Understanding Hindu Undivided Family

HUF is not defined under the Income Tax Act but is covered under the Hindu law. By definition, HUF consists of all Individuals who are lineally descended from a common ancestors and also comprises of unmarried daughters.

Formation of HUF

  • Minimum two members are required to form a HUF, constituting a joint family.
  • A HUF is automatically formed when a person marries and start their family.
  • The Hindu law though does not govern Buddhists, Jains and Sikhs, it can be treated as a HUF for taxation purpose.
  • In HUF, the income generated belongs to the whole family, instead of a specific individual. Thus, then income is taxed in the name of HUF.

Benefits of HUF

  • One of the major benefits of the Hindu Undivided Family is that it is considered a separate legal entity.
  • This entitles HUF to obtain a separate PAN card and bank accounts in the name of the HUF.
  • Once a HUF is formed typically, the oldest member of the family becomes the ‘Karta’ and is provided with an additional exemption.
  • The tax slabs are lower when compared to that of regular corporates.

Taxation of HUF

  • HUF is eligible for deductions under section 80 and other relevant exemptions.
  • Allowed to take insurance policies for its members.
  • Investments is allowed from HUF income and returns from such investments are taxable.

Legal Formalities Involved

  • Form Corpus: A capital asset can be used to form the HUF. It can be any ancestral property, asset received as a gift from relatives or through a will.
  • Register a Deed: A deed is required on stamp paper declaring the formation of the HUF. It should include information of the Karta and the co-parceners. Once the declaration deed is made, the Karta can apply for a PAN card for the HUF as a separate legal entity.
  • Opening Bank Account: Once the PAN is allocated, open a bank account in the name of the Hindu Undivided Family.

Documents required for HUF accounts

  • Latest passport size photograph of the Karta/existing authorized signatories to the account.
  • Identity proof of the Karta/existing authorized signatories to the account.
  • Communication address proof of the Karta/existing authorized signatories to the account.
  • Present phone/mobile number and e-mail id.
  • PAN card (if not provided earlier).

How ASA helps you create HUF

  • Hiring someone to help you with the registration process can turn out to be a great stress reliever. It can help you in making your business more professional, and give you a clear understanding of the process involved.
  • We are here to help you with the entire process and make it easy and hassle-free.
  • We have a team of experts, who have been a part of this industry for a long time, and know all the rules and regulations and the documents required documents.
  • Our representatives are going to take up the registration process, so you can put your entire focus on the more important aspects of the business.

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