Can HUF save tax? Check what new tax law says
Hindu Undivided Families (HUFs) are considered separate taxable entities under the Income-tax Act, 1961, and the Income-tax Act, 2025. This allows HUFs to have their own taxable income, basic exemption limit, and slab rates. However, transferring one's personal savings to an HUF may not result in tax savings due to a specific clubbing rule under the new tax law.
The rule states that income generated from the transferred funds is taxed in the hands of the individual who transferred the funds, and not in the HUF's name. Despite the "relative" exemption allowing for tax-free receipt of money or property, the subsequent income remains taxable in the individual's name. Thus, it is essential to understand the implications of the clubbing rule before transferring funds to an HUF for potential tax benefits.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
