Chapters of Hindu Undivided Family (HUF) Registration in India

Chapter #1
WHAT IS HUF?

So, HUF, i.e., Hindu Undivided Family, is a separate tax entity.

Let us understand this with an example.

Suppose there are four members in the family of Mr. Ram: himself, his wife, and two adult children.

All four of them have PAN cards. However, Mr. Ram can form an HUF from the Income Tax Department’s point of view, and then instead of four members, there will now be five members from the Income Tax point of view.

This means that all five members can get the benefits that an individual can get, such as claiming the 80-C deduction and LTCG up to Rs. 1 lakh.

Suppose you are already aware of this and have already formed an HUF; also know that if you open a Demat account for an HUF, you can additionally apply for IPOs. Opening a personal demat account is just a matter of a few seconds, but HUF is a bit complicated as it requires some offline documentation work.

We wouldn’t say your process will be less complicated if you open your account with

E-Tax World, but you will receive on-call support from our team to help you with the process., but you will receive on-call support from our team to help you with the process. HUF registration is not a separate legal entity but a separate tax entity from the Income Tax Office’s point of view. HUF is not an entity where you can say it has a separate legal existence like it does in a company, LLP, etc. We are discussing this concept from the Income Tax point of view.

Chapter #2
MEMBERS OF HUF

“Who can form a HUF?”

Since the term is Hindu Undivided Family, Hindus, Jains, Buddhists, and Sikhs are eligible to form a HUF.

Now, if you belong to these religions, then “who in your family can become members of HUF?”

Here, the word “family” is used; “what is the smallest unit of a family?” You, your wife, and your children, where there is more than one. All of this will be called a HUF.

Now, if we go up in the family tree, above you are your father and your mother. Suppose you have two more brothers. Then you, your parents, and your siblings are all members of your father’s HUF.

So, in a larger HUF, there can be other smaller HUFs. So, when we say your father’s HUF, and your three brothers and one sister, if you and your brothers are married, then there is your father’s HUF and your further HUFs.

Now, when your children get married, a new HUF will be formed. This means one person can become a member of multiple HUFs.

There is also a doubt in this; many people ask, “Can a couple form a HUF?” Or should they have one child?

According to us, it does not matter because a couple can form a HUF. Nowhere in the law is it said otherwise. So, there should be two persons in a HUF who are running as a family and who are Hindus.

“What do we call the manager of a HUF?”

The manager of a HUF is called the Karta, the most senior male member of the family. Suppose you have formed a HUF; then out of your wife and children, you will be called the Karta.

If the Karta is ill or unable to perform his duties for any reason, whoever is the next senior member will be made the Karta.

Members of a HUF are divided into two categories: ‘coparceners’ and ‘members.

” What is the difference between “coparcener” and “member” in a HUF?”

In your father’s HUF, you are a member and a coparcener, but your wife is just a member and not a coparcener.

So, “What difference does it make?”

The property of HUF is undivided, so all coparceners have a share in it. Even members have a share in it, but only coparceners have the right to ask for a partition of the property.

No member can ask for a share in the property of HUF. For instance, your wife cannot ask for her share in her property of the HUF. But you and your brother can ask for your shares as you are coparceners.

So, this is one of the main differences between coparceners and members.

Can a woman remain a coparcener in her father’s HUF even after marriage?

A major change was made in the Hindu Succession Act in 2005, which clearly stated that even after marriage, the woman will continue to be a coparcener in her ancestral HUF. This means that she has the same right to the property as her brothers. So, you must have understood why HUF has so many benefits.

Chapter #3
REGISTRATION OF HUF

HUF is a natural creation, but the point is that you want to bring it into existence for income tax. So how?

#Step 1: Create a Hindu Undivided Family (HUF) Deed

The details of the Karta and his family are used to draft the HUF deed.

The HUF deed requires ₹100 in stamp paper.

The HUF deed and the stamp paper must be signed by the Karta and notarized.

#Step 2: Apply for PAN Card for HUF

Form 49A (Application for Allotment of PAN) shall be filed to apply for the HUF PAN card.

The Karta shall put his signature in three places on Form 49A and courier the documents listed below to “Income Tax PAN Services Unit (Managed by Protege eGov Technologies Ltd.) 4th Floor, Sapphire Chambers, Baner Road, Baner, Pune – 411045”:

1. a) Form 49A (Original)
2. b) HUF Deed with Stamp Paper (Photocopy)
3. c) Self-attested PAN and Aadhaar Card of the Karta (Photocopy)

#Step 3: Open a Bank Account for HUF 

After obtaining the HUF registration includes a PAN card, Karta can open a savings account at the nearest branch.

You can also obtain the TAN, GST, etc., which you can avail from the HUF if you are running a business in HUF.

Now we have done all the HUF registration and everything, but now we will introduce capital into the HUF.

Chapter #4
INITIAL CAPITAL/INCOME IN HUF

So, there are three main ways to generate income in HUF:

1. Ancestral Property (पैतृकसंपत्ति): The first is ancestral property that you can take in the name of HUF.
2. Gifts: You can take gifts up to Rs.50,000 from your relatives; above this limit, there will be certain tax implications on it. So, when you gift to your HUF, it will generate income from it. But Section 64 of the Income Tax Act states that the fund that you have deposited in your HUF, and the income that is generated from that fund, is not HUF’s income, but yours. So, this means this is not the full planning.

So, a person outside HUF registration should gift me; then clubbing will not be done. Then how can it be an outsider? Assume you, your wife, and your children are a HUF.

Now, “if you ask me that your father-in-law wants to gift Rs. 5 Lakh to your HUF, should I take that?”

Then I will say yes, you can take that as there will be no clubbing in this case. But you have to understand that if HUF takes a gift from its members, then the HUF will not be liable for tax, as money is coming from members. But if HUF takes a gift from a non-member, like your father-in-law here, then it’s taxable. So, for that, first, you have to pay tax on Rs. 5 Lakh. From Rs. 5 Lakh, Rs. 2.5 Lakh is already exempt, the other Rs. 1.5 Lakh we will manage through 80C; so, for Rs. 4 Lakh, there will be no tax, and for the remaining Rs. 1 Lakh, the tax will be Rs. 5,000.

In just Rs 5,000, you got a capital of Rs. 5 Lakh; is this not a bad proposition?

3. Business Income: Assume that you have a big family, including your brother and father, together you are running a medical agency, and you are also doing social work, but as a family, you are manufacturing those medicines, marketing them, etc.

Then this business is run by the whole family, so such a kind of business can be shown as HUF business. Many people who have already formed a HUF registration make the mistake of noting the commission in the books, as the income tax department does not accept it.

So, we suggest that in HUF update, you show your interest income, rental income, business income, dividend income, and capital gain income; even you can buy and sell real estate in the name of HUF. But generally, try to avoid commission income in the books.

Chapter #5
PURCHASE OF ASSETS IN HUF

How you have generated capital and income in HUF and want to purchase some assets for investment; “then what assets can you buy in the name of HUF?”

As you have received money in the bank, now you can buy land, shares, mutual funds, etc. This means the assets that I can buy as an individual, HUF can also buy those assets. You can also buy a car, apply for an IPO, etc.

Chapter #6
TAX ON HUF

“How can you save tax on HUF?”

Note that the tax slab of HUF is the same as that of an individual.
(Latest Income Tax Slabs FY 2025-26 after Budget 2025)

Apart from this, HUF can also claim deductions like an individual, such as 80C, Mediclaim, home loan, etc., with the condition that those expenses are incurred by the HUF.

The only major difference here is that the 87A rebate is not available to HUF. One of the major parts of the 80C rebate is PPF.

“Can you invest in PPF though HUF?”

You may contribute to members’ PPF as a HUF. That can be a kind of contribution from your side to your members. However, the fund of the HUF is a consolidated fund, meaning all members have rights over that.

So, if you put the HUF’s fund into a member’s PPF, the first thing I want to say is that HUF cannot have its own PPF.

So now, if the HUF says that it deposited in its member’s PPF and wants to claim 80C until the law specifies this, we will not advise this to be done.

Chapter #7
TAX SAVING

Let’s take Mr. Ram as our example.

• Income from Salary: 12 lakhs
• Income from Property: 12 lakhs
• LTCG from 2 Demat accounts: 3 lakhs

Now let’s take an example when Mr. Ram has not formed a HUF; how much tax does he have to pay?

As a fictitious example, the value of tax varies according to your conditions. It is important that you only take income in your HUF that is allowed, such as parental income and gift income. When multiple sources of income are generated, you can consider HUF.

If you are only a salaried person, then create your HUF only when you want to apply for multiple IPOs and to increase the probability of getting them. Otherwise, if multiple sources of income are generated or you are receiving a large gift, then HUF is for you.

Chapter #8
HUF PARTITION

Now, “once you have formed a HUF, can it be dissolved or broken?”

HUF is not dissolved; only a partition can be done.

This is one of the disadvantages of HUF. The partition is of two types. To dissolve means to end the HUF, which is not applicable here. So, HUF is partitioned, and it is separated. Assume that a father has three children.

They all want to be separated to live in peace. Income tax recognizes the complete partition of HUF, but not a partial partition. For that, a simple partition deed can be written.

The partition of HUF is not a taxable event in Income Tax Law, so there are no worries.

Chapter #9
LOAN BY HUF

“Can HUF take a loan?”

Yes, financial institutions grant loans against the HUF. When they grant a loan to HUF, they make the Karta or main co-parceners co-applicants because HUF is not real.

It is also not a juridical person, so they must include co-applicants. If HUF’s assets need to be mortgaged, they must appraise the income of HUF and accept EMIs from HUF’s account.

If the HUF fails to pay the loans, then the co-applicants will be liable for it.

Can HUF take a loan from its members if it wants to increase its business?

Yes, a HUF can take a loan from its members and pay them interest on the loan, which will be deducted from HUF’s income.

Chapter #10
HUF Partner

“Can a HUF become a partner in a partnership firm and LLP and a director in a private limited company?”

No, as a HUF is not a real person, it cannot become a partner or a director.

However, a HUF can be a shareholder in the company, and because it is a shareholder, it can nominate a person for the post of director, whether in an LLP or a normal partnership firm. On behalf of the HUF, any coparcener or member can be made a partner.

Chapter #11
WHO SHOULD MAKE HUF?

We can advise those to form an HUF who have parental property or multiple sources of income. For example, if my annual income is around Rs. 15 lakhs, and another Rs. 5 lakhs come into my income, it could be taxed at a 30% tax rate, which my father-in-law wants to gift me.

Then we will ask him to gift that to my HUF, so if you don’t have multiple sources, then there is no point in creating an HUF. Multiple IPOs can increase the probability of getting more IPOs, and they can be formed through your planning. If you do anything like this, we would simply advise people that whenever you do any financial transaction, whether from any individual or HUF account, please try to file your returns. If you opened a HUF account and conducted a few transactions of Rs. 1.5 lakhs to 2 lakhs, after some time, you might receive a notice under section 148A.

Then people will think they have committed a crime by opening an HUF account. So, we would say it is better to comply with regulations to avoid these problems.

If you have any queries or suggestions, please contact us at +91-9958869427.

Contact for HUF Registration Services In India