HUF formation for Tax benefits

A Hindu Undivided Family (HUF) has specific advantages for taxation. HUFs enjoy all deductions and exemptions under the IT Act independent of the income and tax liabilities of its members as the IncomeTax Act and Wealth Tax Act recognise the HUF as an independent assessable or taxable entity. The Hindu Law defines the HUF as a family, which consists of males lineally descended from a common ancestor and includes their wives and unmarried daughters.

Members: An HUF is automatically constituted after marriage. It can also be formed by partition of an existing HUF into multiple units. A suitable name needs to be given to the
HUF, taking into consideration the prevalent laws and the business that it intends to undertake.

Corpus: An important requisite for the constitution of an HUF is its corpus or capital. This capital is separate from the assets owned by its members. The property received by way of a will in favour of the HUF can become the corpus.

Deed: Though it is not mandatory to have a deed for the formation of an HUF, it is desirable from a legal and taxation perspective. It should contain details of the Karta, members of the HUF consisting of coparceners, and other family members, the capital as well as the business of the HUF.

PAN: An HUF must apply a separate PAN  in the name of the Karta. The PAN is to be quoted while making investments and carrying out financial transactions of the HUF.

The Karta must file the income tax and wealth tax returns on behalf of the HUF, in addition to his personal tax returns.