ITA 2025 HUF Tax Regime: New Default Rules from 2026-27
The Income-tax Act, 2025 makes the New Tax Regime the default for Hindu Undivided Families from Tax Year 2026-27 under Section 202 — and unlike individuals, HUFs get no rebate under the new regime. Here is what changes and how to opt out if the old regime suits your HUF better.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Legal basis: Income-tax Act, 2025, Section 202 (default regime for HUFs), read with Section 263(1) and Rule 136 of the Income-tax Rules, 2026 — Effective: 1 April 2026 (Tax Year 2026-27). Source: https://taxguru.in/income-tax/huf-tax-rules-2026-27-regime-slabs-deductions-tax-planning.html. Last reviewed by CA Harun Raaj: September 2026.
If your family runs a Hindu Undivided Family, a statutory switch takes effect from Tax Year 2026-27 that you cannot afford to miss. Section 202 of the Income-tax Act, 2025 (ITA 2025) makes the New Tax Regime the default framework for HUFs. If your HUF files nothing to opt out, it is taxed under the new regime automatically — and an HUF under the new regime does not get the tax rebate that individuals receive.
What Section 202 actually changes
Section 202 of ITA 2025 sets the New Tax Regime as the default for HUFs from Tax Year 2026-27. The new regime slabs are: nil up to ₹4,00,000; 5% for ₹4–8 lakh; 10% for ₹8–12 lakh; 15% for ₹12–16 lakh; 20% for ₹16–20 lakh; 25% for ₹20–24 lakh; and 30% above ₹24 lakh — plus applicable surcharge and 4% health and education cess.
An HUF stays under this default regime unless it validly exercises the option to be taxed under the old regime through its return of income under Section 263(1) of ITA 2025, following Rule 136 of the Income-tax Rules, 2026.
A timing note that matters for this year's filing: AY 2026-27 (FY 2025-26) is still governed by the Income-tax Act, 1961 under Section 115BAC(1A). The ITA 2025 provisions described here apply from Tax Year 2026-27 (FY 2026-27, April 2026 onwards) — not to the return your HUF is filing right now.
Key point: From Tax Year 2026-27, an HUF that files no election is automatically taxed under the new regime, and unlike individuals it gets no rebate under that regime.
Five differences that change the arithmetic for your HUF
1. No tax rebate for HUFs. Section 156 of ITA 2025 — the equivalent of the old Section 87A rebate — provides relief of up to ₹60,000, but only to resident individuals. An HUF is explicitly excluded. Practically, an HUF with ₹10 lakh of income pays full slab-rate tax under the new regime, while an individual at the identical income level pays nil after the rebate.
2. Self-occupied home loan interest is not deductible. Under the new regime, interest on borrowed capital for a self-occupied residential house is not deductible, and house-property losses cannot be set off against other heads of income.
3. Old-regime deductions fall away. The Chapter VI-A equivalent deductions under Section 123 of ITA 2025 — covering what were 80C and 80D reliefs such as life insurance premiums, health insurance, and PPF contributions — are not available under the new regime.
4. The one-way door for business HUFs. For an HUF earning business or professional income, the regime choice carries a consequence. If such an HUF opts out of the default new regime, it may later switch back to the new regime — but only once. After switching back, it cannot elect the old regime again unless it ceases to have business or professional income.
5. Surcharge capped at 25%. Surcharge under the new regime is capped at 25% where total income exceeds ₹5 crore, bringing the effective Maximum Marginal Rate below the old-regime MMR of 42.744%. For very high-income HUFs, this cap can tilt the decision toward the new regime.
Old regime vs new regime for an HUF
Who this affects most
- HUFs currently claiming significant old-regime deductions — insurance premiums, PPF/EPF contributions, and home loan interest on a self-occupied property.
- HUFs with income roughly between ₹8–12 lakh, where the absence of the rebate has the sharpest relative impact.
- Business or professional HUFs, given the one-way-door rule on switching back into the new regime.
- Families weighing whether the HUF structure remains the right vehicle compared with individual holdings or a private family trust.
How to opt out, if the old regime suits your HUF
Where a computation shows the old regime is more beneficial, the option must be exercised in the return of income under Section 263(1) of ITA 2025, following Rule 136 of the Income-tax Rules, 2026. For non-business HUFs, this election is made afresh each year within the return itself. The exact filing mechanics should be confirmed with your CA before the return is submitted.
Planning points to raise with your CA
- Ask for a side-by-side old-regime versus new-regime computation for your HUF for Tax Year 2026-27.
- List every deduction the HUF currently claims — the gap between the two regimes is what drives the decision.
- If the HUF has business income, settle the regime decision before filing, since the one-way-door rule makes a later course correction costly.
- Review with your CA and, where succession is involved, a qualified lawyer, whether the HUF structure remains the most efficient vehicle for your family given these new-regime asymmetries.
I'm CA Harun Raaj, Visakhapatnam. If your HUF's regime decision for Tax Year 2026-27 needs a proper computation, reach out to our office before you file.
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See Also
Frequently Asked Questions
My HUF has not actively chosen a regime for Tax Year 2026-27 — what applies?
The New Tax Regime under Section 202 of the ITA 2025 applies automatically. To be taxed under the old regime instead, the option must be exercised in the return of income under Section 263(1), following Rule 136 of the Income-tax Rules, 2026.
Can my HUF claim the ₹60,000 rebate equivalent to Section 87A under the new regime?
No. Section 156 of ITA 2025, which mirrors the old Section 87A rebate, is available only to resident individuals. HUFs are explicitly excluded, even under the new regime.
Does ITA 2025 apply to my HUF's AY 2026-27 filing?
No. AY 2026-27 (FY 2025-26) is still governed by the Income-tax Act, 1961 under Section 115BAC(1A). The ITA 2025 provisions, including Section 202, apply only from Tax Year 2026-27 (FY 2026-27) onwards.
Can my HUF still deduct home loan interest on a self-occupied house under the new regime?
No. Under the new regime, interest on borrowed capital for a self-occupied residential house is not deductible, and the resulting house-property loss cannot be set off against other heads of income.
Are 80C and 80D-type deductions still available to my HUF under the new regime?
No. The Chapter VI-A equivalent deductions under Section 123 of ITA 2025 — covering items like life insurance premiums, PPF, and health insurance — are not available once the HUF is taxed under the new regime.
My HUF has business income and opted out of the new regime — can we switch back later?
Yes, but only once. A business HUF that opts out of the default new regime may switch back later, but after that it cannot elect the old regime again unless it ceases to have business or professional income.
Does a high-income HUF benefit from the new regime's surcharge cap?
Where total income exceeds ₹5 crore, the new regime caps surcharge at 25%, bringing the effective Maximum Marginal Rate below the old regime's 42.744%. This can make the new regime more attractive for very high-income HUFs, subject to a full computation.
How does my HUF formally elect the old regime for Tax Year 2026-27?
The option must be exercised in the return of income under Section 263(1) of ITA 2025, following Rule 136 of the Income-tax Rules, 2026. For non-business HUFs, this election is made afresh in the return each year, so confirm the exact filing steps with your CA.
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