Is Rebate under Section 87A Available to a Hindu Undivided Family (HUF)?
Author: Team Indian Tax Planning (ITP)
Website: www.indiantaxplanning.in
🧾 Introduction
Many taxpayers are aware of the rebate under Section 87A that reduces tax liability for individuals with lower incomes. However, confusion often arises about whether this rebate also applies to a Hindu Undivided Family (HUF).
In this article, we explain whether an HUF can claim rebate u/s 87A, what tax benefits are still available, and how an HUF can effectively plan its taxes.
⚖️ What Section 87A Says
Section 87A provides a rebate of up to ₹25,000 (from FY 2023-24 onwards) for resident individuals whose total income does not exceed:
- ₹7 lakh under the new tax regime (Section 115BAC), or
- ₹5 lakh under the old tax regime.
This rebate reduces the final tax payable, effectively making income up to these limits tax-free for eligible individuals.
🚫 Is HUF Eligible for Section 87A Rebate?
No.
The rebate under Section 87A is available only to resident individuals.
A Hindu Undivided Family (HUF), though assessed similarly to individuals for slab-rate purposes, is treated as a separate taxable entity under the Income Tax Act, 1961.
Therefore, an HUF cannot claim the 87A rebate, even if its total income is below ₹7 lakh (new regime) or ₹5 lakh (old regime).
✅ What HUF Can Still Claim
While the Section 87A rebate is not available, an HUF can still enjoy several other benefits:
Basic Exemption Limit –
The HUF enjoys the same basic exemption as an individual:
- ₹2,50,000 under the old regime.
- Under the new regime, tax is calculated from ₹3 lakh onward.
Deductions under Chapter VI-A:
- Section 80C – Investments such as PPF, life-insurance premium, ELSS, etc., in the name of the HUF (limit ₹1.5 lakh).
- Section 80D – Health-insurance premium for HUF members (limit ₹25,000 / ₹50,000 for senior members).
- Other deductions – Donations (80G), interest on savings (80TTA), etc., if eligible.
Property Ownership & Income Distribution:
HUFs can hold property and generate income separately from individual members, allowing for legitimate income-splitting and overall tax reduction through effective structuring.
🧮 Example
| Particulars | Individual | HUF |
|---|---|---|
| Total Income | ₹6,80,000 | ₹6,80,000 |
| Eligible for Section 87A? | ✅ Yes | ❌ No |
| Tax Payable | ₹0 | ₹18,200 (approx.) |
This simple comparison shows that even though both are taxed at slab rates, the HUF misses out on the rebate benefit available to individuals.
📘 Summary
| Feature | Individual | HUF |
|---|---|---|
| Eligible for Rebate u/s 87A | ✅ Yes (Resident) | ❌ No |
| Basic Exemption Limit | ₹2.5 L (old) / ₹3 L (new) | ₹2.5 L (old) / ₹3 L (new) |
| Chapter VI-A Deductions | Available | Available |
| Separate PAN & Return | Yes | Yes |
🧩 Tax-Planning Insight from ITP
Even though the 87A rebate is not available to HUFs, strategic income allocation and investment planning can still minimize tax liability:
- Channel specific incomes (like rent, interest, or business profit) through the HUF where deductions are possible.
- Utilize 80C and 80D benefits fully.
- Maintain proper documentation of HUF property and partition to support assessment.
📞 Need Expert Guidance?
At Indian Tax Planning (ITP), we specialize in HUF formation, taxation, and compliance. Our advisors help you structure income and investments efficiently within the legal framework.
📩 Email: info@indiantaxplanning.in
🌐 Visit: www.indiantaxplanning.in
