A list of tax benefits a HUF can claim are:
Tax Deductions under Chapter VI-A::
1) Deduction u/s 80C:: A HUF can claim tax deduction by
(a) taking out Life Insurance Policies/ ULIPs in the name of its members and make payment of the premium
(b) contributing to the PPF account of its members
(c) investing in Five Year Bank Fixed Deposits, Equity Linked Savings Scheme
(d) invest in notified bonds of NABARD
(e) purchase a house property on bank loan and claim principal amount of loan paid
The maximum amount for deduction u/s 80C cannot exceed Rs. 1,50,000 from F.Y. 2014-15.
2) Deduction u/s 80D:: Medical Insurance premium paid by HUF for the benefit of any member of the family is deductible from gross total Income. The limit for deduction is Rs. 15,000 (Rs. 25,000 from F.Y. 2015-16) for any member and Rs. 20,000 (Rs. 30,000 from F.Y. 2015-16) for senior citizen member.
3) Deduction u/s 80DD:: W.r.t. Medical treatment of a handicapped dependent who is a person with disability – If the HUF pays for medical treatment for rehabilitation of such a member of the family, tax deduction is available upto Rs. 50,000 (Rs. 1,00,000 in case of severe disbaility). However to claim this, the member should be wholly dependent upon HUF for support and he should also not have claimed the same disability deduction u/s 80U in his return.
4) Deduction u/s 80DDB:: If the HUF pays for medical treatment for any member of the family who is wholly/ mainly dependent on the HUF for support, tax deduction is available upto Rs. 40,000 (Rs. 60,000 in case of senior citizen) or actual expenditure, whichever is lower.
5) Deduction u/s 80G:: Any donations to certain funds, charitable institutions, NGOs made by HUF can be claimed u/s 80G.
6) Deduction u/s 80GGC:: Any contribution made to political party or electoral trust by HUF is deductible. If the contribution is made in cash, it is not allowed as deduction.
Agricultural Income, Long Term Capital Gains on securities on which STT is paid and Dividend Incomes remain tax-free even in the hands of HUF.
If HUF is a partner in a partnership firm, the share of profit of HUF from partnership will be exempted from tax.
Also, any payments received by a member of HUF from HUF’s income is exempted from tax.
Interest on housing loan::
If a house is purchased on loan, the HUF can claim deduction w.r.t. interest on loan upto Rs. 2,00,000 in case of self-occupied house. When the house is put on rent, the whole amount of interest paid is deductible from Rental Income.
An effective way to structure your taxes would be when you are a salaried employee and your HUF is the owner of the house property in which you are staying. Then you can make payment of rent to HUF, obtain rent receipt from HUF and submit the same along with PAN card of HUF to the employer and claim a tax deduction on the HRA amount from the employer. And the HUF can also claim the whole housing loan interest from the rental income. In this way, you can effectively reduce your tax outgo of the family.