the same. I was wondering if you have any information on the same and could help me?
Thanks,
Siddharth
K.Gopalakrishnan // October 5, 2009 at 4:57 pm |
It is good and handy to explain some body about HUF and declaration. Thanks a lot.
rakesh bhatt // October 29, 2009 at 11:15 am |
can a ladies member after death of male can create new huf
v. k. jain // November 5, 2009 at 11:37 pm |
mukesh, hi information on your site is useful but some questions are there..
1.who can gift money/others to huf and how much for no tax
2 a person having PAN NO and relative of KARTA but younger ,Can gift how much
money if he is not the member of huf
CA.Kunjar Shah // December 15, 2009 at 11:14 am |
Sir, information is very useful but there are still some question in my mind. Hope I get answer of this.
1. Can Karta of HUF give gift to his HUF at inception of creating HUF? If no, how to get opening capital in HUF?
Rakesh Kumar Dixit // December 18, 2009 at 6:09 pm |
How we can open a HUF account
mukeshrajco // December 20, 2009 at 11:06 am |
First you apply PAN card of the HUF and then open a savings account with any bank. HUF can be created with full partition of the biger HUF or to create a corpus of the HUF you can take gift from your relatives. A format of the gift deed is given on our blog.
Avinash Bhoyar // December 23, 2009 at 4:34 pm |
I got crushial information for creation of HUF, I am begineers in this field of profession, satisfied with the information.
I also need information about how to manage the HUF according to tax planning in this present day scenario.
mukeshrajco // December 24, 2009 at 8:13 am |
Service class can divert his other sources income and income from shares to the HUF account. Business class can use HUF fund as borrowed fund and save tax by paying interest. If you owned immovable property in the name of HUF then you can save tax on rental income also.
KULDEEP RATHEE // December 26, 2009 at 2:46 pm |
sir
this is very useful information.
thanks
vinod katare // January 3, 2010 at 1:12 pm |
realy excellent information
vinod katare // January 3, 2010 at 1:19 pm |
my father has 10 acre ancestor agriculture land and earning 2 lacs per yearfrom it.he is getting 7000 pension also and not paying tax as individual. now atage of 75 he wants to open huf. at present he is getting 3 lacs annual intrest income from earned agriculture income.he has landed rs 15 lacs on loan to public without cheques.how can this 15 lacs amt and 60 tola gold can be shown in huf pls reply
BELA SRIVASTAVA // January 11, 2010 at 7:03 pm |
I like the information provided in the site. they are educative.
VISHWANATH SHELKE // January 22, 2010 at 10:54 am |
its important information for me to forming HUF & opening account in the name of huf.
thanks & regds,
vdshelke
OM PRAKASH SINGH // February 24, 2010 at 1:08 pm |
it is very important information for the created of new HUF account but how to get opening capital in HUF Account ? ……………………………….
SMITA KELKAR // February 26, 2010 at 5:52 pm |
I WANT TO KNOW WHETHER SURAJMAL HUF CAN BE A PROPRIETOR OF SHREEJEE TEXILES. IF YES HOW THE STAMP SHOULD BE FOR OPENING A CURRENT ACCOUNT IN A BANK.
mukeshrajco // February 27, 2010 at 10:19 am |
You can use stamp as
FOR SHREEJEE TEXTILE
Proprietor
Through Karta of Surjamal HUF