What is HUF Deed/Affidavit?
The HUF Deed is viewed as a vital document for registering an HUF. HUF registration requires acquiring a PAN card and drafting a HUF Deed. Subsequently, a bank account is established, and the processes associated with transactions commence. Certain individuals refer to the HUF Deed as an affidavit. It includes the names of the Karta and other family members, the father’s name, the address, and the marriage date of the Karta. A stamp paper worth 100 rupees is also necessary. The HUF Deed/Affidavit and the stamp paper contain only the signature of the Karta. A notary public subsequently authenticates both documents. Hence, the HUF Deed/Affidavit is prepared.
How to Make HUF Deed?
To draft a correct and legal HUF deed, it is important to consult an experienced tax expert or chartered accountant who can provide assistance. When drafting a HUF deed, it is crucial to provide accurate and precise information to eliminate any potential errors. The names and addresses of the Karta and HUF members must always be provided according to the information on their current identity proof.
What key aspects must be included in the HUF deed?
Constitution of the HUF: This must be confirmed by the Karta, who asserts that I am the Karta of our Hindu Undivided Family (HUF), known as “(Name of Karta) HUF,” which came into existence on (date of marriage) and exists as a separate entity under Hindu Law.
Name of HUF: Even though a family may not possess an official name, it is essential to establish one for income tax purposes, as it must have an identity under which the HUF is recognized, with the Karta playing a key and significant role. It is highly recommended to follow the standard practice (Karta’s name + HUF) to avoid compliance issues with the Income Tax Department and banks.
Let us understand this with an example: A married individual named Honey Jain aims to establish a HUF as Karta, necessitating a PAN card and a HUF deed. Consequently, his HUF will be referred to as “Honey Jain HUF.”
Members of the HUF: Stating the Karta and members/coparceners of the HUF in the deed is a significant step. Since they are all members of this family, they have the right to document their presence here.
Address: The deed should list all HUF members’ names, along with their accurate and up-to-date addresses. This is not contingent upon your current location, but rather on the address, but instead on the address stated on your identification papers, so it ought to rely on your identity verification.
Relation with Karta: The relationship of all members of the HUF to the Karta should be mentioned. This finalizes the structure of the family tree and serves as a crucial element in comprehending all the individuals within this family.
Age of Karta: This is to guarantee the accuracy and dependability of the affidavit, to demonstrate that the individual swearing the oath is mentally competent and comprehends the facts, particularly when age influences legal issues (such as inheritance, identity, or cases concerning minors), and to assist in deterring fraud or misrepresentation by validating age.
Declaration of Intention: The Karta declares that I, as the Karta, along with the family members, declare my intention to form and continue this HUF as a separate legal entity, distinct from its individual members, for all purposes, including ownership of property, taxation under the Income Tax Act, 1961, and other legal purposes permitted under Hindu law.
Powers of the Karta: The Karta is the most senior member of the HUF; thus, the Karta may have full authority to manage and operate the affairs of the HUF, including:
- Opening and operating bank accounts in the name of the HUF;
- Making and managing investments in the name of the HUF;
- Receiving gifts and income on behalf of the HUF;
- Completing and signing all necessary documents, forms, and declarations related to the affairs of the HUF.
Adherence: The word “family” is highlighted most significantly in the “Hindu Undivided Family” (HUF). The Karta and members of the HUF may outline important terms or significant information in the deed, considering the Income Tax Act. This aids in guaranteeing adherence.
Receipt of Gifts/loan: A Hindu Undivided Family (‘HUF’) is able to receive gifts from relatives as per section 56(2)(x) of the Income Tax Act and also take interest-free loans from its relatives and mention the same in the HUF deed.
Source of Corpus: The Karta and members can share information about the HUF’s initial corpus here, should they choose to do so. This contribution represents the initial capital of the HUF and can be recorded as its corpus in the HUF’s accounts.
Date of Incorporation: The establishment of a HUF is usually dated from the date of the Karta’s marriage. Therefore, the date of marriage is considered the date of creation of the HUF.
Change in Karta: The Karta may also declare in the HUF deed that in the event of his death, incapacity, or inability to act as Karta, the next eldest coparcener of the family, in accordance with Hindu law and the mutual consent of the family members, will assume the role and responsibilities of the Karta of the HUF.
Continuance of HUF: The Karta may declare that the HUF will continue to exist as a separate entity despite any change in the composition of its members, except where the entire partition has been duly effected and recorded in accordance with the law.
Place and date of signing: The date on which the PAN card application is submitted or the stamp paper is being acquired will be indicated here. The mention of a place is based on the Karta’s address as per identity proof.
Stamp Paper: A HUF Deed requires stamp paper worth rupees 100. It should also be certified by a recognized notary public, signifying legal verification.
Signature: The HUF deed is usually signed by the Karta.
Is ancestral property declared in the HUF deed?
Ancestral property refers to the property inherited by an individual from any of his three immediate male ancestors, namely his father, grandfather, and great-grandfather. Hence, property inherited from any other relative is not regarded as ancestral property. Ancestral property is an essential element of a Hindu Undivided Family (HUF) and must be specified in the HUF deed; however, the HUF arises automatically when ancestral property is passed down through generations (father, grandfather, great-grandfather), and the deed (typically for banking or tax reasons) simply confirms its existence and enumerates members, rather than forming the HUF anew. The inherited characteristics (from before 1956 or through specific descent) are what classify it as HUF property, rather than the deed alone.
Which family members can be part of the HUF deed?
A Hindu Undivided Family (HUF) is a family traced back to a single male ancestor, consisting of the Karta (head), his sons, daughters, grandsons, granddaughters, great-grandsons, and great-granddaughters (all coparceners), and their wives (members). It includes an ancestor and all his descendants. A HUF may consist of at least one and as many as four generations.
If an individual serves as the Karta (head) of their HUF, their parents are unable to join his HUF, since the Karta is acknowledged as the senior member of the HUF. However, the same son will be eligible to join the HUF deed created by his parents.
Is the source of income of the HUF mentioned in the deed?
After establishing the HUF deed, an application is submitted for a PAN card, which acts as essential identification for opening an HUF bank account and for tax-related matters. Only at that point can any transaction or income-related activities commence. If the members of the HUF consent and desire this, the HUF deed can state the activities that the HUF plans to pursue in the future, which will provide income for the HUF. This may involve business, investment, interest, or rent, among others.
How many HUF deeds can be created within one family?
Creating an HUF deed means HUF registration, where it is registered with the Income Tax Department for the purpose of tax benefits or division of property. All married individuals in the same family are eligible to create their own separate HUF. They can create a separate HUF deed, apply for a PAN, open a bank account, file HUF income tax returns, and receive income tax benefits.
Can a woman act as the Karta in a HUF deed?
Yes, in India, a woman also has equal rights as a man, under which a woman can become the head of the family in the absence of a senior male member. In 2016, a ruling by the Delhi High Court determined that the oldest female member of a Hindu Undivided Family can serve as its ‘Karta’ (manager).
Also read- HUF registration services in India
About Author:
Honey Jain
(Tax & Legal Consultant)
Honey Jain, the founder of the leading tax consulting firm “E-Tax World,” is a distinguished Tax & Legal Consultant dedicated to making the intricate realm of taxation easier to understand through his informative and valuable blog.
E-Tax World is India’s leading consultancy firm that offers hassle-free HUF registration from the comfort of your home for just ₹2,000. This includes the HUF deed/affidavit, HUF PAN card, and courier charges. E-Tax World completes the entire process online, and it takes approximately six working days. It’s worth noting that E-Tax World completes the highest number of HUF registrations across India each year. This service is offered in all states of India.