HUF Tax Slabs, Deductions & 5 Mistakes That Cost Money
Tax slabs for FY 2025-26 (new regime — the default)
| HUF Income | Tax Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4L – ₹8L | 5% |
| ₹8L – ₹12L | 10% |
| ₹12L – ₹16L | 15% |
| ₹16L – ₹20L | 20% |
| ₹20L – ₹24L | 25% |
| Above ₹24L | 30% |
These are identical to individual slabs. The old regime (₹2.5L exemption, 5%/20%/30%) is available too but must be actively opted into.
Critical difference: HUF does not get the Section 87A rebate.
Individuals under the new regime pay zero tax on income up to ₹12 lakh (the ₹60,000 Section 87A rebate wipes it out). This rebate is available only to "resident individuals" — HUF is excluded.
A HUF with ₹10 lakh income pays ~₹60,000 in actual tax. An individual with the same income pays zero. Always calculate HUF tax before assuming it's cheaper.
Deductions HUF can and cannot claim
| Deduction | HUF eligible? | Notes |
|---|---|---|
| Section 80C (₹1.5L) | Yes (old regime) | ELSS, 5-yr FD, NSC, LIC on members' lives |
| Section 80D (health insurance) | Yes (old regime) | Up to ₹25,000 for HUF members |
| Section 80TTA (savings interest) | Yes (old regime) | Up to ₹10,000 |
| Section 87A rebate | No | Individuals only |
| Section 80TTB (senior FD interest) | No | Senior citizen individuals only |
| NPS / 80CCD(1B) | No | Not available to HUF |
| PPF (new accounts) | No | Banned for HUF since 2011 |
| 30% standard deduction on rent | Yes (both regimes) | Under Section 24(a) |
| Section 54/54F capital gains | Yes (both regimes) | On reinvestment in residential property |
New regime vs old — which one to pick for HUF?
New regime is the default from AY 2024-25, but both regimes are available. The right answer depends on the HUF's income mix.
| New Regime (default) | Old Regime | |
|---|---|---|
| Basic exemption | ₹4 lakh | ₹2.5 lakh |
| Section 87A rebate | Not for HUF | Not for HUF |
| 80C deductions (₹1.5L) | Not available | ELSS, FD, NSC, LIC |
| 80D health insurance | Not available | Up to ₹25,000 |
| Home loan interest | Not available | Section 24(b) |
| 30% deduction on rent | Available | Available |
| Capital gains exemptions (54F) | Available | Available |
Old regime wins when: HUF has substantial 80C investments + health insurance + housing loan interest. If total deductions exceed ₹3–4L, old regime usually saves more.
New regime wins when: HUF income is mainly rental or capital gains with few deductible investments. Lower mid-slab rates and less paperwork.
5 mistakes that wipe out HUF tax savings
- Routing salary through the HUF account. Salary is personal income. Any salary deposited in the HUF bank account gets added back to your personal return by the Assessing Officer — with interest and penalty. This is the most common and most costly mistake.
- Gifting personal savings to HUF to shift income. Section 64(2) clubs all income from such assets back to your personal return. The gift itself isn't taxed, but the interest, rent, or dividends it earns come right back to you. See Part 2 for the right way to fund a HUF.
- Assuming HUF income up to ₹12L is tax-free. It's not — because HUF has no Section 87A rebate. A ₹12L HUF income means paying ~₹80,000 in tax. Do the math before deciding how much income to park in the HUF vs keeping personally (where it might be zero-tax with the rebate).
- Opening a PPF account for HUF. New PPF accounts for HUF are prohibited since 2011. If one gets opened by error and you claim 80C on it, the deduction gets disallowed on scrutiny. Use ELSS or 5-year FDs instead.
- Filing ITR-1 for the HUF. ITR-1 is exclusively for salaried individuals. HUF must file ITR-2 (investment/rental income), ITR-3 (business income), or ITR-4 (presumptive business). Filing the wrong form means the return gets defective.
What happens when you want to close it
A HUF can only be legally closed through a full partition — all coparceners agree, a partition deed is executed, and the Assessing Officer issues a formal order under Section 171(3) recognising the partition date. All assets are divided and the HUF PAN is surrendered.
One trap: partial partitions (splitting only some assets) are not recognised for tax purposes under Section 171(9) — the HUF continues to be taxed as an undivided family regardless. If you want tax recognition, the partition must be complete.
When the Karta passes away, the HUF doesn't automatically end — the next senior coparcener (including daughters after 2005) takes over as Karta and the HUF continues.
HUF Series — 5 parts
← Part 1: What Is HUF and Is It Worth Forming? ← Part 2: How to Open a HUF Account — Documents, Steps & Funding Part 4: How to File ITR for HUF — Step by Step → Part 5: HUF Investments, Capital Gains & the 54F Exemption →