TAXAJ

Hindu Undivided Family (HUF) Registration

HUF means Hindu Undivided Family. You can save taxes by creating a family unit and pooling in assets to form a HUF. HUF is taxed separately from its members. A Hindu family can come together and form a HUF. Buddhists, Jains, and Sikhs can also form a HUF. HUF has its own PAN and files tax returns independent of its members.

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About This Plan

File your HUF registration application online through TAXAJ. Get help with GST registration procedure, eligibility and documents required.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 5 to 7 working days.

Starts @ INR 2,500/-
Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Session with TAXAJ Expert
  • Filing of Application for Registration
  • Follow up till you secure PAN
Who Should Buy
  • Any Eligible Individual
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Upload documents on vault
    • Registration Form Submission
    • Allotment of PAN
Documents Required

  1. Name, Contact Number and Email Id of Karta & Members.

  2. Self Attested PAN, Aadhar & Passport size photo of Karta & Members

  3. Specimen Signatures of Karta & Members.

  4. Latest Electricity Bill/Landline Bill of Registered Office.

  5. NOC from owner of registered office. (If Owned)

  6. Rent Agreement from Landlord. (If Rented/Leased)

  7. Brief description of main business activities of the HUF

  8. Capital and Share in between members.

Fill up this Form to Launch your Dream Start-Up

Now reap the benefits of a HUF in India!

What is a Hindu Undivided Family (HUF) ?

The term HUF stands for ‘Hindu Undivided Family’ and consists of all persons directly descended from a common ancestor, and also the wives and daughters of the male descendants. A HUF comprises a Karta, coparceners, and members. Karta possesses the highest authority and manages the entire business and makes the final decision. Generally, the eldest member of the family takes the position of Karta. Hindu Undivided Family is governed and regulated by Hindu Law. HUF Registration is not possible by an agreement between two parties, nor can it be formed by a group of people who do not constitute a family.


The HUF has perpetual existence meaning that it continues to exist even after the death of the common ancestor acting as the Karta, and the next eldest male or female member becomes the head of the family and becomes the “Karta”. By forming a HUF, you can avail tax benefits by creating a family unit and pooling in assets, since HUF is taxed separately. The income of a HUF is assessed in the hands of the HUF and not in the hands of any of its members of the HUF family. Thus HUF is considered to be a separate entity. It has a separate PAN and a separate income tax return is filed for the same.

Who can be the Members of a HUF?

As HUF stands for Hindu Undivided Family, individuals belonging to other religions are not allowed to form HUF’s except Jain and Sikh who can create HUF even though they are not governed by the Hindu Law.

An HUF consists of

Karta: Karta is generally the father of the family who has the right to do all the things for the family and takes all the decisions on the behalf of the family.: Karta is generally the father of the family who has the right to do all the things for the family and takes all the decisions on the behalf of the family.

Co-Parceners: Coparcener is the person who has the right to demand the share of the property of family if he/she wants to part away with the family with his/her share.: Coparcener is the person who has the right to demand the share of the property of family if he/she wants to part away with the family with his/her share.

Not all members of the HUF are its coparceners. The co-parcenery extends to four degrees down the family hierarchy in the following manner:

  • 1st degree: Holder of ancestral property for the first time.: Holder of ancestral property for the first time.
  • 2nd degree: Sons and daughters: Sons and daughters
  • 3rd degree: Grandsons.: Grandsons.
  • 4th degree: Great grandsons.: Great grandsons.

Schools of Law

A HUF forms under two schools of law, which are Dayabhaga and Mitaakshara. Let’s examine them in detail:

Dayabhaga

The Dayabhaga School of law entitles the son/daughter to acquire the right in the family property after the demise of the father. This school of law is fervently practised in the states of West Bengal and Assam.

Mitaakshara

In stark contrast to what has been described above, the son acquires a right in the family property with the effect of his birth. This school of law is practised throughout India.

What are the benefits of HUF Registration?

There are several advantages of forming a HUF.

  • Monetary gifts up to Rs. 50,000 may be received in cash, cheque, draft, etc. by a HUF which is not taxable as per the income tax act. Also, a gift by Karta to his daughter on her marriage is exempted from taxation.
  • A HUF is taxed separately from its members, therefore, deductions or exemptions allowed under the Income tax laws can be claimed by it separately. For example, if you and your spouse along with your 2 children create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C.
  • The head of the HUF has the authority to sign the pertinent documents on behalf of other members.
  • Different taxable units of HUF can be formed easily.
  • Any asset or savings made or insurance premium disbursed by the HUF will be subtracted from the Net Income for the tax purpose.
  • Since HUF has a separate legal entity, one major benefit is creating two separate PAN Cards and file taxes separately.
  • A wife can be a co-partner in the HUF with her husband as a Karta. And any additional income earned by the wife cannot be added to this.
  • The official stature remains the same irrespective of death or disability of the Karta. Thus, the ancestral and the acquired assets of the HUF will stay in the hands of the widow and need not be partitioned.
  • A child who is adopted can also become a member of HUF family.
  • Women in the family can gift a property in her name which is owned by her or her family.
  • Members of HUF can easily avail loans.
  • This act is recognised in overall India except Kerala.

What are the disadvantages of HUF Registration?

Following are some of the disadvantages of forming a HUF.

  • One of the biggest disadvantages of the HUF is that all members have equal rights on the property. The common property or asset cannot be sold without the consent of all the members.
  • Closing a HUF is a difficult job as compared to opening a HUF. Once the HUF is terminated, then the assets need to be distributed among all the members of HUF which can be quite difficult.
  • HUF is considered as a separate legal entity by the income tax department. Nowadays, joint families are losing their importance. This is mostly due to the disputes over the property. In addition, divorce cases have augmented as well. All this is making HUF lose its amenity of a tax-saving tool.

How to Register a Hindu Undivided Family (HUF)?

Following are the steps for HUF Registration Process in India.


Step 1: Create HUF Deed

The first step in creating a HUF is to create or draft the HUF Deed. The HUF Deed is a written formal document on a Stamp Paper stating the names of the Karta and the Co-Parceners/Members of the HUF. The eldest male member of the HUF becomes the Karta of the HUF. It also states the amount of capital invested in HUF initially.


Step 2: Apply for HUF PAN Card

A HUF is required to apply for a separate PAN Card because it is a separate legal entity. An application for HUF PAN Card is to be made in Form 49A which can be furnished online as well as manually. Once the PAN Card has been allotted, the HUF would be required to file separate tax returns and can therefore claim tax benefits. It can also claim most of the income tax deductions which are available to an Individual. The application for PAN Card and the Income Tax Return must be signed by the Karta.


Step 3: Open HUF Bank Account

The last step is to open a Bank Account in the name of the HUF through which all the transactions will be made. At the time of opening of HUF Bank Account, the HUF would also be required to have a Rubber Stamp. And all documents pertaining to the HUF should be properly stamped.

How to save Tax by forming a HUF?

A HUF is taxed separately from its members, therefore, deductions (such as under Section 80) or exemptions allowed under the tax laws can be claimed by it separately. For example, if you and your spouse along with your 2 children decide to create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C. HUF is usually used by families as a means to build assets.

Let’s understand in detail.

  • HUF has its own PAN and files a separate tax return. A separate joint Hindu family business is created since it has an entity separate from its members.
    • Deductions under section 80 and other exemptions can be claimed by the HUF in its income tax return.

    • HUF can take an insurance policy on the life of its members.

    • HUF can pay a salary to its members if they contribute to its functioning of the HUF. This salary expense can be deducted from the income of HUF.

    • Investments can be made from HUF’s income. Any returns from these investments are taxable in the hands of the HUF.
    • A HUF is taxed at the same rates as an individual.
    • Let’s understand a HUF is taxed with an example – After the death of his father, Mr Rajesh Chopra decides to start a HUF with his wife, son, and daughter as members. Since Mr Chopra had no siblings, the property held by his father was transferred in the name of the HUF. The property held by late Mr Chopra earns an annual rent of Rs 7.5 lakhs. Mr Rajesh Chopra has an income from salary of Rs 20 lakh. By creating a HUF, Mr Chopra can save tax, see below.


Income from various sourcesIncome of Mr. Chopra before formation of HUFIncome of Mr. Chopra after formation of HUFIncome of HUF
Salary20,00,00020,00,000
House property rent7,50,0007,50,000
Standard deduction on house property2,25,0002,25,000
Income from house property5,25,0005,25,000
Total taxable income25,25,00020,00,0005,25,000
Section 80C1,50,0001,50,0001,50,000
Net taxable income23,75,00018,50,0003,75,000
Tax payable5,53,6253,91,4007,725
Total tax paid by Mr. Chopra & HUF3,99,125
Tax saving due to forming an HUF1,54,500

Due to this tax arrangement, Mr Chopra saved tax of Rs 1,54,500. Both HUF and Mr Chopra (as well as other members of the HUF) can claim a deduction under section 80C. Furthermore, the income of the HUF can be invested by the HUF and will continue to be taxed in the hands of the HUF.

Need help with estimating your taxes as an HUF? Our CAs can help you

Frequently Asked Questions

  • Who is the Karta of an HUF?
    The head of a HUF is called the Karta, he is the senior-most male member of the family.
  • Can a Woman be HUF Karta?
    Yes! Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF. However, the same has not been incorporated in the Income Tax Act as yet.
  • Who are HUF Coparceners?
    All the members of the Karta’s family can be members of the HUF. The male members are called coparceners, while the females are referred to as just members. The difference between the two is that any of the coparceners can demand partition of the HUF.The female members do not have this right in most parts of the country, except for some states like Maharashtra and Tamil Nadu that have allowed unmarried daughters to function as coparceners.
    The Hindu Succession (Amendment) Act, 2005 which came into force from September 9th September 2005 removed this gender discrimination by giving equal rights to daughters as sons.
    The daughters become the coparceners of their father’s families on birth in the same manner as sons and have the same rights as sons in the family properties.
  • Can a daughter claim a share in her father’s property where her father had passed away before the amendment made in 2005, giving equal rights to daughters and sons?
    No. Both the daughter and the father has to be alive on the date of the amendment for the daughter to get the benefit, irrespective of whether she has been married or not on that date. If the father has passed away before the amendment date, then she wouldn’t have been a daughter on the date of the amendment. Hence she cannot claim a share in father’s property.

    a. Are there any incomes which are not taxed as income of HUF?
    b. The following incomes are not taxed as income of HUF
    c. If a member transfers his self-acquired property to the HUF without receiving proper sale consideration, income from such property is not taxable in the hands of the HUF. It will continue to be taxed in the hands of the member.
    d. Personal income of the members cannot be treated as income of HUF.
    “Stridhan” is an absolute property of a woman, hence income from it is not taxable as income of HUF.
    e. Income from an individual property of the daughter is not taxable in the hands of HUF even if such property is vested into HUF by the daughter.

  • Are there any minimum number of coparceners required for an entity to be taxed as HUF?
    A HUF can be formed with just two members one of whom is a coparcener. But for an entity to be taxed as a HUF, it should have at least two coparceners. For instance, if HUF consists of only the husband and wife, then there is only one coparcener. So it will not be taxed in the hands of HUF except in the case where the funds are received on the partition of larger HUF. It will be taxed in the hands of a sole coparcener.
  • Should a HUF always be a resident of India
    It is not necessary that a HUF must always be a resident of India. In case the control and management of the HUF are situated outside India, the HUF would be a non-resident. Where the affairs of the HUF are managed from outside India, the HUF would be a non-resident.
  • Karta of HUF sits outside India. HUF is managed by the other members residing in India. Will HUF be a non-resident?

    The residential status of a HUF is determined not on the basis of where the Karta resides but on the basis of where the HUF is managed from. In this case, though the Karta resides outside India, the HUF is managed by members from India and hence the HUF will be a resident of India.

  • Can the members of the HUF and the HUF separately claim deduction under Section 80C?
    The HUF being a separate taxable assessee, can claim a deduction under section 80C. However, the member and the HUF cannot claim a deduction in respect of the same investment made or expense incurred.
  • Upon the demise of the Karta, who takes over the title ‘Karta’?
    Upon the demise of Karta, the eldest male member of the family becomes the Karta of the family. Even when the deceased Karta’s wife is alive, the eldest son or any other eldest male member of the family will take over that position.
  • What happens if the eldest male member of the family is an NRI?
    A HUF is considered to be a resident of India if the control and management of its affairs happen wholly or partly in India. In some cases, the Karta of the family may be non-resident. The resident status of the family will not change to be non-resident only because the Karta is a non-resident unless the decisions concerning the family are made outside India.