Income Tax applicability on HUF

Income Tax applicability on HUF
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Income Tax applicability on HUF

Introduction

No change in the income tax rates and no additional cess was one of the biggest takeaways of Union Budget 2021 or Union Budget 2022 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.

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.

Who can create a HUF?

A Hindu Family can form a HUF (Hindu Undivided Family.  However, Jains, Sikhs, and Buddhists are not governed by the Hindu Law, but they are also permitted to form a HUF under the Income Tax Act.

How to form a HUF? 

When an individual gets married he becomes a separated Hindu family i.e. automatic creation of a HUF.

But for attaining a separate legal person’s status one needs to register as a HUF  as per the provisions of the Income Tax Act.

Who can contribute assets to HUF?

Karta as well as the coparceners can contribute to the assets of HUF.

How is HUF taxed?

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

HUF has to file a separate return of income for each financial year. HUF  doesn’t have to pay any taxes as long as the income does not exceed the basic exemption limit after availing of the benefit of all eligible deductions.

Can HUF opt for concessional tax rates under the new tax regime u/s 115BAC?

YES. HUF can opt for concessional tax rates under the new tax regime u/s 115BAC. But if HUF opts to pay under the new tax regime benefit of deductions will not be available.

Can HUF declare income on a presumptive basis u/s 44AD?

The benefit of declaring income on a presumptive basis u/s 44AD is available to HUF.

Can HUF declare income on a presumptive basis u/s 44ADA?

The benefit of declaring income on a presumptive basis u/s 44ADA for professionals is available to HUF.

Can HUF claim rebate u/s 87A?

No. HUF cannot claim rebate u/s 87A. (Read in detail about section 87A)

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).

Can HUF claim relief u/s 89?

No. HUF cannot claim relief u/s 89.

What is the due date for filing ITR for HUF?

Particulars Due date
If books of accounts are to be audited 31st October of AY
If the provisions of transfer pricing are applicable 30th November of AY
In all other cases 31st July of AY

Click here to see the updated Income Tax Compliance Calendar for the current 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 an updated return u/s 139(8A)?

HUF can file an updated return u/s 139(8A). (Read more about the updated return of Income Tax)

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.

Click here to see the updated Income Tax Compliance Calendar for the current AY

Income tax rates/slabs applicable to HUF from AY 21-22 onwards

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 rates/ 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 30%

Surcharge from AY 20-21 onwards

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 income tax and applicable surcharge.

Some important points in respect of HUF

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Disclaimer: The above content is for general info purpose only and does not constitute professional advice. The author/ website will not be liable for any inaccurate / incomplete information and any reliance you place on the content is strictly at your risk.

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