uTrade AlgosDividends received in an HUF trading account are managed by the Karta. The Karta oversees these transactions and has the discretion to distribute dividends among the coparceners, reinvest them, or use them in a manner that aligns with the collective interests of the HUF.
Tax Treatment of Dividends in HUF Accounts
Dividends earned through an HUF trading account are considered the income of the HUF entity, not the personal income of the Karta or individual members. This income is taxed under the Income Tax Act, offering distinct advantages due to the separate legal status of the HUF.
1. Taxation Structure
- HUF Income: Dividends and other income from the HUF trading account are reported as HUF income and taxed accordingly.
- Separate Tax Slabs: The HUF is treated as a distinct taxable entity and enjoys the same tax slab benefits as an individual taxpayer, allowing it to claim basic exemptions and deductions.
2.Tax Benefits
- Separate PAN: The HUF is assigned its own Permanent Account Number (PAN), which is necessary for filing tax returns and conducting financial transactions.
- Eligible Deductions: The HUF can claim tax benefits under various sections, such as 80C (for investments in ELSS, insurance premiums, etc.).
- Savings: The HUF’s separate tax status can potentially lead to tax savings compared to if the income were taxed in the hands of individual family members.
3.Responsibility for Income and Taxes
- The Karta is responsible for handling the dividend income and filing the HUF’s income tax returns, ensuring timely tax payments.
- Family members do not pay tax on their share of income received from the HUF trading account, as it has already been taxed under HUF.
4.Tax Benefits for Beneficiaries
Beneficiaries of the HUF also enjoy indirect tax advantages:
- Since the HUF is taxed separately from the individual members, it provides opportunities to optimise tax liability. By strategically distributing income between the HUF and the beneficiaries, all the taxable entities may reduce their overall tax burden by availing deductions separately.
- Beneficiaries can also claim their share of income apart from availing tax benefits available to the HUF.
If you want to open an HUF account with Share India, click here to get a list of forms and supporting documents you need to submit to conveniently open an HUF account. Once these are ready, send hard copies of these to the corporate office of Share India at:
A-15, Sector 64, Noida,
Distt. Gautam Buddha Nagar,
Uttar Pradesh-201301.
If you have any questions or need further support during the account opening process, don’t hesitate to contact Share India’s support team. You can reach us at 18002030303 or email us at support@shareindia.com.