Definition
HUF (Hindu Undivided Family)
A Hindu Undivided Family (HUF) is a separate entity under Indian tax law, consisting of family members descended from a common ancestor, that can own assets and be taxed in its own right.
An HUF has its own PAN and files its own return, so it enjoys a separate basic exemption limit and can claim deductions like Section 80C independently of its members — a feature families use to split income and save tax. It is headed by a karta (typically the senior-most member), and its assets often come from ancestral property, gifts or a will specifying the HUF as recipient.
While an HUF can be a useful tax and succession tool, it has complexities: income clubbing rules, restrictions on gifting in, the rights of coparceners (including daughters, following legal reforms), and difficulties in partition. Families should weigh the tax benefits against the loss of individual control and the legal intricacies of running and eventually dissolving an HUF.
Related terms
- Section 80CSection 80C allows a deduction from taxable income for specified investments and expenses, such as EPF, PPF, ELSS, life insurance premiums and home-loan principal, under the old regime.
- Intestate SuccessionIntestate succession is the distribution of a deceased person's assets according to statutory law when they die without leaving a valid will.
- Gift DeedA gift deed is a legal document used to voluntarily transfer ownership of property or money from one person (the donor) to another (the donee) without any consideration in return.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.