Albert Einstein had once said, “The hardest thing in the world to understand is the income tax.”`

 Every year we go to great lengths to understand more about taxes and try to maximize our savings. In our mission to maximize savings, we end up investing in various instruments without doing a proper research and without realizing that the instrument might not meet our financial goals. We just want to get over with it. This is the story of majority of us and Shashank is no exception.

Shashank is working with a reputed firm and stays in Mumbai with his parents, wife, a son and a daughter. Tax time is the most dreaded for Shashank as he has income from multiple sources like salary, rent from his flat in Pune etc. Despite of his efforts, he usually ends up paying heavy taxes. In fact, his tax worries have grown since he received the news that he is about to receive an ancestral property. He decides to meet his financial advisor, Danish, to understand the tax implications that the house could accompany and how he can minimize his tax liability.

On hearing about Shashank’s tax worries, Danish says “In India, there are many families with income from multiple sources and are equally worried about taxes just like you. And you know what? The solution lies with the word ‘Family’ itself. In simpler terms you can create a ‘Hindu Undivided family’ (HUF) to reduce your tax liabilities.” Danish looks at Shashank’s reaction and tells him “Confused? Don’t worry, I’ll simplify it for you.”

“You can create an HUF comprising yourself, your wife, and children.

An HUF is treated as an independent entity for tax purposes. It even has a separate PAN card. An HUF enjoys all the benefits of Income Tax Slabs, Deductions u/s 80 and the majority of the tax provisions including exemptions which are available to Individuals.

If you form an HUF, you can distribute and plan your investments separately, in your name and HUF’s name, thereby earning income from investments in both the accounts. Thus, you can file two income tax returns, one under your PAN card and second under your HUF on their respective incomes. This will help you plan your taxes properly.

You can save tax under section 80C and section 80D upto Rs. 54,075/-* on HUF account’s taxable income by investing in insurance policies (Life/ health Insurance) through HUF account for HUF members. Receipts from Life insurance policy under HUF account are tax free subject to conditions of section 10(10D) of Income Tax Act 1961.

You know what, In future your daughter can continue to be a member of the HUF even after her marriage.”

On hearing these benefits, Shashank exclaimed “I love the Idea of an HUF.” He decides to get his HUF PAN card and is now relaxed that he found an apt solution to his worries.

Disclaimer

* Tax benefit of Rs. 54,075/- is calculated at highest tax slab rate of 30.9% (including Cess) on insurance premium u/s 80C of Rs. 1,50,000- and health premium u/s 80D of Rs. 25,000/- and other conditions mentioned therein. Tax benefits under the policy are subject to conditions under Section 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. The tax laws are subject to amendments from time to time. Please consult your tax advisor for details, before acting on above.

`http://www.forbes.com/sites/robertwood/2012/12/02/hate-paying-taxes-12-quotes-youll-love/#5d5360eb608f

Advt: L/II/1304/2016-17

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ICICI Prudential Life Insurance Company Limited is one of the leading life insurance companies in India. We provide insurance plans & policies that include a range of products like term insurance, ULIPs, tax saving plans and pension & retirement plans.

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