Basic Exemption Limit and Tax Slabs Applicable to HUFs for FY 2025-26
- Kanchan Bhatt
- 1 day ago
- 10 min read
The basic exemption limit and tax slabs for HUFs depend on the tax regime chosen for FY 2025-26 (AY 2026-27). Under the Income Tax Act, a Hindu Undivided Family is taxed separately from its members and follows slab-based taxation similar to individuals. The new tax regime, now the default option, provides a higher effective exemption through revised tax slabs and a rebate under Section 87A. The old tax regime continues to allow deductions but starts taxing income at a lower threshold. Understanding the applicable exemption limit and tax slabs helps HUFs plan their taxes efficiently and choose the most suitable regime.
The basic exemption limit for HUFs is ₹4,00,000 under the new tax regime and ₹2,50,000 under the old tax regime for FY 2025-26. Under the new regime, HUFs may effectively pay no tax on income up to ₹12 lakh due to the Section 87A rebate, while the old regime follows traditional slabs but allows deductions such as those under Sections 80C and 80D.
Table of Contents
What is a Hindu Undivided Family (HUF) Under the Income Tax Act?
A Hindu Undivided Family (HUF) is a distinct taxable entity recognised under the Income Tax Act, 1961. It consists of members of a family who are lineally descended from a common ancestor and includes their spouses and unmarried daughters. An HUF is governed by Hindu personal law and is treated as a separate legal and tax entity from its members.
The head of the HUF is known as the Karta, who manages financial and legal matters on behalf of the family. Other members are known as coparceners or members depending on their rights in the family property. After the amendment to the Hindu Succession Act in 2005, daughters are also considered coparceners and have equal rights in the HUF property.
For tax purposes, an HUF is taxed separately from its individual members. This means that income earned by the HUF from sources such as property, business, investments, or ancestral assets is assessed under a separate PAN and filed through a separate income tax return.
How HUF Taxation Works in India
Under the Income Tax Act, a Hindu Undivided Family is taxed in the same way as an individual taxpayer. It follows slab-based taxation and must file its own income tax return if its income exceeds the basic exemption limit.
An HUF can earn income from multiple sources, including:
Rental income from property owned by the HUF
Business or professional income carried on by the HUF
Capital gains from the sale of assets
Interest, dividends, and other investment income
The income earned by the HUF is calculated after deducting allowable expenses and deductions. Once the total income is determined, tax is calculated according to the applicable tax slabs based on the tax regime chosen.
The HUF can choose between the old tax regime and the new tax regime. The new regime is the default option for FY 2025-26, while the old regime allows deductions and exemptions if the HUF opts out of the new regime.
Basic Exemption Limit for HUFs
The basic exemption limit refers to the level of income up to which no income tax is payable. For HUFs, this limit depends on the tax regime selected.
Under the new tax regime for FY 2025-26, income up to ₹4,00,000 is exempt from tax. Under the old tax regime, the exemption limit remains ₹2,50,000.
This means that if the total taxable income of the HUF does not exceed the applicable exemption limit, no tax is payable. However, if the income exceeds this threshold, tax is calculated according to the applicable slabs.
Although the exemption limit differs between regimes, the overall tax liability also depends on deductions, rebates, and available exemptions.
Tax Slabs Applicable to HUFs Under the New Tax Regime (FY 2025-26)
The new tax regime introduced under Section 115BAC applies to HUFs as the default regime for FY 2025-26. It provides simplified tax slabs but restricts most deductions and exemptions.
The tax slabs applicable under the new regime are:
Income Range | 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% |
Under this regime, HUFs generally cannot claim deductions such as Section 80C, Section 80D, or housing loan interest benefits. However, the structure offers lower tax rates across multiple slabs.
Health and education cess and surcharge may apply depending on the income level.
Section 87A Rebate for HUFs in the New Tax Regime
A significant benefit of the new tax regime is the rebate available under Section 87A. If the total taxable income of the HUF does not exceed ₹12,00,000, a rebate of up to ₹60,000 can be claimed.
This rebate effectively reduces the tax liability to zero for eligible HUFs within the specified income limit. As a result, an HUF with income up to ₹12 lakh may not have to pay any income tax under the new regime.
The rebate applies after calculating tax according to the applicable slab rates. Once the rebate is applied, the remaining tax liability becomes zero if it falls within the rebate limit.
Is the Basic Exemption Limit for HUFs Higher in the New Tax Regime?
Yes, the basic exemption limit is higher under the new tax regime compared to the old regime.
In the new regime, income up to ₹4,00,000 is exempt from tax, while the old regime exempts income only up to ₹2,50,000. In addition, the Section 87A rebate further increases the effective tax-free income level up to ₹12,00,000.
Because of these features, the new regime may be beneficial for HUFs that do not rely heavily on deductions. However, the final decision should consider deductions, investments, and overall tax planning strategies.
Tax Slabs Applicable to HUFs Under the Old Tax Regime (FY 2025-26)
The old tax regime allows HUFs to claim various deductions and exemptions, including those under Section 80C, Section 80D, and other provisions of the Income Tax Act.
The tax slabs applicable under the old regime are:
Income Range | 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% |
Unlike the new regime, this structure allows HUFs to reduce taxable income by claiming deductions and exemptions. This can significantly reduce tax liability if the HUF makes eligible investments or incurs deductible expenses.
How the Basic Exemption Limit Works in the Old Tax Regime
Under the old tax regime, the basic exemption limit for HUFs is ₹2,50,000. If the total income of the HUF remains within this limit, no tax is payable.
Once the income exceeds ₹2,50,000, tax is calculated progressively according to the slab rates. However, the taxable income can be reduced by claiming eligible deductions such as:
Investments under Section 80C
Health insurance premiums under Section 80D
Interest on certain loans
Donations under Section 80G
Because these deductions reduce taxable income, some HUFs may find the old regime more beneficial despite the lower exemption limit.
Key Differences Between Old and New Tax Regimes for HUFs
The primary difference between the two regimes lies in the balance between tax rates and deductions.
The new regime offers simplified slab rates and a higher basic exemption limit but removes most deductions and exemptions. The old regime allows deductions and exemptions but applies higher tax rates after the initial slab.
Another major difference is the Section 87A rebate in the new regime, which can make income up to ₹12 lakh effectively tax-free for eligible HUFs.
Choosing the appropriate regime depends on the income structure of the HUF and the availability of deductions.
Which Tax Regime is Better for HUFs?
The choice between the old and new tax regimes depends on the financial structure of the HUF.
The new tax regime may be suitable when:
The HUF has limited deductions
Income mainly comes from business or investments
Simpler tax compliance is preferred
The old regime may be beneficial when:
The HUF makes significant investments eligible for deductions
Insurance premiums, donations, or other deductions are substantial
Housing loan interest or similar benefits are claimed
A detailed comparison of both regimes is often necessary to determine which one results in lower tax liability.
ITR Filing Requirements for HUFs
A Hindu Undivided Family must file an income tax return if its total income exceeds the basic exemption limit.
The applicable ITR forms depend on the type of income:
ITR-2 is used when the HUF does not have business income
ITR-3 is used when the HUF has business or professional income
For FY 2025-26, the due date for filing the income tax return for non-audit cases is generally July 31, 2026.
Timely filing ensures compliance and helps avoid penalties and interest.
Documents and PAN Requirements for HUF Tax Filing
An HUF must obtain a separate Permanent Account Number (PAN) to file income tax returns and conduct financial transactions.
The following documents are typically required:
HUF PAN card
HUF declaration or deed
Identity proof of the Karta
Bank account details of the HUF
Income and investment records
These documents help establish the identity of the HUF and allow proper reporting of income and deductions.
How TaxBuddy Helps Simplify HUF Tax Filing
Filing income tax returns for a Hindu Undivided Family can involve multiple steps, such as selecting the correct tax regime, calculating taxable income, and reporting different sources of income accurately.
Digital tax platforms make this process easier by guiding taxpayers through the filing process and ensuring that the correct forms and details are used.
TaxBuddy provides tools that help compare tax regimes, calculate liabilities, and complete income tax returns through a structured filing process. The platform also offers expert assistance when needed, helping HUFs avoid common filing errors and ensuring compliance with tax regulations.
Conclusion
Understanding the basic exemption limit and tax slabs applicable to HUFs is essential for effective tax planning. The new tax regime provides a higher exemption threshold and simplified slabs, while the old regime continues to offer valuable deductions and exemptions. Choosing the right regime depends on the income profile of the HUF and the deductions available during the financial year.
For anyone looking for assistance in tax filing, it is recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. What is the basic exemption limit for HUFs for FY 2025-26?
The basic exemption limit for HUFs depends on the tax regime chosen. Under the new tax regime for FY 2025-26, income up to ₹4,00,000 is exempt from tax. Under the old tax regime, the basic exemption limit remains ₹2,50,000. If the total income of the HUF does not exceed these limits, no income tax is payable.
Q2. Are HUFs taxed in the same way as individuals in India?
Yes, a Hindu Undivided Family is taxed like individual taxpayers under the Income Tax Act, 1961. HUFs follow slab-based taxation and must calculate their taxable income after considering allowable deductions and exemptions depending on the tax regime selected.
Q3. What are the tax slabs applicable to HUFs under the new tax regime for FY 2025-26?
Under the new tax regime, the following slab rates apply to HUFs:
Income Range | 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% |
These slabs apply without most deductions and exemptions.
Q4. What are the tax slabs applicable to HUFs under the old tax regime? Under the old tax regime, the following tax rates apply:
Income Range | 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% |
The old regime allows deductions under provisions such as Section 80C, Section 80D, and other tax-saving investments.
Q5. Can a Hindu Undivided Family claim the Section 87A rebate?
Yes, HUFs can claim the rebate under Section 87A when filing under the new tax regime. If the total taxable income of the HUF does not exceed ₹12,00,000, a rebate of up to ₹60,000 may be available, which can reduce the tax liability to zero.
Q6. Which tax regime is the default regime for HUFs?
The new tax regime under Section 115BAC is the default tax regime for HUFs. If an HUF wants to continue with the old regime and claim deductions and exemptions, it must opt out of the new regime according to the prescribed procedure.
Q7. Can HUFs claim deductions like Section 80C and Section 80D?
Yes, HUFs can claim deductions such as Section 80C investments, health insurance premiums under Section 80D, and other deductions when they opt for the old tax regime. These deductions are generally not allowed under the new tax regime.
Q8. Does the basic exemption limit change if the HUF has business income?
The basic exemption limit itself does not change because of business income. However, if the HUF earns business or professional income and wants to opt for the old tax regime, it must follow specific rules and submit the required declaration before filing the income tax return.
Q9. What types of income can be taxed in the hands of an HUF?
An HUF can earn and be taxed on various types of income, including income from ancestral property, rental income, business income carried out by the HUF, capital gains from asset sales, and interest or dividend income from investments.
Q10. Is a separate PAN mandatory for an HUF to pay taxes?
Yes, a Hindu Undivided Family must obtain its own Permanent Account Number (PAN). This PAN is used for filing income tax returns, opening bank accounts, making investments, and conducting other financial transactions in the name of the HUF.
Q11. Which ITR forms are applicable for HUF income tax filing?
The ITR form depends on the nature of income earned by the HUF. ITR-2 is generally used when the HUF has income from sources such as capital gains, property, or other sources but no business income. ITR-3 is used when the HUF has income from business or profession.
Q12. How can HUFs choose between the old and new tax regimes?
HUFs can compare the tax liability under both regimes before filing their income tax return. If deductions and exemptions significantly reduce taxable income, the old regime may be beneficial. If deductions are minimal, the new tax regime with lower slab rates and a higher exemption limit may result in lower tax liability.
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