An HUF (Hindu Undivided Family) is taxed as a separate person in India, with its own PAN, its own bank account, and its own income tax return. It gets the same tax slabs as individuals — a basic exemption of Rs 2.5 lakh under the old regime and Rs 4 lakh under the new regime. But there is one big catch: an HUF cannot claim the Section 87A rebate, so an HUF earning Rs 8 lakh under the new regime still pays tax, while an individual with the same income pays zero.
Key facts at a glance
- An HUF needs at least a married couple to form — a single person cannot create one. Only Hindus, Sikhs, Jains and Buddhists can form an HUF.
- The Karta (head of the family) manages the HUF’s money, and since the 2005 amendment to the Hindu Succession Act, daughters have equal rights as coparceners.
- The new tax regime has been the default for HUFs since AY 2024-25 (under Section 115BAC; from Tax Year 2026-27 it is Section 202 of the Income-tax Act, 2025).
- An HUF can claim a separate Rs 1.5 lakh 80C deduction, 80D health-insurance deduction, home-loan interest up to Rs 2 lakh, and 80G donations — all over and above what the members claim in their personal returns.
- An HUF cannot open a PPF account in its own name, cannot open an NPS account, and cannot claim HRA exemption.
What is an HUF and who can create one?
An HUF is a family unit that holds property and income together under a common head. For tax purposes it is treated as a separate “person”, which is why it gets its own basic exemption limit and its own slab rates.
Only Hindus, Sikhs, Jains and Buddhists can form an HUF — it is not available under Muslim or Christian personal law. To create one you need:
- At least a married couple. A single person cannot start an HUF. Children born into the family automatically become coparceners.
- A Karta. This is the head of the family who manages the HUF’s affairs. Traditionally the eldest male, but courts have confirmed that a woman can also be the Karta.
- Coparceners. Family members who have a birthright in the HUF’s property. After the Hindu Succession (Amendment) Act, 2005, daughters are coparceners with rights equal to sons.
- Members. Other relatives (such as the wife) who are part of the family but are not coparceners.
Money in the HUF belongs to the whole family, not to any one member. That is the point of the structure — and also the part people should think through before forming one, because an HUF is hard to dissolve. All assets must be divided among the members before it can be closed.
What is the tax slab for HUF in FY 2025-26?
An HUF is taxed at exactly the same slab rates as an individual. Here are the FY 2025-26 slabs (AY 2026-27, still under the 1961 Act), for both regimes.
Old regime
| Total income | Tax rate |
|---|---|
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 – Rs 5,00,000 | 5% |
| Rs 5,00,001 – Rs 10,00,000 | 20% |
| Above Rs 10,00,000 | 30% |
New regime
| Total income | Tax rate |
|---|---|
| Up to Rs 4,00,000 | Nil |
| Rs 4,00,001 – Rs 8,00,000 | 5% |
| Rs 8,00,001 – Rs 12,00,000 | 10% |
| Rs 12,00,001 – Rs 16,00,000 | 15% |
| Rs 16,00,001 – Rs 20,00,000 | 20% |
| Rs 20,00,001 – Rs 24,00,000 | 25% |
| Above Rs 24,00,000 | 30% |
The new regime has been the default for HUFs since AY 2024-25. If an HUF wants the old regime, it must opt out — and an HUF with business income can switch back to the old regime only once; after going back to the new regime, it cannot opt out again. (For individuals the same rule exists; our guide to opting out explains the old vs new tax regime choice and the Form 10-IEA process.)
By the numbers (attributed)
- Rs 60,000 — maximum 87A rebate for resident individuals (not HUFs) with total income up to Rs 12 lakh under the new regime, per the Finance Act, 2025.
- Rs 12,500 — maximum 87A rebate under the old regime for income up to Rs 5 lakh.
- 18.5% — Alternative Minimum Tax (AMT) rate that can apply to an HUF when its adjusted total income crosses Rs 20 lakh.
- Rs 50,000 — gifts above this amount are taxable in the HUF’s hands unless received from a relative.
Is HUF eligible for the 87A rebate?
No. This is the most misunderstood point about HUF taxation, and several small blogs get it wrong.
Section 87A gives a rebate of up to Rs 60,000 to resident individuals whose total income is up to Rs 12 lakh under the new regime (Rs 12,500 for income up to Rs 5 lakh under the old regime). The operative words in the law are “resident individual”. An HUF is a separate person under the tax law, but it is not an individual — so the rebate does not apply to it. TaxGuru, Economic Times and CA Club India all confirm: HUFs, firms, companies and NRIs cannot claim Section 87A under any circumstances. (Our full 87A rebate guide covers who can and cannot claim it.)
A worked example: why it matters
Take an HUF with Rs 8,00,000 total income under the new regime in FY 2025-26:
- Tax on Rs 4,00,001 – Rs 8,00,000 at 5% = Rs 20,000
- Add 4% health and education cess = Rs 800
- Total tax = Rs 20,800
A resident individual with the same Rs 8,00,000 income pays zero — the 87A rebate wipes out the Rs 20,000 tax. The HUF pays Rs 20,800. This gap is the single biggest reason families should compute both regimes for their HUF separately before deciding.
What changed and what stayed under the Income-tax Act, 2025
| What | Before (1961 Act) | Now (2025 Act, from 1 Apr 2026) |
|---|---|---|
| New regime provision | Section 115BAC | Section 202 |
| HUF as a person | Section 2(31) | Carried over under the new Act’s definitions |
| 87A rebate exclusion for HUF | Individuals only | Unchanged — still individuals only |
| AMT for HUF (adjusted total income > Rs 20L) | Section 115JC, 18.5% | Continues |
| ITR forms for HUF | ITR-2 / ITR-3 | Same forms continue for now |
Nothing in the new Act makes HUF taxation simpler or harder — it is mainly a renumbering. The transition only matters for which form numbers and section numbers appear on your paperwork.
How to create an HUF — step by step
- Draft an HUF deed. This is a written declaration on stamp paper recording the HUF’s name, the Karta, the coparceners, and the family’s capital. A deed documents the arrangement; banks and the tax department ask for it.
- Apply for a PAN in the HUF’s name. File Form 49A and attach the HUF deed, the Karta’s identity and address proof, and the Karta’s photograph. The Karta signs in the capacity of Karta.
- Open a bank account in the HUF’s name. The Karta operates it. You will need the HUF PAN, the deed, and the Karta’s KYC documents.
- Put in the initial corpus. This can come from gifts, ancestral property, or money given by relatives. Gifts from relatives to the HUF are exempt from gift tax.
- Keep separate books. Every rupee of HUF income and expense must stay separate from the members’ personal money. Mixing personal and HUF funds is the fastest way to create tax trouble later.
If the HUF runs a business with turnover above the GST registration threshold, it needs its own GST registration too.
What deductions can an HUF claim?
An HUF’s deductions are separate from what its members claim in their personal returns. The main ones:
| Deduction | Limit for HUF | Note |
|---|---|---|
| 80C (LIC, ELSS, NSC, etc.) | Up to Rs 1,50,000 | Separate from each member’s own Rs 1.5 lakh |
| 80D (health insurance for members) | Up to Rs 25,000 (Rs 50,000 if a senior-citizen member is insured) | Premium must be paid by the HUF |
| Home-loan interest | Up to Rs 2 lakh (self-occupied) | Same rule as individuals |
| 80G (donations) | Depends on the charity (100%/50%, with or without the 10% ceiling) | Receipt + Form 10BE from the charity |
| 80TTA (savings-account interest) | Up to Rs 10,000 | Yes, HUFs can claim this |
What an HUF cannot do:
- Open a PPF account in its own name. Only individuals can open PPF accounts (for themselves or a minor child). The HUF can, however, invest in instruments like ELSS, NSC and fixed deposits for its 80C limit.
- Open an NPS account. NPS membership is open only to individual citizens.
- Claim HRA exemption. The HRA exemption is only for salaried employees who are individuals.
Practical impact: when does an HUF actually save tax?
An HUF helps when family income can genuinely be shifted into a second tax file. Two realistic examples:
Example 1 — rental income. A family owns a second flat that earns Rs 6 lakh rent a year. If the flat belongs to the HUF, the HUF gets its own Rs 2.5 lakh basic exemption under the old regime, then claims the 30% standard deduction on rental income plus up to Rs 2 lakh of home-loan interest. Held personally by a member already in the 30% bracket, that same rent would be taxed at 30%+.
Example 2 — separate 80C/80D limits. A member who has already used up his personal Rs 1.5 lakh 80C limit can get another Rs 1.5 lakh of deduction through the HUF’s investments, plus a separate health-insurance deduction for policies the HUF pays for.
The HUF does not help when its income sits in the Rs 5–12 lakh range under the new regime — because the missing 87A rebate means the HUF pays tax where an individual would pay nothing. Always compare both regimes for the HUF before the return is filed.
Which ITR form should an HUF file?
The HUF files its own return with its own PAN — never clubbed with a member’s return.
- ITR-2 — if the HUF has no business or professional income (typically rental income, capital gains, interest and other sources).
- ITR-3 — if the HUF has business or professional income.
Both forms are on the e-filing portal. Nothing needs to be uploaded with the return — keep the deed, PAN and supporting papers ready only if the department asks. (Our ITR form guide explains all seven forms.)
Gifts, partition and clubbing rules in short
- Gifts. Gifts above Rs 50,000 received by the HUF are taxable unless they come from a relative. Gifts from the HUF’s own members are exempt.
- Clubbing. If a member transfers his own property into the HUF, the income from that property is clubbed back into the member’s hands until a partition happens. Simply “gifting yourself to the HUF” does not move the tax bill.
- Partition. A complete partition divides all HUF assets among the members, and each member is then taxed on his own share. A partial partition is not recognised for tax purposes — the HUF continues to be taxed on the undivided assets.
FAQ
What is the tax slab for HUF in FY 2025-26?
The slabs are exactly the same as for individuals. Old regime: nil up to Rs 2.5 lakh, 5% to Rs 5 lakh, 20% to Rs 10 lakh, 30% above. New regime: nil up to Rs 4 lakh, 5% to Rs 8 lakh, 10% to Rs 12 lakh, 15% to Rs 16 lakh, 20% to Rs 20 lakh, 25% to Rs 24 lakh, 30% above. The new regime is the default for HUFs.
Is HUF eligible for the 87A rebate?
No. Section 87A is available only to resident individuals. An HUF with Rs 8 lakh income under the new regime pays about Rs 20,800 in tax, while an individual with the same income pays zero.
Who can create an HUF?
A married couple from the Hindu, Sikh, Jain or Buddhist communities. A single person cannot form an HUF, and Christians and Muslims cannot form one under their personal laws.
Can an HUF claim 80C deduction?
Yes — up to Rs 1.5 lakh, completely separate from the 80C claims of its individual members. The same separation applies to 80D and other deductions.
Which ITR form should an HUF file?
ITR-2 if the HUF has no business income, ITR-3 if it has business or professional income. The return is filed in the HUF’s own name with its own PAN.
Can an HUF open a PPF account?
No. A PPF account can only be opened by an individual (for self or a minor child), never in an HUF’s name. The HUF can use ELSS, NSC or life insurance for its 80C deduction instead.
Official sources
- Income-tax e-filing portal — incometax.gov.in
- Income Tax Department — incometaxindia.gov.in
- India Code (bare Acts) — indiacode.nic.in
Reviewed by Asuthod Rathod, CA
Last updated: 22 October 2026
Disclaimer: This article is for general information only and is not tax advice. Tax rules change; check the official sources above or consult a chartered accountant before acting.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.