Latest news with #HUFs
Mint
4 hours ago
- Business
- Mint
The HUF tax hack everyone's talking about—but few understand
If you were to take social media influencers at face value, a Hindu Undivided Family (HUF) might seem like the ultimate tax hack. A new legal entity with its own PAN? Double the deductions, right? No wonder that every year as tax season approaches, I get a familiar call: "Vijay, should we open an HUF to save taxes?" The short answer might be yes, but the real answer is: it depends. Read this | Maximise your tax savings with an HUF: A smart yet underused strategy Let's unpack what an HUF really is, how it works, when it makes sense, and when it can turn into a tax-planning headache. First, what exactly is an HUF? A Hindu Undivided Family isn't something you incorporate with paperwork. It comes into existence automatically when a Hindu (including Jain, Sikh, or Buddhist) male gets married and has children. Under Hindu law, this family becomes a legal entity, eligible to get a separate PAN, file its own return, and even own property. Yes, the HUF can earn income, invest, pay taxes at slab rates, and claim deductions just like an individual. That means more flexibility in your tax planning arsenal. So why do people use HUFs? Two words: tax saving. Imagine you're a salaried individual earning ₹25 lakh a year. You also inherit a house that fetches ₹6 lakh annually in rent. If this rent is added to your income, it's taxed at your slab rate: 30%. But if the same house is gifted to your HUF, that rental income is taxed under a different PAN, separately and likely at a lower rate. The same logic applies to interest, dividends, capital gains, or even a business run under the HUF banner. The more income the HUF earns, the more room there is to optimise your tax outgo. But what's the catch? Here's the big one: you can't just 'shift" your income to the HUF. For income to be taxed in the hands of the HUF, it must arise from assets gifted to or inherited by the HUF. Transferring your salary or business income to it? That's not valid. Worse, if you gift assets to your HUF, any income they generate could still be taxed in your hands under clubbing provisions (Section 64 of the Income-tax Act, 1961). To steer clear of these pitfalls, HUFs should ideally be funded with: Read this | FAQs on HUF: Tax benefits, formation, and key rules explained So while it may be tempting, you can't route your salary or existing investments through the HUF and expect to save on taxes magically. Legal vs Practical: Where people go wrong Many taxpayers start an HUF, transfer money from their personal account to it, and begin investing, expecting tax breaks. This often raises red flags, especially if the amounts are large or frequent. If a tax officer suspects that the HUF is being misused as a personal tax shelter, reassessments and penalties may follow. Another wrinkle: HUFs are legal persons, and over time, all coparceners (i.e., family members) gain rights to the assets. If you ever dissolve the HUF or want to sell its assets, every coparcener must sign off. Disagreements can, and often do, lead to prolonged family disputes. Also worth noting: since the 2005 amendment to the Hindu Succession Act, daughters are coparceners too, with equal rights. This is a landmark step toward equality, but it also adds legal complexity to HUF-held assets. When does an HUF make sense? An HUF can be a smart tool if you're receiving ancestral wealth or gifts and want to structure it for long-term benefit. For example: You inherit ₹1 crore from your father and invest it through your HUF. The HUF earns ₹7 lakh a year in interest income — taxed in its own hands. You save tax while building wealth under a common family structure. HUFs are also useful for estate planning — they can hold family gold, property, and investments with continuity across generations. Also read | Kalyani family dispute: Gaurishankar files documents to show HUF exists, belying brother's exclusive claims over assets HUFs are among India's oldest legal tax-saving structures. Used right, they're a powerful ally in your financial journey. But beware the oversimplified advice floating around social media — 'open HUF and save lakhs in taxes" is rarely the full picture. Like most tax tools, the HUF works best when used with clarity, planning, and the right intent. Vijaykumar Puri, partner at VPRP & Co LLP, Chartered Accountants.
Mint
06-05-2025
- Business
- Mint
ITR filing for FY 2024-25: What has changed and what you need to know
The Central Board of Direct Taxes (CBDT) has released updated income tax return (ITR) forms 1 to 5 for assessment year 2025-26 , incorporating key Budget 2024 changes—from revised capital gains thresholds to updated presumptive taxation limits—offering taxpayers greater clarity, but also more detailed compliance requirements. ITR 1 (Sahaj) is meant for resident individuals and Hindu Undivided Families (HUFs) with total annual income up to ₹ 50 lakh from sources like salary, pension, interest, dividends, and rent from one house. This year's Budget raised the tax-exempt limit for long-term capital gains (LTCG) on securities from ₹ 1 lakh to ₹ 1.25 lakh. The updated ITR 1 form for FY 2024-25 now allows taxpayers with LTCG income up to ₹ 1.25 lakh to file using this simpler form. Earlier, they had to use the more complex ITR 2 form even for exempt gains. ITR 4 (Sugam) is for resident individuals and HUFs using the presumptive taxation scheme. Budget 2024 raised the business turnover limit from ₹ 2 crore to ₹ 3 crore, and the professional receipts limit from ₹ 50 lakh to ₹ 75 lakh for declaring income under presumptive tax rates (6%, 8% for business; 50% for profession). The updated ITR 4 form now reflects these higher limits. It also allows those with LTCG income up to ₹ 1.25 lakh to report it in this form itself. ITR 2 is for individuals and HUFs with income above ₹ 50 lakh and capital gains. ITR 3 is for those with business or professional income. ITR 5 is for limited liability partnerships (LLPs) and business trusts. Forms 2, 3, and 5 have all been updated with key changes to reflect new tax rules, especially around capital gains and reporting thresholds. Also read: After the Budget, updating ITR may cost you more than a reassessment From 23 July 2024, several key changes in capital gains taxation take effect. The holding period for determining whether an investment is long-term or short-term has been redefined. Listed securities, bonds, and mutual funds will now be considered long-term if held for more than one year, while unlisted securities must be held for more than two years to qualify as long-term. Additionally, the indexation benefit, which allowed inflation-adjusted cost while computing long-term capital gains (LTCG), has been withdrawn for securities. The tax rates on capital gains have also been revised. For listed securities, the LTCG tax rate has been increased from 10% to 12.5%. In contrast, for unlisted securities, gold, and immovable property, the rate has been reduced from 20% to 12.5%. For short-term capital gains (STCG) on specified securities, the tax rate has gone up from 15% to 20%. To facilitate accurate reporting, the updated ITR forms 2 and 3 now include separate fields to disclose gains earned before and after these changes. Taxpayers must differentiate between the pre-amendment period of 1 April to 22 July 2024, and the post-amendment period of 23 July 2024, to 31 March 2025. Also read: Mint Explainer: Can capital gains make you ineligible for a tax rebate? Starting 1 October 2024, share buyback proceeds will be taxed as deemed dividend income. This income will be taxed at the applicable slab rate of the individual taxpayer. Earlier, such proceeds were either exempt or taxed differently, but under the new rule, they fall under the broader scope of dividend taxation, closing a previously existing loophole. Another significant change is in the mandatory disclosure of the Assets and Liabilities (AL) Schedule in the ITR. The income threshold triggering the requirement to file the AL schedule has been increased from ₹ 50 lakh to ₹ 1 crore. This means only those with a total annual income exceeding ₹ 1 crore will now need to report their assets and liabilities in the tax return. The new ITR forms also require more detailed disclosures related to the choice of personal tax regime . Taxpayers who opt out of the default new regime must file Form 10-IEA. If this form is filed after the due date, they must now specify the reason for the delay in a new column introduced in the form. This additional step ensures that the option to continue under the old regime is not denied due to technical delays, provided the taxpayer has a valid explanation. Further, taxpayers must now provide section-wise and subsection-wise breakdowns of deduction claims under Chapter VI-A, such as under section 80C for investments in instruments like PPF, ELSS, etc. The forms also call for precise details of TDS claims, including the applicable TDS section, subsection, and the PAN or TAN of the deductor. These changes ensure that credit for TDS is claimed correctly and transparently. Also read: Filing ITR: Over 3.24 lakh individuals filed tax returns for income of ₹ 1 crore & above till March 31 Overall, the newly notified ITR forms for financial year 2024-25 reflect a move toward greater transparency and data precision. They aim to capture detailed information on income, capital gains, deductions, and tax credits. CBDT appears to be laying the groundwork for smarter compliance and enforcement using artificial intelligence and advanced data analytics. Mayank Mohanka is founder, TaxAaram India, and a partner at S.M. Mohanka & Associates.
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Business Standard
02-05-2025
- Business
- Business Standard
New ITR-3 Form: Relief for professionals as asset limit raised to ₹1 crore
CBDT doubles asset reporting limit to ₹1 crore under revised ITR-3 for AY 2025-26 and introduces structured capital gains rules, buyback taxation, and dropdown menus Monika Yadav New Delhi Listen to This Article The Central Board of Direct Taxes (CBDT) has introduced significant revisions to the Income Tax Return (ITR) Form 3 for Assessment Year 2025–26, aiming to streamline compliance for individuals, Hindu Undivided Families (HUFs) and partners in firms or limited liability partnerships (LLPs) who have income from business or profession. The monetary limit for reporting assets and liabilities under Schedule AL has been doubled from ₹50 lakh to ₹1 crore. For AY 2025–26, taxpayers under ITR-3 must file returns by 31 July 2025, unless extended. In the previous Budget announced on 23 July 2024, the government introduced major changes in the
Time of India
02-05-2025
- Business
- Time of India
ITR-3 form notified by the CBDT: Know what this means for taxpayers
— IncomeTaxIndia (@IncomeTaxIndia) Live Events Due date to file ITR-3 Opting out of new tax regime The Central Board of Direct Taxes ( CBDT ) has notified the ITR-3 form . This income tax return form is used by individuals and Hindu Undivided Families (HUFs) who have income, profits or gains from business and profession. The ITR form is used for reporting income earned for the financial year 2024-25 , i.e., between April 1, 2024, and March 31, per the Income Tax post on X, the ITR-3 form has been further simplified. According to the tax department, the ITR-3 form has a schedule for capital gains split. The split allows capital gains to be calculated for tax purposes before and after July 23, 2024, i.e., as per the changes announced in the Finance Act, the ITR-3 form will allow the taxpayers to report the capital loss on share buyback allowed if the corresponding dividend income is shown as income from other sources as per the amendment effective from October 1, ITR form has raised the asset and liability reporting limit to Rs 1 crore of total income. Reference to Section 44BBC of the Income Tax Act for (cruise biz) has been added to the ITR-3 is a column for enhanced reporting for deductions such as Section 80C, 10(13A), etc. and also the TDS section code to be reported in the TDS schedule of ITR-3 if the taxpayers are trading in F&O in the stock market, then they have to use ITR-3 form to report their speculative gains and taxpayer must choose the last date when filing the income tax return. The last date for filing the ITR will depend on the requirement for submitting the audit report. If there is no requirement to submit the audit report, then the last date for filing the ITR is July 31, 2025. However, if the audit report is mandatorily required to be submitted, then the last date of filing ITR is October 31, 2025. If the taxpayer has undertaken some international transactions, then the last date of filing ITR-3 is November 30, the taxpayer misses the due date of filing ITR, then belated ITR for FY 2024-25 can be filed by Decmeber 31, the taxpayer wants to opt out of the new tax regime while filing ITR, then taxpayer is required to submit Form 10IEA . Remeber, the taxpayer once opts out of new tax regime gets once in lifetime opportunity to switch back to the new tax regime. Once opted for the new tax regime, then he/she cannot opt for the old tax it is advisable to taxpayers to be careful while choosing the tax regime at the time of filing ITR.
The Hindu
30-04-2025
- Business
- The Hindu
Govt notifies ITR forms; individuals with LTCG up to ₹1.25 lakh can file ITR 1, 4
The government has notified Income Tax Return (ITR) forms 1 and 4 for Assessment Year (AY) 2025-26, simplifying the filing process for individuals earning salary or presumptive income who have long-term capital gains (LTCG) up to ₹1.25 lakh from listed equities. Previously required to file the more complex ITR-2, these taxpayers can now use the simpler ITR-1 (Sahaj) and ITR-4 (Sugam) forms, respectively. This change addresses a specific inconvenience highlighted by tax experts. Sandeep Jhunjhunwala, Tax Partner at Nangia Andersen LLP, explained that previously, 'salaried individuals having income under the head capital gains were required to file form ITR-2 even where the capital gains were exempt by virtue of the threshold limit prescribed under Section 112A, resulting in elaborate disclosure requirements.' The new ITR-1 and ITR-4 forms for AY 2025-26 incorporate a section for reporting LTCG exempt under Section 112A up to the ₹1.25 lakh limit. According to the Income Tax law referenced in the notification context, LTCG up to ₹1.25 lakh per annum from the sale of listed shares and mutual funds are exempt, with gains exceeding this threshold subject to a 12.5 per cent tax. However, Mr. Jhunjhunwala clarified that salaried individuals must still use Form ITR-2 if their LTCG under Section 112A exceeds ₹1.25 lakh, if they have other types of LTCG or short-term capital gains, or if they have capital losses to carry forward or bring forward. A similar simplification for reporting exempt LTCG (up to ₹1.25 lakh under Section 112A) has been incorporated into the new ITR-4 form for taxpayers using the presumptive taxation scheme. Experts lauded the simplification. EY India Tax Partner Samir Kanabar stated that allowing those with minimal LTCG to use ITR-1 or ITR-4 'reduces the burden of navigating more complex forms.' He added, 'This move reflects a clear shift towards enhancing taxpayer services... [it] is expected to encourage greater voluntary compliance, reduce filing-related stress, and make the system more user-friendly for small taxpayers.' AKM Global Partner-Tax Sandeep Sehgal echoed this, noting the change 'streamlines the tax filing process, making it more accessible and less burdensome... thereby encouraging timely and accurate compliance'. ITR Form 1 (Sahaj) and ITR Form 4 (Sugam) cater to small and medium taxpayers with total annual income up to ₹50 lakh. Sahaj is for resident individuals with income from salary, one house property, other sources (like interest), and agricultural income up to ₹5,000. Sugam is for individuals, Hindu Undivided Families (HUFs), and firms (excluding LLPs) with income from business and profession under the presumptive scheme. ITR-2 is filed by individuals and HUFs without business or profession income. Beyond the LTCG change, the government has introduced other modifications. The forms now feature a drop-down menu in the utility for selecting deductions claimed under sections like 80C and 80GG. Additionally, assessees must furnish section-wise details regarding Tax Deducted at Source (TDS) deductions within the ITR. Consistent with last year, ITR-1 continues to seek details on expenditures exceeding ₹2 lakh on foreign travel and over ₹1 lakh on electricity consumption during the previous year. Regarding the timeline, the ITR forms are typically notified earlier, around February or March. The delay this year was attributed to Revenue Department officials being preoccupied with the new Income Tax Bill introduced in Parliament in February. Taxpayers can begin filing their returns for income earned in the 2024-25 financial year once the I-T department makes the filing utility available. The deadline for individuals not requiring an audit remains July 31.
