All about HUF

All about HUF

HUF (Hindu Undivided Family ), Basic purpose of creating a HUF is to save Income Tax arising out of family Income .This is new form of Tax saving tool. In India there are many Hindu families who live jointly and their properties are ancestral as well as self acquired. Income arising out of such properties can be shown as separate income and to be taxed separately.

Basically, HUF account can be created by right of birth and not by an agreement between two parties. Any individual covered under Hindu personal law that is Hindu,Sikh, Jain or Buddhist can create an HUF account, if they have property income and want to save income tax.

Benefit of creating HUF

By creating HUF one can save substantial amount of Income tax , this is because HUF is treated as distinct entity , separate from Individual forming the HUF.

Let me give you a live example question asked by a client :

Sir, I am working in govt job and my total income is around Rs. 12 Lakh per year . My wife is a school teacher and her income is around Rs 6 lakh per year . When My father was alive he had constructed house and some shops . From that we get rental income of around Rs. 50000 per month .This income is added to my income and I have to pay Income tax on it along with my income. I want to know how can I show this income separately so that it is not taxed in my hand.??

This question was asked by one of my client.

My answer is he should create a HUF and obtain a separate PAN for HUF , that way his income from ancestral house and shops amounting to Rs.6 Lakh (@Rs 50,000/-) will not be taxed in his hand.

Let us calculate his Taxable Income before and after Creating HUF

Income Tax payable before creation of HUF

Income from salary : Rs. 12,00,000

Income from Property : Rs. 6,00,000

Less : Admissible Expneses for Property 1/3= Rs. 200000

Taxable Income from Property = Rs. 4,00,000

Total Taxable Income = Rs. 16,00,000

Income tax payble = Rs. 304200/-

If he creates HUF

a. income from his Salary (after deductions) Rs. 12,00,000

Tax payable : Rs. 179400/-

b. Income from HUF Rs. 600000

less admissible ded. Rs. 200000                                                                                 

Taxable income Rs. 400000

Tax payable = Rs. 7800

Total Tax payable : 179400+7800 = Rs. 187200

saving in Tax Rs. 117000

Salient features of HUF

1. HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.

2. Deductions under section 80 and other exemptions can be claimed by the HUF in its income tax return.

3. HUF can take an insurance policy on the life of its members and claim deductions under section 80C upto Rs. 1.50 Lakh

4. HUF can pay a salary to its members if they contribute to its functioning of the HUF. This salary expense can be deducted from the income of HUF.

5. Investments can be made from HUF’s income. Any returns from these investments are taxable in the hands of the HUF.

A HUF is taxed at the same rates as an individual.

Please remember your personal income like salary etc can not be shown as HUF income .

A women can not create HUF, she will be part of husband or father's HUF

Only male member can be KARTA of HUF a child becomes a member of HUF by birth itself, no agreement required.

If you are interested in creating a HUF to save your Income Tax , please contact us.(whatsapp 9470307730

What are documents required for GST registration ?

What are documents required for GST registartion ??

For different categories of entity , different documents are required for Registration of GST

1. For Sole Proprietorship –

Photo of sole proprietor;

Copy of PAN card;

Copy of bank statement or cancelled cheque or first page of the pass book of owner.

Copy of address proof for registered office;

Electricity bill, water bill, landline bill etc. of owner;

Copy of legal ownership document or municipal bill copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

2. Partnership Firm –

PAN card of partnership firm and designated partners;

Photograph of all the partners;

Identity proof of all the partners;

Copy of address proof for registered office;

Electricity bill, water bill, landline bill etc.;

Copy of legal ownership document or municipal khata copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

Copy of partnership deed;

Copy of bank statement or cancelled cheque or first page of the pass book.

3. Limited Liability Partnership (LLP) –

PAN card of LLP and of designated partners;

Photographs of designated partners;

Copy of registration certificate of LLP;

Copy of identity proof of designated partners;

Copy of address proof of registered office;

Electricity bill, water bill, landline bill etc.;

Copy of legal ownership document or municipal khata copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

Copy of LLP agreement;

Copy of bank statement of LLP or cancelled cheque or first page of pass book;

Copy of Board’s resolution.

4. Private Limited Company, Public Limited Company And One Person Company –

PAN card of company and directors;

Copy of registration certificate of the company;

Photograph of all the directors;

Copy of identity proof of the directors;

Copy of address proof of registered office;

Electricity bill, water bill, landline bill etc.;

Copy of legal ownership document or municipal khata copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

Copy of Memorandum of Association (MOA) and Articles of Association (AOA);

Copy of bank statement or crossed cheque or first page of pass book;

Copy of Board’s Resolution.

5. Hindu Undivided Family (HUF) –

Copy of PAN card;

Photograph and PAN of Karta;

Copy of address proof of registered office;

Electricity bill, water bill, landline bill etc.;

Copy of legal ownership document or municipal khata copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

Copy of bank statement or crossed cheque or first page of pass book;

Authorized signatory (if different) – Photo; Letter of authorization.Authorized signatory –

6. Society / Trust / Club –

Copy of PAN card of society / trust / club and of promoters / partners;

Photograph of promoters / partners;

Copy of registration certificate;

Copy of address proof of registered office; Electricity bill, water bill, landline bill etc.;

Copy of legal ownership document or municipal bill copy (in case of owned premises)

Rent agreement and No Objection Certificate (NOC) from the owner of the premises (in case of rented premises).

Copy of bank statement or crossed cheque or first page of pass book;

Authorized signatory (if different) – Photo; Letter of authorization.

What is Presumptive Taxation

What is Presumptive Taxation  (Section 44AD)

We all know that in order to calculate Tax payable by a business house or Professionals like Doctor , lawyers, CA etc , we have to check their Books of accounts , Find out his Turnover or Income and assess Income tax payable by Them.

However in order to save them from complexities , Govt has launched a scheme for such Business man whose annual turnover is less than 2 crore per FY  and Professionals whose Income is less than 50 lakh per FY to avoid keeping books of Accounts and pay tax on Presumption basis as follow :

A person adopting the presumptive taxation scheme can declare income at a prescribed rate and, in turn, is relieved from tedious job of maintenance of books of account.

in case of a person adopting the provisions of section 44AD, income will be computed on presumptive basis, i.e., @ 8% of the turnover or gross receipts of the eligible business for the year.

Income shall be calculated at rate of 6% in respect of total turnover or gross receipts which is received by an account payee cheque or draft or use of electronic clearing system.

In other words, in case of a person adopting the provisions of section 44AD​, income will not be computed in normal manner (i.e., Turnover less Expense) but will be computed @ 8%/6% of the turnover.

Income at higher rate, i.e., higher than 8% can be declared if the actual income is higher than 8%. ​

Professionals like doctors, lawyers, architects, interior designers CA CMS CS and others can adopt PTS. For them, 50% of the total receipts during the fiscal will be considered as profit and get taxed accordingly. A professional can voluntarily declare the income at a higher rate than mandatory 50% of the total receipts.

Example :

A business house adopts PTS (Presumptive Tax System ) , his total income by way of cash transaction is 1 cr and by way of digital mode (Banking) is 50 lakh , his income for taxation purpose will be computed as follow

8% of 1 crore =  Rs. 800000

6% of 50L     =  Rs. 300000

 Toatl             = Rs  1100000

Tax on Rs 11 Lakh will be computed as per his slab

2. A lawyer receives Rs 50 Lakh as his fee in a year. His income for tax purpose will be Taken as Rs 25lakh (50% of Rs 50 Lakh) . Tax on 25 Lakh will be computed as per his Slab.

In both cases books of Accounts are not needed to be maintained.

This scheme is not available for salaried class people.
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