A Hindu Undivided Family (HUF) is a unique tax-recognised entity under Indian law — a separate "person" under Section 2(31) of the Income-tax Act, 1961, with its own PAN, its own tax exemption limits, its own Chapter VI-A deductions, and its own slab rates as available to individuals. Recognised in personal law under the Mitakshara school of Hindu Law (and codified in the Hindu Succession Act, 1956 with the 2005 amendment giving daughters equal coparcener rights), an HUF consists of all persons lineally descended from a common ancestor — the karta (typically the seniormost male / now any senior member), the coparceners (sons and daughters with birthright), and members (other relatives by marriage).

HUF formation creates a powerful tax-splitting tool — every Indian Hindu, Buddhist, Jain, or Sikh family can establish an HUF that earns its own income and pays tax separately from the individual coparceners. The HUF gets its own ₹2.5 lakh basic exemption (₹3 lakh for senior citizens — though HUF as such does not have age-based benefit, the karta-equivalent thresholds), its own ₹1.5 lakh Section 80C deduction, ₹25,000 / ₹50,000 Section 80D, and full slab rate ladder. Common income streams routed through HUF — rental from ancestral / HUF property, interest from HUF-owned investments, business income from HUF business, capital gains from HUF assets. The legal architecture spans the Income-tax Act (Sections 2(31), 6, 64(2), 171), Hindu Succession Act, 1956 (coparcener / karta / partition rules), Indian Trusts Act 1882 (analogous principles), and FEMA where NRI coparceners are involved. Tax saving from HUF formation is typically ₹50,000-₹1.5 lakh annually for middle-income families, scaling significantly higher for high-income / high-asset families. However, Section 64(2) clubbing on individual-to-HUF gifts and Section 171 partition rules require careful structuring.