FULL FORM OF HUF

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           HUF stand for Hindu Undivided Family. One can save taxes by forming a family unit and combing asset to form a HUF. HUF is taxed separately from its member. For instance A Hindu family can come together and form a HUF likewise Buddhist,Jains and Sikhs can also form a HUF. HUF has its own PAN and files tax returns independents of its members.
            A HUF is taxed separately from its member,hence deductions such as under section 80C or exemptions allowed under the tax laws can be claimed separately. For instance if someone and his spouse along with two children decided to create a HUF all four members as well as HUF can claim a deduction for section 80C and will be eligible for other exemptions.

TAX CRITERIA FOR HUF

    The followings are the tax criteria for the HUF.
  1. HUF has its own PAN and files a separate tax return. A separate joint  Hinhu family business is created since it has entity separate from its members.
  2. Deduction can be claimed under section 80C and for the others exemptions.
  3. HUF can take an insurance policy on the life of its members.
  4. HUF can pay salary to its members. This salary expenses can be deducted from the income of HUF.
  5. A HUF is taxed at the same rates as an individual.     

HOW HUF IS FORMED

       For forming HUF some conditions are required which are as follows--

  1. One person cannot form HUF,for forming HUF family member are required.
  2. A HUF is automatically created at the time of marriage.
  3. HUF consist of a common ancestor and all his legal descendants such as their wives and unmarried daughters.
  4. HUF can be formed by HIndu,Buddhist,Jains and Sikhs family.
  5. HUF normally has asset that comes as a gift,a will,or ancestral property or property acquired from the sale of joint family property or property contributed to common pool by members of HUF.
  6. After forming the HUF it must be registered in its name. A HUF should have a legal deed. The deed must contain details of HUF members and the business of the HUF. A PAN number and a bank account should be opened in the name of the HUF.

DISADVANTAGE OF MEMBERS

   There are some complication with the HUF which are as follows--

EQUAL RIGHT OF MEMBERS

 The greatest disavantage of opening a HUF is that it members have equal right on the property. The common property cannot be sold without the consents of all the members. Any addition to the family by way of birth or marriage, become a member of the HUF and get equal rights. 

 PARTITION

          The most difficult  of opening A HUF is closing it down. The only way a HUF is dissolved  is by a partition.  All members have to agree to dissolve the HUF.

  LOSING OF JOINT FAMILY RELEVANCE

           HUF was  recognise as a separate taxable entity by the Income Tax Department. However, in today's time, where nuclear family are the norm, it is losing relevance.

HUF IS ASSESSED TILL PARTITION

      Once HUF is formed , it  must continue to file it tax return, unless a partition takes place.

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