The following Tax planning tips can be useful to the HUF assesses. The tools given herein below are not exhaustive and there can be other tax planning tools also.
GENERAL TAX BENEFIT OF UP TO RS 5,00,000 /- FOR. A.Y. 2019-20 BEING THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX.
HUF is an important tool of assessment under the frame work of Income Tax Act, 1961 and as such when effectively used, it can serve as a best way to manage the joint family for the benefit of all those in the family. Now that even daughters have become coparceners in the joint family, it augurs well for the entire family and therefore, it is foremost that in respect of all ancestral property which is inherited by a Hindu, the status of HUF is claimed in respect of the said properties so that it can be used as a corpus for the benefit of the entire family and for meeting the expenses of the entire family.
The creation of HUF is very easy as we have seen elsewhere and therefore it is important that every Hindu family creates a unit of HUF and the joint family ancestral property is cloned with the HUF property status.
The above not only gives the family a right to enjoy tax free income of upto Rs. 5,00,000/-Being the maximum amount not chargeable to tax for A.Y. 2019-20, but also lets the family accumulate another sum equal to Rs. 1,50,000/- by way of investment in the specified savings instruments to claim deduction u/s 80C of the Act as has been specified elsewhere. Moreover, a further deduction in respect of Section 80CCF can also be claimed as per details given Chapter
DEDUCTION IN RESPECT OF MEDICAL INSURANCE PREMIUM U/S 80D OF THE INCOME-TAX ACT, 1961.
If the HUF is having a senior citizen as its member and any insurance premium is being paid by such senior citizen, then it is better to pay this premium from the HUF to avail of the higher deduction of Rs. 25,000 ( Rs. 50,000 for a senior citizen) .
Further, the provisions of Section 80D has been amended by Finance Act, 2007 to provide that the payment for medical insurance premia can be made by any mode other than cash. Thus, it is important that the payment should not be made by cash so as to loose the benefit of deduction under this Section. However, the payment can be made by any other mode like Credit card, ECS, Direct debit instructions etc.
DEDUCTION IN RESPECT OF MEDICAL TREATMENT ETC U/S 80DDB OF THE INCOME-TAX ACT, 1961.
If the HUF incurs any expenditure in respect of any member of its family for the purposes of medical treatment of the diseases as specified in Section 80DDB, then it is eligible for a maximum deduction of Rs. 40000/- (Rupees 1,00,000/- if the member is a senior citizen) from its total income. Thus, it is better to incur the medical expenses of a family member from the joint Hindu family property so as to claim deduction under this section.
INVESTMENT IN THE NAME OF HUF
Now a days the income by way of Short term capital gains is eligible for a concession rate of tax @ 15% and the certain types of long term Capital gains are totally exempt from tax. It is advisable to let the Investments be made in the name of HUF assessee to avail of the concessional rate of tax in the Joint family and for the benefit of entire family.
REMUNERATION TO KARTA ETC
Karta and other members working for the HUF business can be provided salary or working remuneration, which would be deductible and net taxable income can thus be reduced. Interest can also be provided to members on their own deposits.
GENERAL EXEMPTION UNDER THE WEALTH-TAX ACT 1957
It may be noted that the limit of Rs. 30 lacs is available to HUF assesses also in respect of the Wealth of the family. Moreover, the family can claim exemption in respect of One House or part of House or a plot of land not exceeding 500 sq meters. For further details, the Chapter dealing with HUF-Wealth tax Act, 1957 can be referred to.