Benefits of HUF
HUF refers to Hindu Undivided Family, and it is basically a body that comprises of persons that are descendent lineally from common ancestors. This includes all wives and also unmarried daughters living together and share food, worship and estate. Once a daughter becomes married, she is now considered as a member of the HUF of her partner and not her father’s. HUF has a lot of significance and it allows for better tax planning.
1. Tax benefits
HUF status in India is very important as it has great tax benefits linked to wealth tax and income tax. As per these laws, a person having HUF income and personal income is entitled to an exemption for both HUF and personal income. Furthermore, you are also eligible for an additional tax exemption or deduction in view of LIC premium, NSC, PPF contribution, both on HUF and individual income separately.
2. Better management of resources
A senior person in the HUF known as Karta is responsible for operating bank transactions. In most cases, Karta is usually a male. He may give other family members the chance to control the HUF. Hence, HUF offers better resource management since the resources are pooled together. The bank accounts of the HUT are managed well by the Karta. This results in less disputes since decisions are made after consultation.
3. Easy transferring of assets
Whenever a person desires to transfer property using will to his family members, it is simpler to do this action when you are in a HUF. This is because he can easily transfer the resources amongst the HUF members because of the proximity of relatives. This reduces the chances of in-fighting within the family during asset distribution.
In conclusion, HUF offers a great benefit in both wealth and income tax, which makes it a very beneficial status.