Income Tax applicability on HUF

Income Tax applicability on HUF
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Income Tax applicability on HUF

No change in the income tax rates, no additional cess was one of the biggest takeaways of Union Budget 2021 considering the impact of COVID-19 on the economy and reforms announced for its revival.

In Union Budget 2020, the Government gave individual taxpayers & HUFs flexibility to evaluate the two options available for calculating the tax and choose the method which is beneficial for them. Individuals & HUFs can continue to pay tax as per the old tax regime OR opt for the newly introduced concessional tax regime in lieu of foregoing certain tax exemptions & deductions.

Note: Hindu Undivided Family (HUF) will be taxed at the same tax rates and same income slabs as of individual assessee below the age of 60 years.

What is Hindu Undivided Family (HUF)?

Hindu Undivided Family (HUF) is treated as a separate person u/s 2(31) of the Income Tax Act,1961. For the purpose of assessment under the Income Tax Act and Goods & Service Tax Act, Hindu Undivided Family(HUF) will be considered a separate entity from its members.

As per Hindu Law, a family consists of all persons lineally descended from a common ancestor. It will include wife, children, their wives, their children, and unmarried daughters. However, Jains, Sikhs, and Buddhists are not governed by the Hindu Law, but they can also form a HUF under the Act.

Some important points in respect of HUF

  • Deduction u/s 80CCD for contribution to NPS is not available to HUF.
  • Deduction u/s 80E for repayment of loan taken for higher education and interest thereon is not available to HUF.
  • Deduction u/s 80EE for interest on home loans will not be available to HUF.
  • Deduction u/s 80EEA for interest on home loans will not be available to HUF.
  • Deduction u/s 80EEB for interest on electric vehicle loans will not be available to HUF.
  • Deduction u/s 80QQB for royalty to Indian authors will not be available to HUF.
  • Deduction u/s 80RRB for patent royalty will not be available to HUF.
  • Deduction u/s 80TTA for interest income is available to HUF. (Note: Deduction u/s 80 TTA will not be available if new tax regime u/s 115BAC is opted for)
  • Deduction u/s 80U  for disabled individuals will not be available to HUF.
  • Rebate u/s 87A is not available to HUF.
  • Relief u/s 89 is not available to HUF.
  • The benefit of declaring income on a presumptive basis u/s 44ADA for professionals is not available to HUF.
  • Relief from the enhanced surcharge for income chargeable u/s 115AD (1)(b) will not be available to HUF.

Income tax slabs applicable to HUF for AY 22-23 & AY 21-22

Before selecting any method, members of HUFs should carefully examine the pros & cons of both the available options.

Income Slabs New Tax Regime Old Tax Regime
Upto Rs. 2.5 lakh Nil Nil
Rs. 2.5 lakh to Rs. 5 lakh 5% 5%
Rs. 5 lakh to Rs. 7.5 lakh 10% 20%
Rs. 7.5 lakh to Rs. 10 lakh 15%
Rs.10 lakh to Rs.12.5 lakh 20% 30%
Rs.12.5 lakh to Rs.15 lakh 25%
Above Rs. 15 lakh 30%

Note: If HUF intends to opt for a new tax regime  u/s 115BAC then it will be mandatory to furnish Form 10-IE before the due date of 139(1).

Income tax slabs applicable to HUF for AY 20-21 (FY 19-20)

Income Slabs Tax rate
Upto Rs. 2.5 lakh Nil
2.5lakh to 5 lakh 5%
5 lakh to 10 lakh 20%
Above 10 lakh 0%

Surcharge for AY 22-23, AY 21-22, and AY 20-21

Income Slabs Rate of surcharge
Upto Rs. 50 lakhs Nil
Rs. 50 lakhs to Rs. 1 Crore 10%
Rs. 1 Crore to Rs. 2 Crores 15%
Rs. 2 Crore to Rs. 5 Crores 25%
Above Rs. 5 Crores 37%

Note: Surcharge will be subject to marginal relief.  Hence, the maximum increase in tax payable due to surcharge will be lower from the following

  • Income above Rs. 50 lakhs/Rs. 1 Crore/Rs. 2 Crores//Rs. 5 Crores.
  • Total amount payable as income-tax and surcharge less the Total amount payable as income-tax on total income of Rs. 50 lakhs/Rs. 1 Crore/ Rs. 2 Crores/Rs. 5 Crores.

Health & Education Cess

4% will be applicable on the total of the income tax and applicable surcharge.

Tax rebate u/s 87A

Cannot be claimed by HUFs. 

Note: It is proposed in Union Budget 2021, that the presumptive taxes u/s 44ADA of the Act will also be applicable in the case of Hindu Undivided Family (HUF).

Due date of filing income tax return for HUFs

Particulars Due date
If books of accounts are to be audited 31st October of AY
If transfer pricing report is to be submitted in Form no. 3CEB 30th November of AY
In all other cases 31st July of AY

Note: The Government has powers to extend the due date of filing an income tax return, tax audit report, and transfer pricing report if the need arises.

Can HUF file a belated return?

As per section 139(4) of the Income Tax Act, 1961 – A belated return of income tax can be filed by a HUF if the return u/s 139(1) was not filed within the prescribed due date.

Note: A belated return can be filed up to 31st December of the relevant assessment year OR before the completion of the assessment whichever is earlier.

Can HUF revise the return?/ Can HUF revise the belated return?

As per section 139(5) of the Income Tax Act, 1961 – A revised return of income tax can be filed by a HUF if the return u/s 139(1) was filed within the prescribed due date.

As per section 139(5) of the Income Tax Act, 1961 – A revised return of income tax can be filed by a HUF if the belated return u/s 139(4) was filed within the prescribed due date.

Note: A revised return can be filed up to 31st December of the relevant assessment year OR before the completion of the assessment whichever is earlier.

 

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About CA Ankita Khetan 162 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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