Hindu Undivided Family (HUF)

What is a HUF?

HUF means Hindu Undivided Family. You can save taxes by creating a family unit and pooling in assets to form a HUF. HUF is taxed separately from its members. A Only Hindu family can come together and form a HUF. Buddhists, Jains, and Sikhs can also form a HUF. Muslim's are not allowed to form a HUF. HUF has its own PAN and files tax returns independent of its members and signed by "Karta" of HUF. Under section 2(31) of the income tax Act, 1961. The head of a HUF is called the Karta, he is the senior-most male member of the family.

How to save tax by forming an HUF?

A HUF is taxed separately from its members, therefore, deductions (such as under Section 80C) or exemptions allowed under the tax laws can be claimed by it separately. For example, if you and your spouse along with your 2 children decide to create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C. HUF is usually used by families as a means to build assets and save tax.

How is HUF taxed?

1. HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.

2. Deductions under section 80C and other exemptions can be claimed by the HUF in its income tax return.

3. HUF can take an insurance policy on the life of its members.

4. HUF can pay a salary to its members if they contribute to its functioning of the HUF. This salary expense can be deducted from the income of HUF.

5. Investments can be made from HUF’s income. Any returns from these investments are taxable in the hands of the HUF.

6. A HUF is taxed at the same rates as an individual.

How to form an HUF?

While there are tax advantages of forming an HUF, you must also meet some conditions –

One person cannot form HUF, it can only be formed by a family.

A HUF is automatically created at the time of marriage.

HUF consists of a common ancestor and all of his lineal descendants, including their wives and unmarried daughters.

Hindus, Buddhists, Jains and Sikhs can form HUFs.

HUF usually has assets which come as a gift, a will, or ancestral property, or property acquired from the sale of joint family property or property contributed to the common pool by members of HUF.

Once a HUF is formed it must be formally registered in its name. A HUF should have a legal deed. The deed shall contain details of HUF members and the business of the HUF. A PAN number and a bank account should be opened in the name of the HUF.

Disadvantage of forming an HUF

Though HUF seems like the perfect way to save tax as a family, it comes with its own drawbacks.

Equal rights of members: The greatest disadvantage of opening a HUF is that its members have equal rights on the property. The common property cannot be sold without the concurrence of all the members. Any additions to the family, by way of birth or marriage, become a member of the HUF and get equal rights. A HUF can get too large to manage.

Partition: Perhaps the worst nightmare of opening a HUF is closing it down. The only way a HUF can be dissolved is by a partition. All members have to agree to dissolve the HUF. Under a partition, assets are distributed to members which can lead to a lot of disputes and can be a lot of legal hassle.

Joint family system losing relevance: HUF was recognised as a separate taxable entity by the income tax department. However, in today’s times, where nuclear families are the norm, HUF is losing relevance. Several cases have come to fore where couples or families are fighting it out on common household expenses, forget to pool in of assets. Divorce rates are rising and therefore, HUF as a tax vehicle is losing importance.

HUF continues to be assessed as such till partition: Once a HUF is formed, you must continue to file its tax returns, unless a partition takes place. Any claim for partition is made to the assessing officer. The assessing officer, on receiving such a claim, must make an enquiry after giving due notice to the members. Income from the property which was partitioned is taxed as individual income of the member. If the member forms another HUF with his wife and children, the income of the property which was transferred from the original HUF is taxed in the hands of new HUF.

Want to Form an HUF?

Call us on 9680007016 or mail to etax2care@gmail.com for more info.

Section 115BAC : Features of the New Tax Regime and its benefits

 From FY 2020-21, you can choose to pay income tax under an optional new tax regime. The new tax regime is available for individuals and HUFs with lower tax rates and zero deductions/exemptions. We will discuss the features of the new tax regime and how you can benefit from it.

What is the new tax regime of taxation for FY 2020-21

What are the tax rates under the new regime

Exemptions and deductions not claimable under the new tax regime

What are the deductions and exemptions available under the new system

Can I choose between the new tax regime and the existing regime

How do I choose the new scheme and plan my tax

House property loss under the new tax regime

Deductions for business expenditure not allowed under the new regime

Unabsorbed depreciation and business loss under the new regime

1. What is the new tax regime for FY 2020-21 | AY 2021-22

The Budget 2020 introduces a new regime under section 115BAC giving an option to individuals and HUF taxpayers to pay income tax at lower rates. The new system is applicable for income earned from 1 April 2020 (FY 2020-21), which relates to AY 2021-22.

2. What are the tax rates under the new regime

The tax rates under the new tax regime and the existing tax regime are:

New slab rates

Income from Rs 2.5 lakh to Rs 5 lakh     5%

Income from Rs 5 lakh to Rs 7.5 lakh     10%

Income from Rs 7.5 lakh to Rs 10 lakh     15%

Income from Rs 10 lakh to Rs 12.5 lakh 20%

Income from Rs 12.5 lakh to Rs 15 lakh 25%

Income above Rs 15 lakh          30%

Old Slab Rates

Income from Rs 2.5 lakh to Rs 5 lakh  5%

Income from Rs 5 lakh to Rs 10 lakh   20%

Income above Rs 10 Lakh    30%

3. Exemptions and deductions not claimable under the new tax regime

The following are the deductions and exemptions you cannot claim under the new tax system:

The standard deduction, professional tax and entertainment allowance on salaries

Leave Travel Allowance (LTA)

House Rent Allowance (HRA)

Minor child income allowance

Helper allowance

Children education allowance

Other special allowances [Section10(14)]

Interest on housing loan on the self-occupied property or vacant property (Section 24)

Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJAA)

Without exemption or deduction for any other perquisites or allowances

Deduction from family pension income

4. What are the exemptions and deductions available under the new regime

You can claim tax exemption for:

Transport allowances in case of a specially-abled person.

Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.

Any compensation received to meet the cost of travel on tour or transfer.

Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.

5. Can I choose between the new tax regime and the existing regime

An employee can choose the new tax regime at the beginning of FY 2020-21 and intimate their employer. The employee cannot change their choice anytime during the financial year. However, the change can be done at the time of filing the income tax return in July 2021. The due date for tax filing for the FY 2020-21 (AY 2021-22) is 31 July 2021.

In case an employee does not choose the new tax regime at the beginning of the financial year, the employer will deduct tax (TDS) under the existing tax regime.

A salaried taxpayer can opt-in and opt-out every year. That means you can choose the new tax regime in one year and choose the regular tax regime in another year.

A non-salaried taxpayer has to choose the new regime at the time of filing the tax return. They need not declare or intimate their choice to anyone at any time during the year. However, a non-salaried taxpayer cannot opt-in and opt-out of the new tax regime every year. Once a non-salaried opts out of the new tax regime, they cannot opt-in again for the new tax regime in the future.

6. How do I choose the new regime and plan my tax

From a tax planning perspective, it is essential to choose the tax regime at the beginning of the financial year. A taxpayer must make a comparison of the income tax under the new tax regime with the existing regime. Once the taxpayer chooses the tax regime at the beginning of the year, the investments and TDS or advance tax payable calculations are made accordingly.

7. House property loss under the new tax regime

In case of a self-occupied property, you cannot claim a deduction on interest for a housing loan under the new tax regime. The deduction of Rs 2 lakh allowed in the existing system is not available in the new tax regime. You cannot set-off the loss of Rs 2 lakh from house property from your salary income.

If you have let-out a house property, you can claim a deduction for interest paid on the housing loan. Do note that the new tax regime restricts the deduction to the taxable rent received from the property. You cannot set-off the loss arising from the house property due to excess of interest paid over the rental income. Also, you cannot carry forward the loss from house property to future years for set off.

8. Deductions for business expenditure not allowed under the new regime

Deductions and exemptions not allowed for business income:

Additional depreciation under section 32.

Investment allowance under section 32AD

Sector-specific business deductions under section 33AB and 33ABA

Expenditure on scientific research under section 35

Capital expenditure under section 35AD

Exemption under section 10AA for SEZ units

9. Unabsorbed depreciation and business loss under the new regime

In the case of a business income, an individual or HUF cannot claim set-off of the brought forward business loss or unabsorbed depreciation. The deductions not available under the new regime to the extent they relate to deductions/exemptions withdrawn.

New Tax Regime vs. Old Tax Regime – Which is better?

 Salaried employees can choose between the old and new income-tax regime at the time employers are deducting tax at sources (TDS) from salaries, a circular issued by the Central Board of Direct Taxes said.

The Budget has proposed a New Tax Regime in addition to the existing, i.e. Old Tax Regime. However the New Tax Regime is optional. To put it simply, the assessee can choose between the New Tax Regime and the Old Tax Regime depending on what is best suitable from a tax planning point of view.

New vs. Old – Which is better?

The New Tax Regime has proposed lower income-tax rates, for income segments up to Rs 15 lakh. But you need to remember that the proposed lower tax rates will be applicable only if you are willing to give up exemptions and deductions available under various provisions of the Income-tax Act, 1961.

This means that when you choose the New Tax Regime, you will have to forgo some exemptions [such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), etc] and deductions available under chapter VI A of the Act that grant deductions under Section 80 [such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G, 80GG, 80GGA, 80GGC, etc].

Only the deduction under Section 80CCD(2) [i.e., employer’s contribution on account of an employee in a notified pension scheme] and Section 80JJAA [i.e. for new employment] can be claimed.

Even the Standard Deduction under Section 16 [which is currently Rs 50,000] available to salaried individuals and the deduction on home loan interest, under Section 24(b) will be disallowed. Around 70 exemptions and deductions have been removed in the New Tax Regime.

Boycott China and make 'Atmanirbhar Bharat'

1. Why Boycott China, why spread hate ?
It's not spread hate. It's for our Country otherwise whole country for a single product will depend on China only. Economic sanctions are not new. BoycottMadeInChina is a Citizen's Personal Economic Sanctions Agnist an irresponsible aggressive regime. Prevention is better then cure.

2.Why should People have to Boycott, shouldn't our Government Ban?
Their is protocols and regulations to the Goverment of the Country so they can't take directly any Actions. But public can do as it's their choice. Customer is the King. And why should wait for government we ourselve can do at our hand.

"Ask not what your Country can do for you, Ask what You can do for your Country."

3.  Is it practically possible launch such a Boycott Movement ?
Yes it is possible if people of the Country decide to do this. We have our Wallte Power at our hand.

4. Can we manage without Chinese Products?
We are just going in deep for Chinese product and Now time to control it's uses. For eg like Muslims don't use Liquors , Sikhs don't use Tobacoo and it's products , Jains avoid Non-veg etc. So like we could also create a ecosystem in the way to avoid unnecessary things. In 1-2 years we could create a new ecosystem.

* Software in a week
 * Hardware in year
 * Other Products in 1-2 years
We can make strategies for it not necessarily do it in one Day, it will take time but we have to first decide for it.

Options and Replacement could be made and it's not necessarily we can live simple life also, as living in Lockdown period.

5. How can we make it a Lasting National Movements?
If every person decide to do it then definitely will win. Every Single Person is Soldier of the Economy for their Country. It's going long as you decide to go far it. It's an Opportunity for Country to make India as 'Atmanirbhar Bharat'.

Practicing Firms

If you want to walk fast, walk alone. But if you want to walk far, walk together. - RatanTata

Practicing Firms

• 1 Proprietorship Firms- 52,913
• 2-5 Partners - 20,506
• 6-10 Partners - 1744
• 11-15 Partners - 235
• 16-20 Partners - 48
• 21-30 Partners - 27
• 31-50 Partners - 7
• 51 & Above Partners - 9

          Total Firms - 75,489

Let us first go through this data published Professional Development Committee ICAI February-2019 edition, where almost 70% CA practicing as a Proprietorship firm and around only 3% partnership firm having more than 6 partners.

About Insurance

An essential part of financial planning is insurance planning. Just like financial planning, it is also specific to the individuals and their situation.

Insurance products available to an individual can be categorized as life insurance and non- life insurance.

Let’s talk about life insurance.

It is taken primarily for the financial safety of your family so as to ensure them a decent/good life even in your absence. A huge responsibility isn’t it?

However insurance is also seen as a way to save and invest. Some insurance policies include a saving component along with the risk protection. The premium collected will be higher, with one portion assigned for risk protection (insurance component) and the other for the saving component (investment component).

Life insurance products can be defined by the benefits that they provide to the insured (Insurance company is called insurer and the one who takes out the policy is called insured).

There are many types of life insurance policies. It should be chosen based on your needs and goals.

👉 Term Life Insurance

It is a pure risk cover product. It pays a benefit only if the policy holder dies during the period for which he/she is insured.

Term insurance premiums are typically low because it only covers the risk of death and there is no investment component in it. The 3 key factors to be considered here are-
• Sum assured (protection or death benefit)
• Premium to be paid (cost to the insured), &
• Length of coverage (term).
Various insurance co sell term insurance with many different combinations of these 3 parameters.

It is the cheapest form of life #insurance.
For a 25 year old male (Non-smoker) who wants to buy life cover of Rs. 1 Cr for upto 60 years age (term = 35 years), the monthly premium will range between Rs. 600-900.

Just imagine a security cover of 1 Cr for your family by paying just Rs. 7200-10800 p.a.

However the same cover for a 35 year old male (term = 25 years) will come at a monthly premium of Rs. 900-1300.

What’s the catch?
Take life cover as early as possible because that will lead to significant reduction in your total outflow in the form of premium plus you will also be covered for a longer tenure. A win-win situation.


👉 Life Insurance

Life insurance cover is must for a sound financial planning of a non-gov employee or a self-employed person atleast.

And now when it is pretty much clear that for a considerable time we have to live alongwith Covid-19, life insurance should not be ignored. 

Government has announced 20 lakh crore package

Government has announced 20 lakh crore package to help the people in these times of economic slowdown and recession. it was annouced on 12th May but details were released in FIVE parts across 5 days by our finance minister press conferences. i will summarize the details of this package.

Monetary policy = 8 lakh crore (by RBI)

This one for Banks and NBFC's

Fiscal Policy = 12 lakh crore (by Govt)

This one for

MSME - Collateral free loan worth 3 lakh crore

POWER DISCOM - 90,000 liquidity lifeline

FARMERS - Already annouced but Now again repeate

STREET VENDORS - 5,000 crore credit facility

MIGRANT WORKERS - 3500 crore

TDS REDUCTION - 25% in existing rate (except Sec 192)

REDUCE EPF CONTRIBUTION - 12% to 10%

OTHERS

FINALLY

WHAT IS THE REAL STIMULUS AMOUNT

BETWEEN 1 LAKH CRORE TO 2.7 LAKH CRORE (APPROXX)