An HUF or Hindu Undivided Family (HUF) comprises all the male persons lineally descended from a common ancestor, their wives and unmarried daughters. A Hindu Undivided Family must consist of at least two members. An HUF cannot be created under a contract, it is created automatically in a Hindu Family. A Hindu family can form an HUF. Sikhs and Jains can also form an HUF but they are not governed by the Hindu Law, however, they will be treated as an HUF for Income Tax purposes.
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The main reason behind forming an HUF is to save tax as an HUF gets an extra PAN card through which the family members can divert the family income to the HUF income that will result in tax saving and will reduce the tax outgo.
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