A Hindu Undivided Family (HUF) is a unique legal and tax concept recognized under Indian law, primarily governed by the Hindu Succession Act, 1956 and the Income Tax Act, 1961. It refers to a family structure where the family members (who are Hindus, Buddhists, Jains, or Sikhs) live together, share common ancestral property, and are treated as a single taxable entity for the purpose of income tax.

Who’s Involved in an HUF?

An HUF includes members of a family who are connected by shared ancestry. It generally consists of the Karta (the head of the family), coparceners (family members who have a legal right to the family property), and other members (like wives, unmarried daughters, etc.).

Karta: The Karta is the head of the family and manages the HUF’s affairs. He or she is responsible for making decisions and dealing with legal matters on behalf of the HUF.

Coparceners: These are the family members (sons, grandsons, and great-grandsons) who have a right to the family property. Since 2005, daughters are also considered coparceners and have the same rights as sons.

Members: These are the other family members who may not have direct rights to the property but can benefit from the family’s income, such as wives and unmarried daughters.

Income Tax Rules for HUF (Hindu Undivided Family) – FY 2025-26

Separate Entity: An HUF is treated as a distinct legal entity, separate from its members, for income tax purposes. It must have its own PAN and file a separate tax return

Who Can Form an HUF: Eligible members include Hindus, Buddhists, Jains, and Sikhs. The HUF consists of a common ancestor and all lineal descendants, including both male and female members

Deductions and Exemptions: HUFs can claim deductions under Section 80C, 80D, 80G, and other applicable sections, similar to individuals

Separate Asset Pool: Assets contributed to the HUF become common property, and income from these assets is taxed in the hands of the HUF

Other Rules:

HUFs can pay salaries to members for services rendered, which are tax-deductible.

HUFs can take out insurance policies on members’ lives and claim deductions.

If property is transferred to the HUF without adequate consideration, the income may be clubbed with the transferor’s income

Filing Requirements: HUFs must file annual income tax returns, and the Karta (head of the family) is responsible for compliance

Important Documents Required for Income Tax Filing for HUF

HUF PAN Card: The HUF must have its own Permanent Account Number (PAN) separate from its members

HUF Deed: A legal document that establishes the HUF, listing the Karta, coparceners, and members, and outlining the business or asset structure

HUF Bank Account: A dedicated bank account in the name of the HUF for all financial transactions

Income Proofs:

Rental income statements, interest certificates, or any other documents supporting income earned by the HUF

Sale deeds or investment statements if the HUF has capital gains or investment income

Investment Proofs:

Documents supporting deductions claimed under sections like 80C, 80D, etc., such as LIC premium receipts, PPF passbooks, or mutual fund statements

Details of Assets and Liabilities: Records of HUF-owned property, investments, and liabilities for accurate reporting and tax calculation

Supporting Documents for Deductions/Exemptions: Receipts or statements for eligible expenses or donations claimed under various sections

Which ITR Form Should You Use for HUF (FY 2024-25, AY 2025-26)?

ITR-2: For HUFs with income from sources like salary, house property, capital gains, or other sources-but not from business or profession

ITR-3: For HUFs having income from business or profession, including those maintaining books of accounts

ITR-4 (Sugam): For HUFs opting for presumptive taxation under Sections 44AD, 44ADA, or 44AE, with total income up to ₹50 lakh (from business/profession computed on a presumptive basis)

Summary Table:

Why Income Tax Filing for HUF is Beneficial

Separate Tax Entity: An HUF is treated as a separate taxpayer from its members, allowing both the HUF and its individual members to claim tax exemptions and deductions independently.

Additional Basic Exemption: The HUF enjoys the same basic exemption limit as an individual (e.g., ₹2.5 lakh), providing an extra layer of tax-free income for the family, over and above what each member can claim individually.

Eligible for Deductions: HUFs can claim deductions under various sections such as 80C (investments, insurance premiums), 80D (health insurance), 80G (donations), and more, just like individuals.

Capital Gains Exemptions: HUFs can avail of capital gains exemptions under Sections 54 and 54F, which can help save tax when reinvesting proceeds from the sale of property.

Tax-Free Gifts: Gifts received by the HUF up to ₹50,000 are tax-free, and certain gifts from family members can be structured to enjoy further tax benefits.

Investment Flexibility: The HUF corpus can be invested in tax-saving instruments like ELSS, PPF, and tax-saving fixed deposits, optimizing returns and tax savings for the family.

Efficient Asset and Wealth Management: Filing as an HUF helps manage family assets, shared properties, and investments in a streamlined, legally recognized manner, with the Karta making decisions on behalf of the family