Smt. H is head of the family consisting of her husband (who is physically challenged person) and two sons. She heard that there about numerous benefits in terms of management, decision making and taxation, if she forms a

Key points in creation of HUF: Under the Income Tax Act, 1961, an HUF is a separate entity for the purpose of income tax return. The same tax slabs are applicable to HUF as to individual assessee. If you have ancestral property and earning some income from this property, then it is better to transfer this asset to HUF and save tax up to exemption limit applicable to individual. You can transfer the money received on sale of ancestral property / assets into your HUF. The income from property of HUF can be further invested in instruments such as shares, mutual funds, etc and will be assessed under HUF. Existence of property or multiple members is not a pre-requisite to create HUF. A family which does not own any property may still have the character of Hindu joint family. This is because a Hindu is born as a member of the joint family. The HUF is taxable as separate person under income tax hence one can save tax from basic exemption of ₹2.5 lakh. Apart from basic exemption of ₹2.5 lakh, section 80C deduction upto ₹1.5 lakh is also available.