NOTEON CREATION OF HINDU UNDIVIDED FAMILY (HUF) TOWARDS TAX

PLANNING

Tax Planning can beunderstood as the activity undertaken by the assesse/tax payer to reduce

the tax liability bymaking optimum use of all permissible allowances, deductions, concessions,

exemptions, rebatesand so forth, available under the Income Tax Act, 1961 (IT Act, 1961).

The fact remainsthat every individual is interested to save his tax. Tax saving is possible by

taking advantage ofthe various provisions contained in the Income-tax Law. One such very

important way ofsaving income-tax in a legal manner is to form a separate tax entity in the

name of a HinduUndivided Family.

CREATIONOF HUF:

A HUF isautomatically constituted after marriage. A suitable name needs to be given tothe

HUF.

BENEFITS OF FORMINGHUF :

•  
• The HUF would file ITR     (Income Tax Returns) and income earned would be taxed as per

theslabs.

•  
• The deductions and exemptions     available to HUF are more or less the same as the ones

availableto individuals under various sections of the IT Act, 1961.

•  
• Gifts received from the     members of HUF are not taxable. As per section 56(ii) of the IT Act,

1961such gifts do not attract any tax and are fully exempted. It is one of the mostsought

afterroutes taken by HUF members in India to create wealth and add impetus to the

existingcapital

•  
• You can apply for two pan     cards and file taxes separately and personal incomes of

membersneedn’t be considered as the HUF income and benefit of lower slab rate can be

takenon Fixed deposits and other income.

DOCUMENTSREQUIRED TOWARDS FORMATION OF HUF:

A HUF is considereda separate legal entity and is thus eligible to obtain a PAN card and have a

bank account openedin its name. It can be formed easily and once created, the “karta”, usually

the senior male headof the family is provided additional basic tax exemption. The following

documents arerequired towards formation and application of PAN for Hindu Undivided

Family:

Affidavit – ForFormation of HUF

•  
• Proof of Identity of Karta-     copy of Aadhaar card
•  
• Proof of Address: copy of     Aadhaar card. If the premises is different from that is mentioned

inAadhaar then electricity bill or gas bill or telephone bill not older thanthree months shall

besubmitted.

•  
• Proof of date of birth of     Karta- copy of Aadhaar card
•  
• Source of Income