Hindu Undivided Family (HUF) Slabs, Deductions & Filing Tips for FY 2025–26

Every year, families across India file their income tax returns often under individual names, sometimes missing out on a hidden advantage already built into the system - The Hindu Undivided Family (HUF). 

It’s not a new tax scheme. It’s not a loophole. It’s a legally recognized entity that’s been part of India’s tax law for decades and, if your family owns ancestral property or earns income jointly, the HUF structure could help you save thousands (or lakhs) in taxes, legally.

But here's the catch: while many families qualify to form a HUF, very few actually understand how to use it right, especially under the new vs. old tax regime rules.

In this blog, we’ll walk you through the income tax slabs for HUFs in FY 2025–26, what deductions are allowed (and not allowed) under each regime and the right forms and documents to file your HUF’s return without error

Whether you're new to the concept or trying to make your filings sharper this year, this guide will help you do more with the structure you already have. 

What is a Hindu Undivided Family (HUF)?

A Hindu Undivided Family (HUF) is a distinct legal entity under the Section 2(31) of Income Tax Act, 1961. The HUF entity is formed automatically when a Hindu family consists of two or more members living together and sharing income, assets, and responsibilities. It is not a creation of a contract or registration but arises out of status — particularly family and lineage. 

Who Can Form a HUF?

The term "Hindu" for HUF is defined broadly under Hindu personal law and is not restricted to religious Hindus alone. As per Indian law, the following communities can form an HUF:

• Hindus
• Jains
• Sikhs
• Buddhists

These communities are included because they are governed by the Hindu Succession Act, 1956, when it comes to inheritance and joint family property. On the other hand, other communities are not allowed to create an HUF, as their personal laws do not recognize joint family structures in the same way.

What Types of Income Fall Under HUF?

An HUF can earn income in its own name, separate from that of its individual members. This income must arise from joint family property or assets acquired using HUF funds. The key income categories include:

• Rental income from ancestral or jointly purchased property.
• Business income run and operated in the name of HUF.
• Capital gains or interest earned from HUF-owned investments.
• Returns on inherited assets, such as gold, land, or equity acquired using joint family funds.

Note: Salaries or professional income earned by members through personal skill or employment are not considered HUF income.

Who Are the Beneficiaries and Successors (Equitable Interests)

HUF is composed of:

• Coparceners: These are the direct descendants — up to four generations — who have a birthright in the HUF property. After the Hindu Succession (Amendment) Act, 2005, daughters were also added as coparceners .
• Members: These include spouses of coparceners and others who are part of the joint family but do not have equal rights in ancestral property.

Only coparceners can demand a partition or become Karta (head of the family), while members enjoy a share in the income and assets but lack direct control.

The HUF structure ensures equitable distribution among heirs by default, protecting the family legacy across generations and simplifying succession without needing a will.

Filing Returns — Forms, Documents, Timelines for HUF

A Hindu Undivided Family (HUF) is treated as a separate legal taxpayer under the Income Tax Act. Like individuals, HUFs must file annual income tax returns, maintain proper accounts, and comply with statutory filing requirements.

Essential Documents to Keep Ready

• HUF PAN Card
• Karta’s Aadhaar & PAN
• Bank account passbooks/statements
• TDS certificates (Form 16A)
• Investment proofs under Section 80C, 80D, etc.
• Property ownership documents and rental agreements (if applicable)
• Financial statements (Profit & Loss, Balance Sheet) — if in business

Key Timelines

• Standard ITR Filing Deadline (Non-audited HUFs): September 15 for FY 2024-25, July 31 for FY 2025-26
• Audited HUFs: October 31
• Form 15G/15H (TDS Exemption): Submit at the start of the FY, usually in April

Filing under the correct form and timeline ensures smoother processing and quicker refunds, especially if your HUF earns rental, interest, or business income.

Tax-Saving Deductions Under Old & New Regimes

Old Tax Regime – Deductions Available for HUF

The old regime offers numerous deductions, which many HUFs prefer due to flexibility in claiming tax savings:

These deductions help optimize taxes, especially if the HUF holds investments or earns rent, capital gains, or other passive income.

New Tax Regime for HUFs – Key Features (Section 115BAC)

The new regime has lower slab rates but does not allow most deductions. Here's what it offers:

• The standard deduction of ₹50,000 is not available to HUFs. This benefit is only applicable to salaried individuals and pensioners (Section 16(ia)), not to HUF entities.
• Deductions under Chapter VI-A (such as 80C, 80D, 80G, etc.) are disallowed under the new regime. That means HUFs cannot claim tax benefits for LIC premiums, PPF, ELSS, donations, or health insurance under this regime.
• Concessional (lower) income tax slab rates are available for HUFs under the new regime. These reduced slab rates start at 5% and go up to 30%, with higher exemption thresholds than the old regime.

While the new regime simplifies filing, it’s not tax-efficient for HUFs with high investments or medical premiums. In most cases, the old regime is more beneficial.

Common Mistakes HUFs Should Avoid

1. Mixing Personal and HUF Income

One of the most common mistakes is treating the HUF's income and personal income interchangeably. Since an HUF is recognized as a separate legal entity under tax law, its income, deductions, and bank transactions should be clearly separated from those of individual members — including the Karta.

2. Creating an HUF Solely for Tax Avoidance

While HUFs do offer tax-saving opportunities, forming one purely to divert income or assets without a genuine joint family setup can attract scrutiny from the Income Tax Department. An HUF should not be used as a front to reduce personal tax liability without substance or legitimacy.

3. Not Claiming Eligible Deductions

Many HUFs forget that they can claim deductions under sections like 80C (investments in LIC, ELSS, PPF, etc.), 80D (health insurance premiums), and 24(b) (home loan interest). These can help significantly reduce the taxable income of the HUF.

4. Using the Wrong ITR Form

Another frequent error is selecting an incorrect income tax return form. For instance, using ITR-1 or ITR-4 — meant for individuals — instead of ITR-2 or ITR-3 (which are suited for HUFs), can result in a defective return filing or even a rejection.

5. Lack of Proper Documentation

HUFs often fail to maintain records for capital contributions, asset transfers, or decisions made by the Karta. Proper documentation helps in proving the legitimacy of the HUF and defending tax positions if questioned.