Top Benefits of Creating an HUF for Tax Saving in India

Many women are discovering the benefits of an HUF (Hindu Undivided Family) for the first time. Today, managing money, making investments, and planning for tax savings is no longer just a “man’s job.” Understanding HUF tax benefits can empower women to take charge of family wealth, optimize taxes, and plan effectively for major financial goals.

Why Women Should Care About HUF?

For decades, tax and money matters in families were “taken care of by men.” But times have changed. Women are now earning, investing, and leading financial decisions.”: 

•  You can actively participate in family wealth planning.
  
• Helps in reducing overall tax liability
  
• Allocating resources efficiently toward key milestones such as children’s education, property acquisition, or personal wealth creation.
  
• If you’re a businesswoman, professional, or investor, HUF can help separate personal income from family income.
  

What is a HUF?

A Hindu Undivided Family (HUF) is a separate legal entity under the Income Tax Act. It consists of:

• Head of the family, known as the Karta (earlier always male, but now a woman can also be the Karta).
  
• Members: spouse, children, and even extended family in some cases.
  
• So, while you continue filing your Individual ITR, your HUF can also file separately, which doubles the tax-saving opportunities for you.

Important: Only Hindus, Buddhists, Jains, and Sikhs can form an HUF.

What Are the Tax Benefits of an HUF?

Creating an HUF allows your family to save more on taxes because the HUF is treated as a separate taxpayer. This means:

1. Basic Exemption Limit : ₹2.5 lakh basic exemption for the HUF in (Old regime for FY 2025-26) , Rs. 4 lakh (new regime for FY 2025-26) apart from individual exemptions.
   
2. Separate deductions under Section 80C, 80D, etc. – So, if you and your spouse both claim deductions individually, the HUF can claim additional ones to save taxes efficiently.
   
3. Tax-free income from ancestral property can be shown under HUF, not under individual income.
   
4. Women as Karta – Post-2016, daughters and wives can become Karta, enhancing inclusivity.
   
5. Investments in the name of HUF (FDs, property, mutual funds, insurance) can further grow wealth efficiently.
   
   Example: If you and your husband both use your individual Section 80C limit of ₹1.5 lakh, the HUF can invest separately in ELSS or PPF to claim its ₹1.5 lakh deduction and these investments save the tax three times.

How to Create a HUF?

Setting up an HUF is simpler than it sounds. Here’s the step-by-step guide on how to create an HUF :

1. Create an HUF Deed
   
   • A legal document stating the formation of HUF, names of Karta & members, date of formation and other details.
     
2. Apply for PAN in the name of HUF
   
   • HUF is a separate taxpayer, so it needs its own PAN card. You can apply for a PAN in the name of an HUF
     
3. Open a Bank Account in HUF’s name
   
   • HUF Bank Account is used for investments, property, and transactions.
     
4. Start Contributing Assets
   
   • Transfer ancestral property, gifts received by the family, or income generated through HUF-owned assets in HUF Names.

 How Does an HUF Benefit You in Real Life?

• A family earning rental income from ancestral property can show it under HUF instead of individual names, lowering the tax burden.
  
• Women entrepreneurs can use HUF to separate business and family income, making taxation cleaner and more efficient.
  
• Investments under HUF create family wealth for the long term, something every woman should champion for her children’s and her own financial security.
  

 Women as Karta: Breaking the Tradition

Traditionally, the eldest male member was always the Karta. But after a 2016 Supreme Court ruling, a woman (daughter or wife) can also become the Karta of an HUF. This is a huge step for women’s financial independence because:

• It gives women a legal say in family tax and wealth matters.
  
• Women can take the lead in optimizing family savings.
  
• It empowers women to plan beyond individual income and look at collective family wealth creation.

Stay tuned with Lxme to learn more every day and become financially fearless!

Final Thoughts

HUF isn’t just a tax-saving hack;It’s a tool to reduce taxes and increase the family’s overall financial strength. With the correct planning, a HUF can help you save more, invest better, and safeguard your family’s future while controlling taxes, Whether you are salaried, a professional, or managing household wealth, with the right planning, an HUF can help you save more, invest better, and secure your family’s future, all while keeping taxes in check.

FAQs

Further read:

• HRA Calculator: A Smart Way to Maximize Your Tax Savings On Rent!
• ELSS vs PPF: Choosing the Best Investment for Tax Savings
• Income Tax Benefits for Women: What Every Woman Can Avail