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 purpose of 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 property and earning some income from this property, then it is better to transfer this asset to HUF and save tax 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. 1.5 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. 1,80,000 = nil
- Rs. 1,80,000-5,00,000 @10% = Rs. 32,000
- Rs. 5,00,000-10,00,000 @20% = Rs. 50,000
- 80C deductions Rs. 1,00,000
- Therefore total tax payable for HUF on income of Rs. 6,00,000 is only Rs. 32,000.
- If this income of Rs. 6,00,000 is taxed in individual hand @ 30% tax due is Rs. 1,80,000.
- Hence, you can save a total of Rs. 1,48,000 by creating an HUF and transferring ancestral property income and other income under HUF.
FORMAT OF HUF CREATION DEEDS FORMAT-I
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. ————————————– (_____________________)
[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) •