Now Reading: HUF tax benefit not available to salaried individuals: Experts
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HUF tax benefit not available to salaried individuals: Experts
A Hindu Undivided Family (HUF) exists as a separate taxable entity under the Income Tax Act, allowing rental, business, and investment income to be taxed at the HUF's slab rate. But this…
The Story in Brief
A Hindu Undivided Family (HUF) exists as a separate taxable entity under the Income Tax Act, allowing rental, business, and investment income to be taxed at the HUF's slab rate. But this cannot help salaried individuals cut personal tax, livemint.com reports. Clubbing provisions dictate that any income from assets transferred to the HUF without adequate consideration is reattributed to the transferor. Salary earned by an individual cannot be routed through an HUF; such attempts would trigger re-assessment under the individual's name. A loan to the HUF with a formal agreement and fair interest is allowed, but ownership of assets placed in the HUF becomes collective and irreversible. Dissolution can invite scrutiny if past returns misapplied clubbing rules.
The Indian Opinion
The idea that an HUF is a magic tax shield for salaried people is tempting but legally wrong. Some advisers oversell it as a simple fix, ignoring the clubbing rules that block salary routing. At the same time, dismissing HUFs entirely ignores their genuine utility for families with inherited assets or businesses. The real test will come when the Finance Bill clarifies clubbing provisions or eases compliance for genuine HUFs. Will the government close a loophole that barely exists, or simplify a structure that works for family wealth? Watch for the Budget's fine print.
Source: livemint.com
This story was synthesised by AI from the source linked above.
