How a Hindu Undivided Family is taxed for AY 2026-27: new-regime slabs by default and the option to opt out

A Hindu Undivided Family (HUF) is a separate taxpayer under the Income-tax Act, 1961, with its own PAN and its own return, and from AY 2026-27 (the financial year 2025-26) it is taxed under the new regime of section 115BAC by default, exactly as an individual is. The Income Tax Department's "return applicable" help page for AY 2026-27 confirms that a HUF must actively opt out if it wants the old regime, and that opting out is not automatic.

That single change of default matters because a HUF is usually created to pool income and split it away from the members' individual returns. If the family expects the old regime's Rs 2,50,000 basic exemption and its Chapter VI-A deductions to apply, but files without opting out, the return is computed on the new-regime slabs starting at Rs 4,00,000 with no such deductions. This tip walks through the statutory position, a worked example on Rs 15,00,000 of HUF income, and the mistakes that surface in ITR scrutiny.

What the Section Says

Section 115BAC, as amended by the Finance Act 2025, is the default regime for a HUF for the financial year 2025-26. The seven-slab structure runs from Nil up to Rs 4,00,000 to 30% above Rs 24,00,000, and the assessment year for this financial year is AY 2026-27.

The old regime remains available on opting out, and it keeps the older structure: Nil up to Rs 2,50,000, 5% from Rs 2,50,001 to Rs 5,00,000, 20% from Rs 5,00,001 to Rs 10,00,000 and 30% above Rs 10,00,000. A HUF does not get the Rs 3,00,000 or higher basic exemption that resident senior and super-senior individuals enjoy in the old regime, because those higher slabs are personal to individuals of a given age; a HUF's basic exemption is a flat Rs 2,50,000.

On top of the slab tax, a Health and Education cess of 4% applies to the tax plus surcharge in both regimes. Surcharge itself begins at 10% once income crosses Rs 50,00,000, rising to 15% above Rs 1,00,00,000 and 25% above Rs 2,00,00,000. A HUF cannot reach the old regime's 37% top surcharge because the new regime it defaults into caps surcharge at 25%; the 37% rate does not exist under section 115BAC.

Two individual-only reliefs never reach a HUF, and this is the crux of the default change. First, the section 87A rebate (up to Rs 60,000 in the new regime where total income does not exceed Rs 12,00,000, and up to Rs 12,500 in the old regime where income does not exceed Rs 5,00,000) is granted only to a resident individual, so a HUF pays tax from the first rupee above Rs 4,00,000 with no rebate cushion. Second, the standard deduction of Rs 75,000 (new regime) or Rs 50,000 (old regime) attaches to salary income, which a HUF cannot earn, so it never applies. A HUF opting out of the new regime does so through Form 10-IEA before the due date where it has business or professional income, the same mechanism AOPs and BOIs now use.

Worked Example

Take the Sharma HUF with total income of Rs 15,00,000 for AY 2026-27, made up of Rs 6,00,000 rental income after the 30% standard house-property deduction, Rs 4,00,000 interest and Rs 5,00,000 of business profit share. Under the default new regime the tax works out as follows.

Now compare the old regime with no deductions on the same Rs 15,00,000: the tax is Rs 12,500 plus Rs 1,00,000 plus Rs 1,50,000, which is Rs 2,62,500, and with 4% cess the total is Rs 2,73,000. The new regime is therefore cheaper by Rs 1,63,800 before any deduction is even considered.

Suppose instead the Sharma HUF claims the old regime with Rs 1,50,000 under section 80C (life insurance premium on members plus a five-year tax-saving deposit in the HUF's name), Rs 25,000 under section 80D for a family health policy, and Rs 2,00,000 of home-loan interest under section 24(b), a total of Rs 3,75,000. Taxable income falls to Rs 11,25,000 and the old-regime tax becomes Rs 1,50,000, or Rs 1,56,000 with cess. The new regime still wins by Rs 46,800.

The break-even is instructive: on Rs 15,00,000 of income, a HUF would need more than Rs 5,37,500 of old-regime deductions before the old regime's tax falls to the new regime's Rs 1,05,000 base figure. Few families reach that, because a HUF cannot claim section 80CCD(1B) for NPS (that Rs 50,000 deduction belongs to individuals, and in any case is unavailable in the new regime). Run your own numbers on the old vs new regime calculator and cross-check the slab tax on the income tax calculator before you decide whether to file Form 10-IEA.

Common Mistakes

The first mistake, seen repeatedly in ITR processing for AY 2025-26, is a HUF filing the old regime out of habit without submitting Form 10-IEA, then finding the return computed on the default new-regime slabs. Where the HUF has business income, the opt-out is valid only if Form 10-IEA is filed on or before the section 139(1) due date; a late form means the new regime stands for the whole year.

The second is expecting the section 87A rebate. Because the rebate is confined to resident individuals under section 87A, a HUF with total income of Rs 11,00,000 in the new regime pays the full base tax of Rs 50,000 (Rs 20,000 plus Rs 30,000) plus cess, whereas an individual on the same figure would pay nil after the Rs 60,000 rebate and marginal relief. Families that model HUF tax on individual calculators overstate their refund by exactly this amount.

The third is double-counting a deduction across the individual and HUF returns. A life insurance premium paid from HUF funds on a member's life can be claimed under section 80C in the HUF return, but the same premium cannot also be claimed by the individual member; the Rs 1,50,000 ceiling applies separately to each assessee, not to each rupee twice.

The fourth is assuming the standard deduction applies. A HUF has no salary head, so neither the Rs 75,000 nor the Rs 50,000 standard deduction reduces its income; entering it triggers a mismatch against the department's computation and a demand notice.

FAQ

Is the new regime really the default for a HUF in AY 2026-27?

Yes. Under section 115BAC as amended by the Finance Act 2025, the new regime is the default for a HUF for the financial year 2025-26, and the Income Tax Department's return-applicable help page for AY 2026-27 states the HUF must opt out to use the old regime.

How does a HUF opt out of the new regime?

A HUF with business or professional income files Form 10-IEA on or before the due date under section 139(1) to opt out, the same route AOPs and BOIs use. A HUF with no business income can simply choose the old regime in the return itself for that year.

Can a HUF claim the section 87A rebate of Rs 60,000?

No. The section 87A rebate (up to Rs 60,000 in the new regime for total income up to Rs 12,00,000) is available only to a resident individual, so a HUF cannot claim it in either regime.

What is the basic exemption for a HUF in the old regime?

A flat Rs 2,50,000. A HUF does not get the higher Rs 3,00,000 or Rs 5,00,000 exemptions that apply to resident senior and super-senior individuals, because those depend on the age of an individual.

Does a HUF get the standard deduction?

No. The standard deduction of Rs 75,000 in the new regime and Rs 50,000 in the old regime applies to salary income, which a HUF cannot earn.

What deductions can a HUF still claim in the old regime?

Chapter VI-A deductions that are not individual-specific, such as section 80C up to Rs 1,50,000, section 80D for health insurance of members, and section 24(b) home-loan interest of up to Rs 2,00,000 on a self-occupied property held by the HUF.

Is surcharge different for a HUF?

No. The same slabs apply: 10% above Rs 50,00,000, 15% above Rs 1,00,00,000 and 25% above Rs 2,00,00,000, with 4% cess on tax plus surcharge. The old regime's 37% surcharge does not apply, because the new regime it defaults into caps surcharge at 25%.