Income tax benefits of HUF: How to use a Hindu Undivided Family for savings, PPF, and investments

What is HUF?

Under the old tax regime, an HUF enjoys a basic exemption limit of ₹2.5 lakh, while under the new regime, the limit increases to ₹4 lakh.

Can an HUF invest and earn income independently?

An HUF can own and invest in assets such as houses, shares, and mutual funds in its own name. It can also run a business, using its own capital or funds borrowed from members or others.

Can an HUF buy property or take a home loan?

An HUF can own immovable property, including a residential house, and is also eligible to apply for a home loan.

"Just like an individual, an HUF can claim the following tax deductions (depending on the chosen regime):

Section 80C: Deduction up to ₹1.5 lakh for repayment of principal under the old regime.

Section 24(b): Deduction up to ₹2 lakh on interest paid for home loans under the old regime.

Under the new regime, the interest deduction is only allowed for let-out properties, not self-occupied ones," explained Jain.

What are the benefits if an HUF owns a house property?

Jain points out that individuals can treat only two houses as self-occupied. Any additional houses are considered “deemed to be let out” and taxed on notional rent.

However, if one of the properties is owned by your HUF, it can also be treated as self-occupied, allowing your family to have two more houses with nil taxable income, thereby reducing the overall tax burden.

Can an HUF claim a capital gains exemption under Section 54F?

"This exemption under Section 54F is available as long as the HUF does not own more than one house (apart from the new one purchased). This provision helps families diversify ownership between individuals and the HUF while still availing tax benefits," explained Jain.

What deductions can an HUF claim under the old tax regime?

Section 80C: LIC premium, ELSS, tax-saving fixed deposits, or contributions to a member’s PPF account (up to ₹1.5 lakh).

Section 80D: Health insurance premiums ₹25,000 (₹50,000 for senior citizen members).

Section 80DDB: Medical treatment for specified diseases, up to ₹40,000 (₹1 lakh for senior citizens).

Section 80U: Deduction of ₹75,000 for a disabled member or ₹1.25 lakh for severe disability.

Are there any deductions an HUF cannot claim?

Yes. Jain clarifies that an HUF cannot claim deductions for:

• Tuition fees of members’ children

• Deposits under the Senior Citizen Savings Scheme (SCSS)

• Contributions to the National Pension System (NPS) or pension plans

• Investments in National Savings Certificates (NSC)

Why should families consider creating an HUF?

Balwant Jain explains that an HUF helps a family:

• Legally split income and reduce taxes

• Invest and own property in a separate entity

• Enjoy additional exemptions and deductions

• Plan succession and wealth transfer efficiently

An HUF offers both tax efficiency and long-term financial flexibility for families that manage assets together.