Can forming a HUF help you save tax? Experts explain who can create one, key benefits and what to consider
Eshita Gain
Can a salaried person form a HUF?
Key advantages of forming a HUF
Basic tax exemption: Like individual taxpayers, HUFs are also eligible for the basic tax exemption up to ₹2.5 lakh annually if they choose old tax regime and ₹4 lakh for those opting for the new regime.
Section 80C deductions: HUFs are also eligible for deductions of up to ₹1.5 lakh under Section 80C of the Income-tax Act. This benefit is available on investments such as PPF, SSY, SCSS, among others.
LTCG exemption for equity investments: If both the HUF and an individual family member have separate demat accounts, each can independently claim the annual long-term capital gains (LTCG) exemption of ₹1.25 lakh on equity investments. This allows the family to avail a combined exemption of up to ₹2.5 lakh in a financial year.
Capital gains exemptions on property: HUFs can claim exemption from capital gains tax on the sale of a residential property by reinvesting the gains in another property. If the prescribed requirements are met, the tax liability on such capital gains can be reduced or eliminated.
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