According to Indian law, a Hindu Undivided Family (HUF) is a distinct group made up of people who share a common ancestor, as well as their spouses and unmarried daughters. The Income Tax Act of 2025 treats it as a distinct taxable unit. An HUF is a helpful tool for tax planning and collective asset management since it can combine family assets and possess ancestral property.

Determining the Residential Status of HUF

The tax liability of an HUF depends on its residential status in a financial year. An HUF may be:

• Resident in India
• Non-resident in India

A resident HUF is further classified as the following:

• Resident and Ordinarily Resident (ROR)
• Resident but Not Ordinarily Resident (RNOR)

The HUF is ordinarily resident if the Karta (head of family) satisfies the residency criteria under Section 6 of the Act: having been a resident in India for at least two of the ten preceding years and staying in India for at least 730 days during the previous seven years. If either condition is unmet, the HUF is RNOR. A resident HUF is taxed on its global income; a non-resident HUF is taxed only on income that accrues, arises, or is received in India.

Calculation of Income

An HUF’s income is computed under four primary heads

1. Income from House Property
2. Profits and Gains from Business or Profession
3. Capital Gains
4. Income from Other Sources

The total income of the HUF is aggregated across these heads. Clubbing provisions under Section 151 (formerly 64) apply if a member transfers assets to the HUF without adequate consideration; such income may be taxed in the hands of the transferor rather than the HUF. Losses can be set off intra-head and inter-head as permitted, and unabsorbed losses may be carried forward.

Deductions and Regimes

After computing Gross Total Income (GTI), the HUF may claim allowable deductions (such as those under Section 123, formerly 80C) to arrive at total income, provided the HUF opts for the old tax regime. If the HUF remains in the default new tax regime under Section 202, most of these deductions are not available

Tax Rates Applicable to HUF (Tax Year 2025)

Old Tax Regime

Total Income (₹)	Tax Rate
Up to 2,50,000	Nil
2,50,001 – 5,00,000	5%
5,00,001 – 10,00,000	20%
Above 10,00,000	30%

New Tax Regime (Section 202 – Default)

Total Income (₹)	Tax Rate
Up to 4,00,000	Nil
4,00,001 – 8,00,000	5%
8,00,001 – 12,00,000	10%
12,00,001 – 16,00,000	15%
16,00,001 – 20,00,000	20%
20,00,001 – 24,00,000	25%
Above 24,00,000	30%

Important Note on Rebates:

Unlike individuals, an HUF is not eligible for the tax rebate under Section 87A. Even if the HUF income is below ₹12 lakh under the new regime, tax will be payable as per the slabs.

Surcharge, Cess, and AMT

If income surpasses ₹50 lakh, a surcharge is applied; under the current regime, the rate is limited at 25%. The overall tax plus surcharge is subject to a 4% health and education cess. An HUF is subject to the Alternative Minimum Tax under Section 206 if it claims certain investment-linked deductions and its regular tax is less than 18.5% of its adjusted total income.

Conclusion

For families, HUF taxes still provide a special “extra slab” benefit. Now that the Income Tax Act, 2025, is in effect, the family’s investment profile will determine whether they choose the deduction-based old regime or the default Section 202 regime. Maintaining high legal compliance and maximising the tax outflow need careful preparation regarding the Karta’s residence and the type of asset transfers.