how to use HUF for tax saving

[varunaggarwal]

how to use HUF for tax saving

I am having one HUF account already been opened but unable to operate it.
Require help to know how to transfer money in HUF account
& shall i do FD in the name of HUF or what else i can do with the money i transferred in HUF count ?

 

[TaxWiser]

how to use HUF for tax saving

I am having one HUF account already been opened but unable to operate it.
Require help to know how to transfer money in HUF account
& shall i do FD in the name of HUF or what else i can do with the money i transferred in HUF count ?

Hey Savings Master

Using your HUF account for tax saving is a smart move. Here’s how you can make the most of it:

Transferring Money to HUF Account:

• Gifts: You can transfer money to your HUF account as gifts from family members. Gifts up to ₹50,000 per year are tax-free.
• Inheritance: Any property or money inherited by the HUF is also tax-free.

Investing HUF Money:

• Fixed Deposits: Yes, you can definitely do FDs in the name of HUF. The interest earned will be taxed as per HUF’s income tax slab.
• Mutual Funds and Stocks: Investing in mutual funds and stocks can be a good option. The HUF can claim deductions under Section 80C for investments.
• Real Estate: Buying property in the name of HUF can also be beneficial. Rental income and capital gains from the property will be taxed under HUF.

Operating the HUF Account:

• Bank Operations: Ensure the Karta (head of the HUF) is managing the account. If you’re facing issues, visit your bank to sort out any operational problems.
• Tax Filing: File a separate income tax return for the HUF. This helps in availing the tax benefits effectively.

Hope this helps!

(Source: Conversation with Gemini AI)

 

[dashang]

Can i get salary in HUF Account?

 

[dashang]

As Individual, I am trying to figure out how can i use HUF for taxation benefits?

 

[TaxWiser]

Can i get salary in HUF Account?

Hey! Good question. Unfortunately, you can't deposit your salary directly into an HUF account. Here's why:

1. HUF Income Sources: HUF accounts are meant for income generated from ancestral property, business, or investments, not personal salaries.
2. Tax Implications: Salaries are considered individual income and should be taxed under your personal PAN, not the HUF's PAN.

As Individual, I am trying to figure out how can i use HUF for taxation benefits?

Here are some quick tax-saving tips for using your HUF account:

1. Separate Tax Entity: HUF has its own PAN and files its own tax returns.
2. Basic Exemption: HUF gets a basic tax exemption of ₹2.5 lakh per year.
3. Section 80C & 80D Deductions: Claim deductions for investments and health insurance premiums.
4. Income Splitting: Transfer money or property to the HUF and get taxed at a potentially lower rate.
5. Investments: Use HUF funds for FDs, mutual funds, etc.
6. Real Estate: Buy property in the HUF's name for tax benefits.
7. Business Income: Income from an HUF-run business is taxed under the HUF.

These tips can help you save on taxes.

Hope this resolve all your queries!

(Source: Conversation with Gemini AI)

 

[dashang]

Hey! Good question. Unfortunately, you can't deposit your salary directly into an HUF account. Here's why:

1. HUF Income Sources: HUF accounts are meant for income generated from ancestral property, business, or investments, not personal salaries.
2. Tax Implications: Salaries are considered individual income and should be taxed under your personal PAN, not the HUF's PAN.

Here are some quick tax-saving tips for using your HUF account:

1. Separate Tax Entity: HUF has its own PAN and files its own tax returns.
2. Basic Exemption: HUF gets a basic tax exemption of ₹2.5 lakh per year.
3. Section 80C & 80D Deductions: Claim deductions for investments and health insurance premiums.
4. Income Splitting: Transfer money or property to the HUF and get taxed at a potentially lower rate.
5. Investments: Use HUF funds for FDs, mutual funds, etc.
6. Real Estate: Buy property in the HUF's name for tax benefits.
7. Business Income: Income from an HUF-run business is taxed under the HUF.

These tips can help you save on taxes.

Hope this resolve all your queries!
Like & Share

(Source: Conversation with Gemini AI)

Salaries are considered individual income and should be taxed under your personal PAN, not the HUF's PAN. what does it mean??
So if i am in 20% tax slab then HUF tax will also be in 20 % slab?

 

[TaxWiser]

Salaries are considered individual income and should be taxed under your personal PAN, not the HUF's PAN. what does it mean??
So if i am in 20% tax slab then HUF tax will also be in 20 % slab?

Hey! Let me break it down for you:

Individual Income vs. HUF Income:

• Individual Income: Your salary is considered your personal income and should be taxed under your personal PAN (Permanent Account Number). This means you file your salary income in your individual tax return.
• HUF Income: Income generated by the HUF (like from ancestral property, business, or investments) is taxed under the HUF's PAN. This is separate from your personal income.

Tax Slabs:

• Your Tax Slab: If you're in the 20% tax slab, it means your personal income (including salary) is taxed at 20%.
• HUF Tax Slab: The HUF's income is taxed separately based on its own income levels. The tax slabs for HUF are the same as for individuals. So, if the HUF's income falls into the 20% slab, it will be taxed at 20%.

Example:

• Your Salary: ₹5,00,000 (taxed at 20% under your PAN)
• HUF Income: ₹4,00,000 (taxed at 10% or 20% depending on the slab it falls into)

By separating your income and the HUF's income, you can potentially save on taxes by utilizing the basic exemption limits and lower tax slabs for both entities.

Hope that clears things up!

(Source: Conversation with Gemini AI)

 

[dashang]

Hey! Let me break it down for you:

Individual Income vs. HUF Income:

• Individual Income: Your salary is considered your personal income and should be taxed under your personal PAN (Permanent Account Number). This means you file your salary income in your individual tax return.
• HUF Income: Income generated by the HUF (like from ancestral property, business, or investments) is taxed under the HUF's PAN. This is separate from your personal income.

Tax Slabs:

• Your Tax Slab: If you're in the 20% tax slab, it means your personal income (including salary) is taxed at 20%.
• HUF Tax Slab: The HUF's income is taxed separately based on its own income levels. The tax slabs for HUF are the same as for individuals. So, if the HUF's income falls into the 20% slab, it will be taxed at 20%.

Example:

• Your Salary: ₹5,00,000 (taxed at 20% under your PAN)
• HUF Income: ₹4,00,000 (taxed at 10% or 20% depending on the slab it falls into)

By separating your income and the HUF's income, you can potentially save on taxes by utilizing the basic exemption limits and lower tax slabs for both entities.

Hope that clears things up!

(Source: Conversation with Gemini AI)

Yup All Clear.
As an individual i dont have any HUF currently. what is cost of opening HUF ? Shall i invest some small cap fund under HUF so that when i redeem later after 15-20yr it would be as per HUF. I dont have any property to rent out

 

[TaxWiser]

Yup All Clear.
As an individual i dont have any HUF currently. what is cost of opening HUF ? Shall i invest some small cap fund under HUF so that when i redeem later after 15-20yr it would be as per HUF. I dont have any property to rent out

Hey buddy! Here’s what you need to know about opening an HUF and using it for investments:

Cost of Opening an HUF:

• HUF Deed: You’ll need to create an HUF deed, which is a legal document. The cost for this is usually nominal, around a few hundred rupees.
• PAN Card: Apply for a PAN card for the HUF, which is free of cost.
• Bank Account: Opening a bank account for the HUF is generally free, but some banks might have minimal charges.
• Equity and Commodity Trading Account: If you plan to trade, the account opening charges are around ₹500.

Investing in Small Cap Funds:

• Long-Term Benefits: Investing in small cap funds under the HUF can be a great idea. Over 15-20 years, these investments can grow significantly.
• Tax Benefits: The income generated from these investments will be taxed under the HUF, which can help in tax planning and savings.

Steps to Open an HUF:

1. Create an HUF Deed: This document declares the formation of the HUF and lists its members.
2. Apply for PAN: Get a PAN card for the HUF.
3. Open a Bank Account: Open a bank account in the name of the HUF.
4. Start Investing: Use the HUF account to invest in mutual funds, FDs, etc.

Conclusion:
Even without property to rent out, you can still benefit from an HUF by investing in mutual funds and other instruments. This can help in long-term wealth creation and tax savings.

If you need more details, Try to watch some YouTube videos regarding same.

(Source: Conversation with GeminiAI)