Lesson 3 of 3 · 7 min
The tax story, honestly
Yes, an HUF has its own exemption and slabs. But salary can never be HUF income, clubbing undoes transfers, partition is irreversible — and misuse gets noticed.
Now the part the internet gets wrong. An HUF does get its own basic exemption and slab rates — on paper, a second run up the tax slabs. The catch: the HUF must have its OWN income.
Your salary can never become HUF income. And if you push your own money or property into the HUF, the clubbing rules send the income it earns straight back to your personal return.
The numbers, with the catches attached
- HUF's own basic exemption (new regime, FY 2026-27)
- ₹4,00,000
- Section 87A rebate for an HUF
- ₹0
- Gifts an HUF can receive from non-relatives in a year, tax-free
- Up to ₹50,000 in aggregate
The same slab table as an individual
The rebate that wipes out an individual's tax up to ₹12 lakh is for resident individuals only
Cross that line and the whole amount is taxable as the HUF's income
Myth
“Open an HUF, put half your salary in it, pay tax in two slabs. Free money.”
False
Salary is personal income — it can never be HUF income. And under section 64(2), when you transfer your own property into the HUF, the income it produces is clubbed back into your hands and taxed as yours anyway. An HUF only changes things where there is genuine family income: ancestral property, a family business, gifts received by the HUF itself. The 'salary hack' version does not survive contact with the Income Tax Act.
Two sets of slabs — where is the catch?
KabirTara
Kabirasking
So the family gets its own PAN and its own run up the slabs. Why would anyone not put half their salary through it?
Taraexplaining
Because salary is yours the instant you earn it. There is no doorway that turns your pay into the family’s income — the law simply never built one.
Kabirasking
All right. Then I move some of my own savings across and let the family earn on that.
Taraexplaining
You can move the money. The income it throws off gets clubbed back into your return and taxed as yours. You changed the account, not the taxpayer.
Kabirasking
Then what income is genuinely the family's?
Taraexplaining
What the family already owns together: an ancestral property, a business run on family funds, a gift made to the HUF itself. And once something goes in, taking it out means a full partition among every coparcener. That door swings one way.
Sort it
1 / 4
Whose income is it — yours or the HUF's?
Your salary, while you happen to be the karta
Just for you
Does your family already have joint property or a family business? Who in your family would even agree on what counts as 'the family's' versus 'mine'? That conversation is the real cost of an HUF.
This stays in your browser and is never sent anywhere — not to us, not to anyone. It disappears when you leave the page.
Check yourself
1 / 3
Kabir asks
Can half your salary be routed through the family's HUF to use a second set of slabs?
Done reading?
Saved in this browser — and finishes the course.