HUF Registration Process & Features in India
Creation of HUF
HUF stands for Hindu Undivided Family wherein the Income
that is being earned belongs to the whole family and not to any specific
individual. As the Income is being generated in the hands of the whole family,
this income cannot be taxed in the hands of the family but is taxed in the
hands of the HUF. And, therefore HUF is considered a separate entity for the
purpose of the Income Tax Act, and the HUF has a separate PAN Card and a separate
income tax return is filed for the same.
A HUF automatically comes into existence when a person gets
married and starts his family. It is not necessary that this new family should
also have kids. On the day when the bride and groom get married, they have formed a
HUF.
Although a HUF is automatically formed at the time of
marriage, it is always advisable to have a written agreement as the Banks and
Income Tax Dept asks for the HUF Deed. It is not necessary that HUF is created
on the day of marriage itself and can be created at any point of time in the future.
Creating a HUF is not a difficult task and the steps
involved in creating a HUF are explained below.
Registration Of HUF
To create a HUF, 3 things are required i.e.
Step 1: Create HUF
Deed
Step 2: Apply for
HUF PAN Card
Step 3: Open Bank
Account of HUF
These 3 steps have been explained below in detail
Step 1: Create HUF Deed
The 1st Step in creating a HUF is to create 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.
A declaration is also provided by each member of the family
where they declare the name of Karta and also state that –
Karta has the authority of the accounts vested in his hand
That the members are the only members of the HUF
The Karta holds the right to govern all the transactions of
the HUF accounts on behalf of the members.
The names of the members of the HUF and the name of the HUF
are also required to be stated in the HUF Deed at the time of the creation of HUF.
The name of the HUF is usually the name of the Karta followed by the word HUF.
For eg: If the Karta of the HUF is Suresh Kumar, the name of his HUF would be
Suresh Kumar HUF.
It also states the capital with which the HUF has been
initiated. There are various sources through which Capital can be introduced into
the HUF.
Recommended Read: How to create
Capital in HUF
The format of a HUF Deed is given in this link.
Most notary public agents have such formats and help in creating HUF at a
nominal fee. The fees charged by notary public agents for creating a HUF Deed
Format are a few hundred only.
Creating a HUF Deed is not mandatory and PAN Card and Bank
Account can be opened without HUF as well but it’s always better to have a
written document in place.
Step 2: Apply for HUF PAN Card
As a HUF is treated as a separate entity different from its
members, a HUF is required to apply for a separate PAN Card. An application for
HUF PAN Card is required to be made in Form 49A which can be furnished online
as well as manually. HUF PAN Card Application can be made online through this
link: https://tin.tin.nsdl.com/pan/form49A.html
Once the PAN Card has been allotted, the HUF would be
required to file separate Income Tax Returns and can therefore claim the benefit
of income tax slab rates and also claim most of the
income tax deductions which are available to an Individual. The application for
PAN Card and the Income Tax Return would be signed by Karta.
Step 3: Open HUF Bank Account
A HUF is also required to open a Bank Account in which it
will receive all payments. A HUF Account can be opened in any bank account.
At the time of opening of the HUF Bank Account for the creation of
HUF, the HUF would also be required to have a Rubber Stamp of the HUF and all
documents pertaining of the HUF should be properly stamped. This rubber stamp
should be rectangular as Round Stamps are now not accepted (RBI Circular)
Once all the above 3 steps are completed i.e. the HUF Deed
has been created, PAN Card has been allotted and the Bank Account has opened,
the HUF is now a separate legal entity and can start receiving payments and the
amounts received in the name of the HUF will not be taxed in the hands of the
individual members of the HUF.
Members of HUF
As HUF stands for Hindu Undivided Family,
individuals belonging to other religions are not allowed to form HUFs except
Jain and Sikhs who can create HUF even though they are not governed by the Hindu Law.
A 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.
Co-Parceners: Coparcener is the person who has the
right to demand a share of the property of the 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-parcener extends to four degrees down the family hierarchy in the following
manner:
1st degree: Holder of ancestral property for the first time.
2nd degree: Sons and daughters
3rd degree: Grandsons.
4th degree: Great grandsons.
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