80C Deduction for HUF (FY 2024-25 | AY 2025-26): A Complete Guide

A Hindu Undivided Family (HUF) can claim a significant tax deduction up to ₹1.5 lakh under Section 80C of the Income Tax Act. This article explains the eligibility criteria, lists all qualifying investments, and details how a HUF can claim this benefit for the Assessment Year 2025-26. Understanding these provisions allows a HUF to effectively lower its tax outgo.

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Table of Index

• What is a Hindu Undivided Family (HUF) and Can It Claim 80C Deductions?

• The Golden Rule: The ₹1.5 Lakh Limit Under Section 80C for HUF

• Complete List of Eligible 80C Investments and Payments for HUF

• Investments NOT Eligible for 80C Deduction for a HUF (Common Mistakes)

• Who Can Contribute? Karta vs. Members Explained

• How to Claim 80C Deduction for HUF in Your Income Tax Return (ITR)

• Conclusion

• FAQs

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What is a Hindu Undivided Family (HUF) and Can It Claim 80C Deductions?

A Hindu Undivided Family (HUF) is a distinct family unit comprising lineal descendants from a shared ancestor. For tax purposes under the Income Tax Act, a HUF is recognized as a 'person' and a separate legal entity from its members. This unique status absolutely allows a HUF to earn income, own property, and claim tax deductions just like an individual taxpayer can.

The primary 80c deduction for HUF is a key tax-saving benefit available to it. A HUF consists of the following:

• Karta: The Karta is the head of the family, typically the eldest male or female coparcener, who manages the HUF's affairs.

• Coparceners: These are the family members who have a right by birth to the ancestral property, including sons and daughters. Coparceners have the right to demand partition of the HUF's assets.

• Members: This includes individuals who join the family through marriage, such as the Karta's spouse. Members have a right to maintenance but are not coparceners.

The HUF operates through its own PAN and files its own tax return, which is separate from the returns filed by its members. You can find more details on the official Income Tax Department website.

The Golden Rule: The ₹1.5 Lakh Limit Under Section 80C for HUF

The 80c limit for HUF is capped at a maximum of ₹1.5 lakh for each financial year. This deduction limit is a combined total for all eligible investments and expenses under Section 80C, along with contributions to certain pension funds under Section 80CCC and 80CCD(1). It is vital to understand that the HUF and its members have separate deduction limits.

Key Clarification: A Separate Limit for HUF and Its Members The HUF can claim a tax deduction of up to ₹1.5 lakh from its own taxable income. Simultaneously, each individual member of the HUF can claim their own separate ₹1.5 lakh deduction under Section 80C from their personal income. This distinction is a cornerstone of using the HUF structure for tax planning.

Complete List of Eligible 80C Investments and Payments for HUF

An 80c investment for HUF can be made in several approved schemes and expenses to lower its taxable income. As per the latest tax laws for AY 2025-26, the HUF can contribute to these avenues from its own income to claim the deduction.

Life Insurance Premium

A popular 80c deduction for HUF involves paying life insurance premiums.

• The HUF can pay premiums for insurance policies taken on the life of any of its members, including the Karta and other coparceners.

• The payment for the premium must be made from the HUF's income and bank account.

Public Provident Fund (PPF)

The HUF PPF investment rules have an important condition.

• A HUF is not allowed to open a new PPF account, a rule that came into effect in 2011.

• However, if a PPF account was opened in the HUF's name before May 13, 2005, any contributions made to that existing account are still eligible for the 80C deduction.

Equity Linked Saving Scheme (ELSS)

An eligible investment for HUF includes mutual funds with tax benefits.

• A HUF can invest in ELSS mutual funds to claim a deduction under Section 80C.

• These investments come with a mandatory lock-in period of three years.

Home Loan Principal Repayment

A HUF home loan deduction is a significant tax-saving tool.

• A HUF can claim a deduction for the principal portion of the EMI paid on a home loan.

• The property must be registered in the name of the HUF, and the loan must also be in the HUF's name.

• This deduction is available only for residential property.

National Savings Certificate (NSC)

A HUF can also make an 80c investment for HUF in Post Office schemes.

• A HUF can invest in the National Savings Certificate (VIII Issue).

• The interest that accrues annually on the NSC is deemed to be reinvested and also qualifies for a deduction under Section 80C, except for the interest earned in the final year.

Unit Linked Insurance Plan (ULIP)

Similar to life insurance, a HUF can invest in ULIPs.

• Payments made by the HUF for a ULIP taken in the name of any of its members are eligible for the 80C deduction.

Other Eligible Investments

There are several other eligible investments for HUF that qualify for the deduction.

• 5-Year Tax-Saving Fixed Deposits: A HUF can invest in these special FDs offered by banks.

• NABARD Rural Bonds: Investments made in specified bonds issued by NABARD are eligible.

• Subscription to Shares or Debentures: Investment in certain equity shares or debentures of approved institutions also qualifies.

• Tuition Fees: The law for tuition fees deduction is specified for an "individual" for up to two children. While some tax professionals have differing opinions, the widely accepted and safer interpretation is that a HUF cannot claim this deduction, as a HUF has members, not children in a legal sense. It is advisable for the members to claim this deduction from their individual income.

Investments NOT Eligible for 80C Deduction for a HUF (Common Mistakes)

To avoid huf 80c mistakes, it is crucial to know which investments are not allowed for a HUF under Section 80C. Claiming deductions for ineligible investments can lead to tax notices and penalties.

Investment/Scheme	Why it's Not Eligible for HUF
Sukanya Samriddhi Yojana (SSY)	This scheme is exclusively for the parents or legal guardians of a girl child. A HUF does not meet this definition and cannot invest in SSY.
Senior Citizen Savings Scheme (SCSS)	This scheme is specifically designed for individual senior citizens. A HUF, being a separate entity, is not eligible to invest in SCSS.
Post Office Time Deposit (POTD)	While individuals can claim deductions for 5-year Post Office Time Deposits, HUFs are generally considered ineligible for this specific benefit.

Who Can Contribute? Karta vs. Members Explained

To clarify who can invest for HUF, it's essential to understand the source of funds. The investment must be made from the HUF's income and paid out of its dedicated bank account. Funds cannot be the personal savings of the Karta or members channeled through the HUF.

For instance, while a life insurance policy can be in a member's name, the premium payment must originate from the HUF's bank account to qualify for the deduction.

Do's and Don'ts for HUF Investments:

• Do: Pay for all 80C investments from the official bank account of the HUF.

• Don't: Use the Karta's or any member's personal savings account to make payments, as this can disqualify the deduction.

How to Claim 80C Deduction for HUF in Your Income Tax Return (ITR)

Learning how to claim 80c for HUF is a straightforward process. A HUF is required to file its own income tax return, typically using ITR-2 (for income from sources other than business) or ITR-3 (for business income). The deduction is claimed in a specific part of the ITR form.

Here are the steps to claim the deduction:

• First, calculate the total taxable income of the HUF for the financial year.

• Sum up all the eligible investments and payments made under Section 80C during that year.

• When filing the appropriate ITR form (ITR-2 or ITR-3), find Schedule VI-A, which covers deductions under Chapter VI-A.

• In Schedule VI-A, enter the total amount of your 80C investments (up to the ₹1.5 lakh limit) in the designated row for Section 80C.

• Always keep proof of all investments, such as premium receipts, account statements, and home loan certificates, safe in case of any query from the tax department.

For those who find the process complex, consider filing your ITR with expert assistance to ensure accuracy and maximize your deductions.

Conclusion

A HUF is a valuable entity for tax planning, and using the 80c deduction for huf is one of its primary advantages. By understanding the rules, a family can significantly lower its collective tax burden.

Key Takeaways:

• A HUF is a separate tax entity and can claim a deduction of up to ₹1.5 lakh under Section 80C.

• This limit is independent of the ₹1.5 lakh limit available to each of its members.

• All investments must be made from the HUF's income and through its own bank account.

• It is crucial to verify that an investment is specifically eligible for a HUF before claiming a deduction to avoid errors.

If you have questions about your HUF's tax liabilities, letting Taxbuddy's experts manage your ITR filing can provide peace of mind and ensure you claim all rightful deductions. Get started today

FAQs

Q1. Can both the HUF and its members claim a deduction of ₹1.5 lakh?

Yes, they can. The HUF can claim a deduction of up to ₹1.5 lakh on its own income. Separately, each member can claim an individual deduction of up to ₹1.5 lakh on their personal income, as they are treated as distinct tax entities.

Q2. Can a HUF claim a deduction for the tuition fees of a member's child?

This is a contested area. The Income Tax Act specifies that the tuition fee deduction is for an "individual" for their children. The safer and more common practice is for the individual member to claim this deduction on their personal income return, not the HUF, to avoid potential tax disputes.

Q3. Can a HUF open a new PPF account today to claim an 80C deduction?

No. A government notification from 2011 prevents HUFs from opening new Public Provident Fund (PPF) accounts. Only contributions made to HUF PPF accounts that were opened before May 13, 2005, are eligible for deduction.

Q4. What documents should a HUF keep as proof for 80C deductions?

A HUF should diligently maintain all documents related to its 80C claims. This includes life insurance premium receipts, ELSS fund statements, home loan principal and interest certificates, and bank statements that clearly show the payments were made from the HUF's account.

Q5. Can a HUF invest in the Sukanya Samriddhi Yojana (SSY) for a female member?

No. The SSY scheme is restricted to a girl child's parents or legal guardians. A HUF does not fit this criterion and is therefore not eligible to invest in the scheme.

Q6. Is the principal repayment on a loan for a commercial property eligible for HUF?

No. The deduction under Section 80C for home loan principal repayment is only available for a residential house property. It does not apply to commercial properties.

Q7. Does the Karta need to be one of the insured members in a life insurance policy paid by the HUF?

Not necessarily. The HUF can pay a premium on a life insurance policy for any of its members, which can include the Karta or any other coparcener.