look news india
New Delhi. The countdown to pay income tax and file returns has started. All taxpayers must file their tax returns before July 31. Every taxpayer tries to save tax while filing ITR. CAs struggle a lot for this, but do you know that Hindu families get separate tax exemption. That too not in thousands but in lakhs of rupees, through this you can save tax. This exemption is not for any particular family, but any Hindu family in the country can avail it. Apart from Hindus, Jains and Sikhs also get its benefit. That is why AIMEM leader Asaduddin Owaisi has appealed to end this system or give its benefits to Muslims also.
Income tax expert Balwant Jain says that there is a separate provision for Hindu Undivided Families (HUF) in the Indian Income Tax Act. Any Hindu family can open an account under HUF and the transactions, earnings etc. done in it are treated as a separate individual. Obviously, he also gets all the tax exemptions that any individual taxpayer gets. Be it 80C benefit or long term capital gain or basic exemption of Rs 2.5 lakh. An HUF can avail all these benefits.
how to take advantage of it
To avail HUF benefits, you will have to get a separate PAN. Through this PAN you will have to do all the work related to finance. Under HUF, the head of the family will be considered as the Karta and all others will be its members. As soon as someone joins the family by birth or marriage, he or she will also be considered a member of the HUF. This way, you as an individual can start investing under HUF account and get tax benefits.
How HUF Law Works
Under HUF, you can invest as an individual and claim tax exemption. But, it has to be kept in mind that you cannot get tax exemption by investing your earned money in it. Now let's talk about how the discount can be availed. Suppose you work and your income is Rs 10 lakh per year. If you start a side business along with your job, then usually its earnings are also added to your account and if you earn even Rs 5 lakh, you will directly reach the higher tax slab of Rs 15 lakh. Apart from this, you will not get any exemption on this income of Rs 5 lakh, because you have already taken all the exemptions on the income of Rs 10 lakh.
If you open a HUF account and run a side business in its name, then the earning up to Rs 5 lakh will be completely tax free. If the HUF is treated as an individual, it will also be given a basic tax exemption of Rs 2.5 lakh. Apart from this, a rebate of Rs 12,500 will also be available on the remaining Rs 2.5 lakh and the tax liability will become zero. But, keep in mind that you cannot claim tax exemption by depositing your salary in this account. For tax exemption under HUF, it is necessary that the income should also be earned through HUF.
Where are tax exemptions available?
- Tax exemption of Rs 1.5 lakh under Section 80C of Income Tax which includes investments made through life insurance, FD, PPF, small savings schemes, home loans and ELSS.
- Under Section 80DD, you can get a rebate of Rs 25,000 on the health insurance premium of yourself and your family and Rs 50,000 on the health insurance premium of your elderly parents.
- You can buy a house in the name of HUF, on the interest payment of which you get a tax exemption of Rs 2 lakh under Section 24B.
- Under Section 54F, if you invest in shares or equity funds, then long term capital gain of Rs 1 lakh per year will also be out of the purview of tax. Earnings above this will be taxed at 10 percent.
- You can also buy 2 properties in the name of HUF, on which tax exemption is available. On property worth more than this, you will have to pay tax as per national rent.
Why was HUF law made?
The provision of HUF was introduced during the British period. At that time, there were mostly joint families and due to the presence of many people in the same family, their sources of income were also different. In such a situation, the British had difficulty in collecting taxes, so they considered the entire family as one person and the concept of HUF came. Under this, tax is collected equally from everyone and there is no problem. Since there was such a provision in the Hindu Act, it was formally included in the Income Tax Act as a law even after independence. However, very few taxpayers are availing this exemption.