Benefits of Hindu Undivided Family
Hindu Undivided Family or HUF refers to an account or tax entity in India that is based on the joint family system. Citizens are basically given the right to become part of the HUF system with the elder male of the family tagged as the main manager of the plan. The basic concept of HUF is to allow families to gain several benefits in terms of taxation through registering themselves as members of family rather than as separate individuals which may be illegal. Benefits of the HUF system include:
1. Tax breaks
The main function of opening a Hindu Undivided Family or HUF account is to gain the tax benefits provided by the system. All members of one family HUF account will not be taxed if ever they receive any gift that is worth up to 50,000 rupees. If members of the family are not part of the HUF system, they will technically be liable to pay more taxes. With the joint system involved in HUF, members in the family can enjoy some tax benefits.
2. Lower income tax
The HUF system also allows member families to incur lower income taxes if they are registered jointly. Under normal conditions, separate members of a family are taxed individually for all their income. Under HUF rules though, additional income that go beyond the prescribed non-taxable income may be classified for investment purposes and therefore warrant a lower income tax.
3. More savings for families
With the tax exemptions and incentives provided for by the Hindu Undivided Family account system, individual members of one family will be able to save more for their personal expenses. If these members are not registered to the system, they are liable to pay more income and wealth-related taxes which could deplete their savings.
The HUF system is available for all Hindu, Sikh, Buddhist, or Jain families across India. People just need to register in order to avail of the various tax benefits of the system.