Hindu Undivided Family (HUF) and income tax
Updated 11 October 2026
A Hindu Undivided Family (HUF) is a family unit that income tax treats as a separate taxpayer, with its own PAN, bank account, return and tax slabs. Income from property that belongs to the HUF is taxed in the HUF's hands rather than the members', which can lower the family's total tax. It works best for ancestral property and inheritances, because income from money that members put in from their own savings is taxed back in their hands.
What an HUF is
An HUF is not formed by an agreement; it comes into being through birth and marriage. Any Hindu family can be one, and for tax purposes the same applies to Jain, Sikh and Buddhist families. A married couple is enough to start, and children join by birth.
- Karta: the member who manages the HUF, usually the senior-most member. The Karta signs the return and runs the bank account.
- Coparceners: members by birth, who have a right to a share and can ask for partition. Since 2005, daughters are coparceners too, just like sons.
- Members: the coparceners plus the wives who marry into the family.
Setting up an HUF for tax
- Prepare an HUF declaration, a simple deed naming the Karta and the members.
- Apply for a PAN in the HUF's name, giving the Karta's details (see PAN card).
- Open a bank account in the HUF's name, operated by the Karta.
- Bring in the HUF's assets: ancestral property, property received on a partition of a larger family, property left to the HUF by will, or gifts.
How an HUF is taxed
| Point | HUF | Individual |
|---|---|---|
| New regime slabs | Same as individuals: nil up to ₹4 lakh, then 5% to 30% | Same |
| Rebate of up to ₹60,000 (income up to ₹12 lakh) | Not available | Available to residents |
| Old regime basic exemption | ₹2,50,000 | ₹2,50,000 (more for senior citizens) |
| Standard deduction | No, since an HUF has no salary | Yes, on salary or pension |
| 80C and 80D in the old regime | Yes, for payments for members | Yes |
| Return form | ITR-2, ITR-3 or ITR-4, never ITR-1 | Any form you qualify for |
The HUF chooses between the new regime (the default) and the old regime like an individual. In the old regime it can claim 80C for, among other things, life insurance on members' lives, ELSS funds and home loan principal on HUF property, and 80D for members' health insurance. An HUF cannot open a new PPF account. When a member receives a share of the HUF's income, it is not taxed again in the member's hands, because the HUF has already paid tax on it.
Income from the shop: ₹6,00,000 − ₹20,000 = ₹5,80,000, minus 30% (₹1,74,000) = ₹4,06,000.
Total income: ₹4,06,000 + ₹80,000 = ₹4,86,000.
HUF tax in the new regime, with no rebate for an HUF: 5% of ₹86,000 = ₹4,300, plus 4% cess = ₹4,472.
If the same income were taxed in Mr Sharma's own hands, on top of a salary that already puts him in the 30% slab, it would cost 30% of ₹4,86,000 = ₹1,45,800, plus cess = ₹1,51,632. Keeping the income in the HUF saves ₹1,47,160 a year.
The clubbing trap
For an HUF, a "relative" under the gift rules means any member. So a member can give money to the HUF without the HUF paying tax on the gift, but the income earned on that money is added back to the member's own income under the clubbing rules. Moving your salary savings into your HUF therefore saves nothing.
Gifts from people who are not members, such as the wife's parents or family friends, are taxable in the HUF's hands if they total more than ₹50,000 in a year, unless they come by will or inheritance. The real saving comes from ancestral property, a partition of a larger HUF, or property left specifically to the HUF. See tax on gifts and tax on rental income.
Things to know before you start one
- Shared ownership: HUF property belongs to all the coparceners, including daughters, not to the Karta alone.
- Hard to undo: for tax, only a total partition, dividing all the assets, is recognised; partial partitions made after 1978 are ignored, and the tax officer has to record the partition.
- Extra paperwork: a separate PAN, bank account and return every year.
- Salary stays personal: pay a member earns is the member's own income, not the HUF's.
The income tax calculator is built for individuals and applies the rebate, so for an HUF's own income use the slabs above without it, as in the example.