Hindu Undivided Family – HUF Meaning, Benefits & How to Reduce Tax?

By CA Mohammed S Chokhawala

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Updated on: Jul 22nd, 2025

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4 min read

Forming a Hindu Undivided Family (HUF) enables families to pool their assets and be taxed as a separate entity from individual members. By creating an HUF, you can legally optimise your tax liability, as it allows the family to obtain an additional PAN card and claim separate deductions, ultimately reducing the total tax burden.

What is a HUF?

The HUF full form is Hindu Undivided Family. It is a unique legal entity under the Income Tax Act, where a family is treated as a separate single unit for tax purposes. It consists of a common ancestor and lineal descendants, including their wives and unmarried daughters. The head of the HUF is known as Karta and the members are known as coparceners

An HUF can own property, earn income, and claim tax benefits separately from its individual members, allowing families to save taxes by splitting income legally.

Who Can be Members of HUF?

An HUF can be formed by a family with a minimum of two members. The following are the members of a HUF

  • Karta: The karta is the head of the HUF.
  • Coparceners: All the male and female (including daughters) lineal descendants of a common ancestor. The daughters are also coparceners by birth and have equal rights. 
  • Other Members: Wives of coparceners become members of HUF after marriage but are not coparceners themselves. 

It is important to understand that only coparceners have the legal right to demand partition of the HUF property, while the other members have maintenance rights. All coparceners are liable only for their respective shares in the HUF, whereas the Karta has unlimited liability for all dues of the HUF, including tax liabilities.

Determining the Residential Status of HUF

The residential status of a Hindu Undivided Family (HUF) is determined based on where the control and management of its affairs are located during the financial year.

Resident HUF

An HUF is Resident in India if its control and management are wholly or partly situated in India during the previous year.

If the Karta of a Hindu Undivided Family (HUF) is resident and ordinarily resident in India, then the HUF is also treated as resident and ordinarily resident. However, if the Karta is resident but not ordinarily resident, then the HUF is considered resident but not ordinarily resident.

Non - Resident HUF

An HUF is Non-Resident if its control and management are wholly situated outside India during the previous year.

How to Form an HUF?

Forming a Hindu Undivided Family (HUF) is simple and involves steps like creating a HUF deed, applying for a HUF PAN card, opening a bank account, and starting the operations of the HUF

How to register/create a HUF

One person cannot form HUF, it can only be formed by a family. A HUF can be created upon marriage. It includes the husband, wife and their children.

HUF Tax Slabs

The income tax slabs applicable to an HUF are the same as those for individual taxpayers under both the Old Regime and New Regime.

New Tax Regime Slabs FY 2025-26

Income Tax SlabsIncome Tax Rates
Up to Rs. 4 lakhNil
Rs. 4 lakh - Rs.8 lakh5%
Rs. 8 lakh - Rs.12 lakh10%
Rs.12 lakh - Rs.16 lakh15%
Rs.16 lakh - Rs. 20 lakh20%
Rs. 20 lakh - Rs. 24 lakh25%
Above Rs. 24 lakh30%

New Tax Regime Slabs FY 2024-25

Income Tax SlabsIncome Tax Rates
Up to Rs. 3 lakhNil
Rs. 3 lakh - Rs.7 lakh5%
Rs. 7 lakh - Rs. 10 lakh10%
Rs. 10 lakh - Rs. 12 lakh15%
Rs. 12 lakh - Rs. 15 lakh20%
Above Rs. 15 lakh30%

Old Tax Regime Slabs

Income Tax SlabsIncome Tax Rates
Up to Rs. 2.5 lakhNil
Rs. 2.5 lakh - Rs. 5 lakh5%
Rs. 5 lakh - Rs. 10 lakh20%
Above Rs. 10 lakh30%

Surcharge and cess will be applicable.

HUF Tax Benefits

HUFs enjoy several tax benefits under the Income Tax Act. The income tax slabs for HUFs are the same as those for individuals, with a basic exemption limit of Rs. 2.5 lakh under the old regime and Rs. 4 lakh under the new regime for FY 2025-26. HUFs can claim deductions under Section 80C for investments like PPF and ELSS, Section 80D for health insurance premiums, and Section 80G for donations. They are also eligible for deductions on home loan interest repayments and can claim capital gains exemptions under  Sections 54, 54F, and 54EC when reinvesting proceeds as per law. 

Separate PAN & Basic Exemption Limit

HUF is treated as a separate legal entity. Just like an individual, a HUF gets basic exemption limits, helping split income and reduce tax liability. 

Claim Deductions

HUF can claim deductions such as Section 80C up to Rs. 1.5 lakh and Section 80D for health insurance premiums paid for its members. 

Capital Gains Exemption

HUF can claim exemptions under Section 54, 54F, and 54EC on capital gains similar to individuals. 

Income Splitting

Families can split income between the individual members and HUF by earning income in the HUF's name. This ensures that the income is not clubbed and is taxed at lower slab rates. 

How to Save Taxes by Forming HUF

Let’s understand how an HUF is taxed with an example – 

Mr Rajesh Chopra decides to start an HUF with his wife, son, and daughter as members. The property held by Mr. Chopra earns an annual rent of Rs. 15 lakh which was transferred to the HUF. Mr. Rajesh Chopra has an income from salary of Rs. 20 lakh. 

By creating a HUF, Mr. Chopra can save tax under the New Tax Regime for FY 2025-26 as follows:

Income from Various SourcesIndividual's ReturnHUF's Return
Income of Mr. Chopra before formation of HUFIncome of Mr. Chopra after formation of HUFIncome of HUF
A) Salary20,00,00020,00,000 
B) House property rent15,00,00015,00,000
C) Standard deduction on house property (30% of 15,00,000)(4,50,000)(4,50,000)
D) Income from house property (B-C)10,50,00010,50,000
Total Taxable Income (A+D)30,50,00020,00,00010,50,000
(-) Standard Deduction(75,000)(75,000)-
Net Taxable Income29,75,00019,25,00010,50,000
Tax Payable 4,91,4001,92,40046,800

 

Comparison
Total tax paid by Mr. Chopra 4,91,400
Total tax paid by Mr. Chopra & HUF2,39,200
Tax saving due to forming an HUF2,52,200

Due to this tax arrangement, Mr. Chopra saved Rs. 2,52,200 in taxes. The HUF paid Rs. 46,800 tax on the rental income, as the rebate u/s 87A is not available for HUF.

HUF Advantages  

The following are the advantages of forming an HUF:

  • Separate PAN and tax savings
  • Income splitting
  • Succession planning benefits

HUF Disadvantages

The following are the disadvantages of forming an HUF:

  • Partition disputes
  • Complex compliance
  • Limited applicability
  • HUF cannot receive salary

Dissolution of a HUF

A Hindu Undivided Family (HUF) can be dissolved through partition, where the assets are distributed among the coparceners (family members with inheritance rights). This partition may be:

  • Total Partition: All assets of the HUF are divided, and the HUF ceases to exist.
  • Partial Partition: Only some assets are divided, and the HUF continues for the remaining assets.

For the partition to be legally valid, a partition deed must be drafted, stamped, and registered. The HUF’s PAN card is surrendered to the tax authorities to complete the dissolution process.

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Frequently Asked Questions

Who is the Karta of an HUF?

The head of a HUF is called the Karta, he is the senior-most male member of the family.

Can a Woman be HUF Karta?

Yes! Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF. However, the same has not been incorporated in the Income Tax Act as yet.

If a person is survived by his wife and two daughters, can they form an HUF? Can there be an HUF with only female members?

An HUF can be formed by a Hindu widow and her unmarried daughter, even if the widow has not adopted a son, as the daughter is also considered a coparcener.

Who are HUF Coparceners?

Coparceners are members of HUF who acquire their status by birth in the family.

Can a daughter claim a share in her father’s property where her father had passed away before the amendment made in 2005, giving equal rights to daughters and sons?

No. Both the daughter and the father have to be alive on the date of the amendment for the daughter to get the benefit, irrespective of whether she has been married or not on that date. If the father has passed away before the amendment date, then she wouldn’t have been a daughter on the date of the amendment. Hence she cannot claim a share in father’s property.

Should a HUF always be a resident of India?

It is not necessary that a HUF must always be a resident of India. In case the control and management of the HUF are situated outside India, the HUF would be a non-resident. Where the affairs of the HUF are managed from outside India, the HUF would be a non-resident.

Karta of HUF sits outside India. HUF is managed by the other members residing in India. Will HUF be a non-resident?

The residential status of a HUF is determined not on the basis of where the Karta resides but on the basis of where the HUF is managed from. In this case, though the Karta resides outside India, the HUF is managed by members from India and hence the HUF will be a resident of India.

Can the members of the HUF and the HUF separately claim deduction under Section 80C?

The HUF being a separate taxable assessee, can claim a deduction under section 80C. However, the member and the HUF cannot claim a deduction in respect of the same investment made or expense incurred.

Upon the demise of the Karta, who takes over the title ‘Karta’?

Upon the demise of Karta, the eldest male member of the family becomes the Karta of the family. Even when the deceased Karta’s wife is alive, the eldest son or any other eldest male member of the family will take over that position.

What happens if the eldest male member of the family is an NRI?

A HUF is considered to be a resident of India if the control and management of its affairs happen wholly or partly in India. In some cases, the Karta of the family may be non-resident. The resident status of the family will not change to be non-resident only because the Karta is a non-resident unless the decisions concerning the family are made outside India.

Are there any incomes which are not taxed as income of HUF?

The following incomes are not taxed as income of HUF
a. If a member transfers his self-acquired property to the HUF without receiving proper sale consideration, income from such property is not taxable in the hands of the HUF.
d. Personal income of the members cannot be treated as income of HUF. 
e. Income from an individual property of the daughter is not taxable in the hands of HUF even if such property is vested into HUF by the daughter.

Can a HUF get Senior Citizen Benefits?

No, HUF cannot avail of any benefit that is available to the senior citizens. For example, the Karta (senior citizen) can get a health insurance premium deduction of 50,000, but the HUF can only avail of a deduction of Rs.25,000.

Who Can Create a HUF?

A HUF can be created only by a family consisting of a common ancestor and his lineal descendants. Only Hindus, Buddhists, Sikhs, and Jains can form a HUF. The senior most male or female member is traditionally the Karta. 

How to open HUF account in Bank?

A bank account in the name of HUF can be opened by submitting the HUF deed, HUF PAN, and relevant KYC documents. Opening a separate bank account in the name of the HUF is necessary for forming a HUF. 

Is rebate under Section 87A available for HUF?

No, the rebate under Section 87A is available only to resident individual taxpayers whose total income does not exceed the specified limit. Hindu Undivided Families (HUFs) are not eligible for this rebate.

What is the income for HUF exempt from tax?

HUF is taxable at a slab rate applicable to individuals. Under the new regime, Rs. 4 lakhs is exempt from tax, and under the old regime, Rs. 2.5 lakhs is exempt.

Is the new regime's exemption for income up to Rs.12 lakhs also applicable to HUFs?

No, HUFs are not eligible for rebates under section 87A, which is only available to resident individuals. Therefore, income exceeding Rs.4 lakhs under the new regime and Rs.2.5 lakhs under the old regime is fully taxable for HUFs.

Can HUF earn or receive a salary?

No, HUFs are not legally eligible to receive salaries because they cannot enter into the employer-employee relationship, which is essential for receiving a salary. A salary is a payment for personal services, and an HUF, being a collective entity, cannot provide personal services.

Which ITR form is applicable for HUFs?

ITR-1 is not applicable for HUF, but ITR-2, 3, and 4 are eligible. Choosing the right ITR forms depends on the HUF's source of income.

About the Author
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CA Mohammed S Chokhawala

Content Writer
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I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more

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