The fact remains that every individual is interested to save his tax. Tax saving is possible by taking advantage of the various provisions contained in the Income-tax Law. Even if a person were to take full advantage of all the provisions contained in the Income-tax Law specially relating to deductions and exemptions, then surely he will be able to save substantial amount of income-tax for his family. Many tax payers resort to illegal activities to save income-tax but frankly speaking, such illegal activities are not a part of tax planning process but are a part of tax evasion process which I deprecate always. However, one can go ahead with legal ways of saving income-tax and this is possible only when we screen very carefully the provisions contained in the Income-tax Act, 1961 and find out the pointers which are of advantage looking to our facts and circumstances. One such very important way of saving income-tax is to think of forming a separate tax entity in the name of an Hindu Undivided Family. Please note that this is a separate tax entity which is officially recognized and approved under the Income-tax Law. The creation of Hindu Undivided Family helps the tax payers to save their taxes in a legal manner.
It is a well known fact that every individual member of the family specially the adult members of the family would enjoy a tax deduction up to Rs. 1,00,000 in terms of section 80C of the Income-tax Act, 1961. However, most of the prudent individuals are able to take the full advantage of the said section 80C of the Income-tax Act, 1961. For them another vista of saving income-tax lies through the creation of separate tax entity by the name of Hindu a Undivided Family.
Apart from getting tax deduction up to Rs. 1,00,000 for an individual, it is possible that if an HUF is created by that individual, he will be able to claim higher tax deduction and exemptions under the Income-tax Law because the new tax entity in the form of a Hindu Undivided Family will be eligible to claim separate tax deduction under section 80C of the Income-tax Act, 1961. Likewise, the dividend income and the Long-term Capital Gains on listed securities would also be exempted for such Hindu Undivided Family. The income from Short-term Capital Gain by this Hindu Undivided Family will also be eligible to a lower tax rate of 15 per cent tax only.
Various other tax benefits within the framework of the Income-tax Law are available for the Hindu Undivided Family to save tax. Hence, overall we find that a Hindu Undivided Family surely is going to bring tons of tax saving for the individual specially because of the innumerable tax exemptions and deductions which are scattered in the Income-tax Law which provides these exemptions and deductions to be separately availe to the Hindu Undivided Family.
Having known the advantages of a separate tax entity in the form of a Hindu Undivided Family the question which might crop up in the minds of a tax payer is how to start a new HUF file today specially when you find that you do not have an existing HUF Unit in your group may be because till today you are not aware of this important tool of tax planning. Well, the answer is very simple. Even today legally speaking, a new Hindu Undivided Family popularly known as an HUF can be started today. The simple process of starting a new HUF is to receive some gift directly in the name of Hindu Undivided Family from your father or mother or in laws or from friends and relatives. Do remember that better it would be if you avoid contributing your own money to the HUF by way of gift. It may, however, be noted that under the Income-tax Law any gift received by the HUF from its members is not subjected to income-tax as per section 56 of the Income-tax Act, 1961. One should also keep in mind the provisions concerning section 64 of the Income-tax Act, 1961. As per this section if the member of the Hindu Undivided Family were to make a gift to the HUF, in that situation the income arising to the HUF will be clubbed to the income of the person making gift to your own HUF. However, if required as a member of the HUF you can give loan to your HUF. The gift received by HUF from non-relatives is exempt up to Rs. 50,000 in a year.
Once you receive small little gift for your HUF, then it is time now for you to open a Bank Account in the name of a HUF and then start the activities of the HUF. Also do remember that your HUF can carry on business, the said HUF can also become a partner of the partnership firm. Likewise, your HUF can also invest in the stock market, buy Mutual Funds etc. Hence, if you have not yet set up your HUF, it is time now for you to go ahead in planning a new HUF in your family to save your tax. Also please do remember to apply and obtain a separate Permanent Account Number in the name of your HUF. For the purpose of obtaining a PAN please apply in Form No. 49A.
An individual gets tax deduction on various investments made by him in terms of section 80C of the Income-tax Act, 1961. Similarly, the Hindu Undivided Family also enjoys in its own right tax deduction under section 80C of the Income-tax Act, 1961. To claim this tax deduction under section 80C the HUF can take out Life Insurance Policies in the name of its members and make payment of the premium which will enable the HUF to claim tax deduction as per section 80C of the Income-tax Act, 1961. To avail 80C deduction the HUF can open also contribute to PPF account. But now a days the banks do not permit the opening of separate PPF account in the name of the HUF. But the HUF can contribute to the PPF account of its members and claim tax deduction. However, my recommendation is that the HUF for the purpose of claiming tax deduction under section 80C should invest extensively on taking out Life Insurance Policies for its members or it may invest in Five Year Bank Fixed Deposit.
An HUF is also entitled to claim a separate tax deduction in respect of payment of Health Insurance Premium. This deduction is permissible under section 80D of the Income-tax Act, 1961. The maximum deduction is up to Rs. 15,000 per annum. However, if the HUF takes out Mediclaim Policy etc., for members of the family who are senior citizens then the amount of Rs. 15,000 will be enhanced to Rs. 20,000. Out of this amount up to Rs. 5,000 can also be included for Preventive Health Check UP.
The HUF can further receive a separate tax deduction of Rs. 50,000 on account of maintenance including medical treatment of a dependant member which happens to be a person with disability. However, if there is a severe disability, then the deduction gets enhanced to Rs. 1,00,000. This deduction is available as per section 80DD of the Income-tax Act, 1961.
If the HUF actually makes payment on medical treatment of a specific disease or ailments as mentioned in the Income-tax Act for the benefit of its members, then a deduction up to Rs. 40,000 will be allowed to the HUF as per section 80DDB of the Income-tax Act, 1961. However, if such expenditure is made for a member who happens to be a senior citizen, then the deduction to be allowed will be Rs. 60,000. HUF can also donate to recognised charity trusts and institutions and claim deduction under section 80G of the Income-tax Act, 1961. The HUF as per section 24 of the Income-tax Act is also entitled to claim deduction for interest on self occupied house property of Rs. 1,50,000 in a year. The income of the HUF from dividend or shares or Mutual Funds is fully exempt from income-tax. Likewise, the Long-term Capital Gains on listed securities received by the HUF is also exempted.
Once you have set up a tax entity in the name of a Hindu Undivided Family, then it is time now for you to think of buying a residential house property in the name of the HUF by taking loan. The maximum deduction of interest on the housing loan as we know very well will be Rs. 1,50,000 which will be allowed as a deduction in the name of the HUF. It is even possible that one single house property may be purchased jointly in the name of the HUF and any member of the HUF in which situation also the HUF will be entitled to deduction on account of interest on housing loan up to Rs. 1,50,000 per annum.
Similarly, the members of the HUF separately will also be entitled to this deduction of Rs. 1,50,000 on account of interest on loan.
If you are a salaried employee and you receive payment on account of house rent and if by chance your HUF is the owner of the house property, then it is possible for an individual to make payment of the rent to the HUF, obtain rent receipt from the HUF and submit the same to the employer and thereafter get a tax deduction on the HRA amount from the employer. Hence, for all those persons who receive HRA i.e. House Rent Allowance from their employer, for them it would be worthwhile to make payment of rent to the HUF and claim a tax deduction from the salary income by submitting the rent receipt to the employer together with copy of PAN Card of the HUF.
In case the HUF gives its property on rent to any person, then from the rental income, the HUF will get deduction in respect of entire interest on loan paid by it in respect of the said house property.
Source: www.moneycontrol.com
It is a well known fact that every individual member of the family specially the adult members of the family would enjoy a tax deduction up to Rs. 1,00,000 in terms of section 80C of the Income-tax Act, 1961. However, most of the prudent individuals are able to take the full advantage of the said section 80C of the Income-tax Act, 1961. For them another vista of saving income-tax lies through the creation of separate tax entity by the name of Hindu a Undivided Family.
Apart from getting tax deduction up to Rs. 1,00,000 for an individual, it is possible that if an HUF is created by that individual, he will be able to claim higher tax deduction and exemptions under the Income-tax Law because the new tax entity in the form of a Hindu Undivided Family will be eligible to claim separate tax deduction under section 80C of the Income-tax Act, 1961. Likewise, the dividend income and the Long-term Capital Gains on listed securities would also be exempted for such Hindu Undivided Family. The income from Short-term Capital Gain by this Hindu Undivided Family will also be eligible to a lower tax rate of 15 per cent tax only.
Various other tax benefits within the framework of the Income-tax Law are available for the Hindu Undivided Family to save tax. Hence, overall we find that a Hindu Undivided Family surely is going to bring tons of tax saving for the individual specially because of the innumerable tax exemptions and deductions which are scattered in the Income-tax Law which provides these exemptions and deductions to be separately availe to the Hindu Undivided Family.
Having known the advantages of a separate tax entity in the form of a Hindu Undivided Family the question which might crop up in the minds of a tax payer is how to start a new HUF file today specially when you find that you do not have an existing HUF Unit in your group may be because till today you are not aware of this important tool of tax planning. Well, the answer is very simple. Even today legally speaking, a new Hindu Undivided Family popularly known as an HUF can be started today. The simple process of starting a new HUF is to receive some gift directly in the name of Hindu Undivided Family from your father or mother or in laws or from friends and relatives. Do remember that better it would be if you avoid contributing your own money to the HUF by way of gift. It may, however, be noted that under the Income-tax Law any gift received by the HUF from its members is not subjected to income-tax as per section 56 of the Income-tax Act, 1961. One should also keep in mind the provisions concerning section 64 of the Income-tax Act, 1961. As per this section if the member of the Hindu Undivided Family were to make a gift to the HUF, in that situation the income arising to the HUF will be clubbed to the income of the person making gift to your own HUF. However, if required as a member of the HUF you can give loan to your HUF. The gift received by HUF from non-relatives is exempt up to Rs. 50,000 in a year.
Once you receive small little gift for your HUF, then it is time now for you to open a Bank Account in the name of a HUF and then start the activities of the HUF. Also do remember that your HUF can carry on business, the said HUF can also become a partner of the partnership firm. Likewise, your HUF can also invest in the stock market, buy Mutual Funds etc. Hence, if you have not yet set up your HUF, it is time now for you to go ahead in planning a new HUF in your family to save your tax. Also please do remember to apply and obtain a separate Permanent Account Number in the name of your HUF. For the purpose of obtaining a PAN please apply in Form No. 49A.
An individual gets tax deduction on various investments made by him in terms of section 80C of the Income-tax Act, 1961. Similarly, the Hindu Undivided Family also enjoys in its own right tax deduction under section 80C of the Income-tax Act, 1961. To claim this tax deduction under section 80C the HUF can take out Life Insurance Policies in the name of its members and make payment of the premium which will enable the HUF to claim tax deduction as per section 80C of the Income-tax Act, 1961. To avail 80C deduction the HUF can open also contribute to PPF account. But now a days the banks do not permit the opening of separate PPF account in the name of the HUF. But the HUF can contribute to the PPF account of its members and claim tax deduction. However, my recommendation is that the HUF for the purpose of claiming tax deduction under section 80C should invest extensively on taking out Life Insurance Policies for its members or it may invest in Five Year Bank Fixed Deposit.
An HUF is also entitled to claim a separate tax deduction in respect of payment of Health Insurance Premium. This deduction is permissible under section 80D of the Income-tax Act, 1961. The maximum deduction is up to Rs. 15,000 per annum. However, if the HUF takes out Mediclaim Policy etc., for members of the family who are senior citizens then the amount of Rs. 15,000 will be enhanced to Rs. 20,000. Out of this amount up to Rs. 5,000 can also be included for Preventive Health Check UP.
The HUF can further receive a separate tax deduction of Rs. 50,000 on account of maintenance including medical treatment of a dependant member which happens to be a person with disability. However, if there is a severe disability, then the deduction gets enhanced to Rs. 1,00,000. This deduction is available as per section 80DD of the Income-tax Act, 1961.
If the HUF actually makes payment on medical treatment of a specific disease or ailments as mentioned in the Income-tax Act for the benefit of its members, then a deduction up to Rs. 40,000 will be allowed to the HUF as per section 80DDB of the Income-tax Act, 1961. However, if such expenditure is made for a member who happens to be a senior citizen, then the deduction to be allowed will be Rs. 60,000. HUF can also donate to recognised charity trusts and institutions and claim deduction under section 80G of the Income-tax Act, 1961. The HUF as per section 24 of the Income-tax Act is also entitled to claim deduction for interest on self occupied house property of Rs. 1,50,000 in a year. The income of the HUF from dividend or shares or Mutual Funds is fully exempt from income-tax. Likewise, the Long-term Capital Gains on listed securities received by the HUF is also exempted.
Once you have set up a tax entity in the name of a Hindu Undivided Family, then it is time now for you to think of buying a residential house property in the name of the HUF by taking loan. The maximum deduction of interest on the housing loan as we know very well will be Rs. 1,50,000 which will be allowed as a deduction in the name of the HUF. It is even possible that one single house property may be purchased jointly in the name of the HUF and any member of the HUF in which situation also the HUF will be entitled to deduction on account of interest on housing loan up to Rs. 1,50,000 per annum.
Similarly, the members of the HUF separately will also be entitled to this deduction of Rs. 1,50,000 on account of interest on loan.
If you are a salaried employee and you receive payment on account of house rent and if by chance your HUF is the owner of the house property, then it is possible for an individual to make payment of the rent to the HUF, obtain rent receipt from the HUF and submit the same to the employer and thereafter get a tax deduction on the HRA amount from the employer. Hence, for all those persons who receive HRA i.e. House Rent Allowance from their employer, for them it would be worthwhile to make payment of rent to the HUF and claim a tax deduction from the salary income by submitting the rent receipt to the employer together with copy of PAN Card of the HUF.
In case the HUF gives its property on rent to any person, then from the rental income, the HUF will get deduction in respect of entire interest on loan paid by it in respect of the said house property.
Source: www.moneycontrol.com
