A Hindu Undivided Family (HUF) is a joint family with many generations living together. Generally a husband, wife and children and children's spouses all living together, are considered to be part of a HUF. The property owned by this family will be passed on through lineal ascendants. There are a set of laws that govern property ownership, marriages, taxation etc for a legally declared HUF.
An HUF generally consists of:
All male members who are a part of HUF either by birth or adoption.
All unmarried daughters who are present either by birth or adoption.
All the windows.
All the women who have been deserted by their husband.
Hindu undivided family consists of all the degrees of people and it is a very large family.
Taxability of HUF
In order to compute the income of an HUF, one has to first ascertain its income under the different heads of income.
The following points should be keep in mind while computing income:
If funds of an HUF are invested in a company or a firm, fees or remuneration received by the member as a director or a partner in the company or firm may be treated as income of the family.
If fees or remuneration is earned for services rendered by the member in his personal capacity, it will be treated as the personal income of the member.
If any remuneration is paid by the HUF to the karta or any other member for services rendered by him, remuneration is deductible from income of HUF if such payment is genuine and not excessive and paid under a valid and bona fide agreement.
The following incomes are not taxed as income of HUF
If a member has converted or transferred without adequate consideration his self-acquired property into joint family property, income from such property is not taxable in hands of the family.
Income of impartible estate (though it belongs to family) is taxable in the hands of holder of estate and not in hands of HUF.
Personal income of the members cannot be treated as income of HUF.
Income from individual property of daughter is not taxable in hands of HUF even if such property is vested into HUF by daughter.
Deduction from gross total income
An HUF is entitled for deductions available under Chapter VI-A (as applicable) while calculating its taxable income.
Rate of Tax:
An HUF is taxed on same slab rates which are applicable to an Individual.
An HUF is liable to pay Alternate Minimum Tax.If the tax payable is less than 18.5 per cent (including cess and surcharge) of "Adjusted Total Income" subject to prescribed conditions.