Definition
HUF (Tax Entity)
A Hindu Undivided Family is a separate tax entity recognised under Indian law that can hold assets and income and enjoy its own basic exemption and deductions.
A HUF is treated as a distinct taxpayer with its own PAN, allowing a family to pool certain ancestral or gifted assets under the HUF and have its income taxed separately from the individual members. It gets its own basic exemption limit and can claim deductions like 80C and 80D.
This can offer tax planning benefits by splitting income across the individual and the HUF, though income clubbing and source-of-funds rules limit misuse. Only certain incomes and assets can legitimately belong to the HUF.
HUFs are used by families with ancestral property or businesses; setting one up and operating it correctly requires care to ensure the income genuinely belongs to the HUF and complies with tax law.
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.
- Old vs New Tax RegimeIndia offers two personal income-tax regimes: the old one with various deductions and exemptions, and the new one with lower slab rates but most exemptions removed.
- Cost of Acquisition (Gift/Inheritance)When an asset is received as a gift or inheritance and later sold, its cost of acquisition for capital gains is generally taken as the previous owner's cost, with the holding period also carried over.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.