Meaning of Hindu Undivided Family (HUF)
In the eyes of income tax, Hindu Undivided Family (HUF) is a separate legal entity that also has a separate PAN. Every person is identified by his or her name. However, the Income Tax Department identifies any entity based on his/her 10-digit Permanent Account Number (PAN). That’s why every entity has a different PAN. If any person’s name is RAHUL, then there will be lakhs of people in India with the same name.
That’s why the income tax department has given everyone a unique ID and PAN. Similarly, when we make a Hindu Undivided Family (HUF), the PAN of the Hindu Undivided Family (HUF) is also different. Now, since the PAN is separate, all the benefits, all the tax exemptions, all the tax deductions, also come to the Hindu Undivided Family. When its PAN is different, its ITR is also filed separately. That’s why people can reduce their taxes by making a Hindu Undivided Family.
People included in Hindu Undivided Family (HUF)
The formation of any Hindu Undivided Family (HUF) is possible only after marriage. For example, there is a family consisting of Mr. Ram the husband, Mrs. Ram the wife, and their two children.
- Karta: As the name itself suggests, the one who does everything in the Hindu Undivided Family (HUF). In a family, the elder male person plays the role of the Karta. The Karta will manage all the things like creating the Hindu Undivided Family (HUF), signing the document for the HUF PAN Card and operating the bank account. Without his signature, neither any amount can be deposited nor withdrawal can be made. How much money is to be invested? All the decisions are made by the Karta.
Therefore Mr. Ram will play the role of Karta in this (HUF).
- Co-parceners: They have a right they demand partition whenever they want, they have the right in the property of the Hindu Undivided Family (HUF). Here it would not be wrong to say that those who have a blood relation with the Karta.
Therefore, the two children of Mr. & Mrs. Ram will play the role of Co-parceners in this Hindu Undivided Family HUF by birth.
- Members: They do not have any right to demand any share in the property. However, they can be a shareholder in the property. In simple terms, it can be said that in a Hindu Undivided Family (HUF), people who do not have a blood relation with the Karta are called members.
Therefore, Mrs. Ram will play the role of a member of this Hindu Undivided Family (HUF).
Hindu Undivided Family (HUF) formation
There is no need to create a Hindu Undivided Family (HUF) as it is automatically created after marriage.
Register Hindu Undivided Family (HUF) in Income-tax
To save tax from the Hindu Undivided Family (HUF), bringing it into existence and getting it registered with the Income Tax Department is considered the most important part of the process.
Three steps need to be followed for Hindu Undivided Family (HUF) registration.
#Step 1: Create a Hindu Undivided Family (HUF) deed
The deed is prepared on a Rs 100 stamp paper on which only the Karta signs.
#Step 2: Apply for PAN card for Hindu Undivided Family (HUF)
For a PAN card, the applicant files Form 49a online, in which information such as the applicant’s name, address, sources of income, PAN, Aadhaar, etc. is entered.
#Step 3: Open a bank account for Hindu Undivided Family
After receiving the HUF PAN card, the Karta can open a savings account in the nearest branch.
Apart from this, if a person wants to register his Hindu Undivided Family under the legal framework apart from the income tax department, then he has to attach the signed declaration of all the members and coparceners present in his HUF deed. Mainly this type of legal documentation is done more for (HUF) related to ancestral property.
Benefits of Hindu Undivided Family (HUF) Registration
When the PAN of Hindu Undivided Family is different, so everything of it is different. ITR is filed separately and its deduction is also different. Because HUF is treated as equivalent to individuals, all the benefits that an individual has are available to Hindu Undivided Family as well. So, you avail the benefit of tax exemption. Income up to Rs. 4 lakhs are allowed. So, Hindu Undivided Family are also allowed. Yes, here Hindu Undivided Family (HUF) do not get the benefit of 87a.
HUF can earn money from all sources of income, there are five heads of income tax, if they want they can earn income from all of them, and they can accept a salary. Because the (HUF) is not a real person in reality. They will get a salary from them as well. Apart from that, house property, capital gain, business, profit and gain business or profession, and other sources. They can have income in all these four heads.
Friends, Hindu Undivided Family (HUF) is the best tax planning tool under section 2(31) of the Income-tax Act, 1961. You can save your taxes with HUF registration.
For professional assistance with HUF registration, call us at 9958869427. We are happy to announce that E-Tax World is the leading choice for HUF registration services in India.