Are you interested in acquiring an HUF PAN card and creating an HUF deed? Would you like to reduce your taxes through an HUF? Do you want to establish a Demat account in your HUF’s name and engage in share market trading? If so, this article could be very beneficial for you—Like How to open your HUF demat account ……please read it through to the end.
What is HUF?
H means “Hindu.” This word draws attention to a religion. All the people belonging to the Hindu religion can be a part of an HUF or can get a PAN card for it.
U means “Undivided.” This word draws attention to the unity and integrity that cannot be divided or separated.
F means “Family.” This word draws attention to a group where two or more people live their lives together.
How to Form HUF?
For HUF registration, first, the HUF deed/affidavit is prepared. The deed contains the names of the Karta, all co-owners (participants), and a statement from family members confirming the establishment of the HUF, as well as details about the family members’ contributions. After this, one has to apply for a PAN card for the HUF with the help of an expert and send it along with the relevant documents to the Pune office for verification. After receiving the PAN card, one can open a savings account in the name of the HUF in any nearby branch. All transactions related to the HUF will be done in this account, which will be separate from the Karta’s personal account.
How are a trading account and a Demat account different from each other?
Demat Account: –
A Demat account, known as a Dematerialized account, stores your shares electronically. This account transforms your shares from a physical format to a digital one. It serves as a storage space for all your investments, including shares, bonds, futures and options, exchange-traded funds, mutual funds, and other securities. The bank delivers the Demat account number to the account holder once the KYC procedure is finished. You can open a Demat account without needing an initial deposit or balance. Additionally, your account can remain inactive with no minimum share requirement.
Trading Account: –
A trading account allows you to buy and sell stocks from various companies on the stock market. You can utilize your trading account to conduct transactions involving the purchase and sale of shares. Demat accounts and trading accounts are complementary and enable each other to operate in concert. From this, you can understand that all the shares in your trading account are kept safe in your Demat account. You can access your trading account anytime you wish to sell those stocks. An account number is also issued for this account for trading in the stock market.
Ways to Establish a Demat Account for HUF – A Comprehensive Step-by-Step Guide
Hindu Undivided Families (HUFs) offer a clever approach to oversee family investments while also minimizing tax obligations. Being acknowledged as separate entities under the Income Tax Act, HUFs enjoy rights similar to individual taxpayers when it comes to trading and investing through Demat accounts.
As is clear from the name HUF, it is made up of a family, so the assets present in it belong to the whole family, which wants to expand or, in other words, earn income from them. For this purpose, a Demat account proves to be a good option through which they can invest in the stock market; if the investors are well-versed in the markets, then they can earn good profits from it. Additionally, there has been increasing interest from families in managing wealth through the HUF structure, which has resulted in a surge of Demat account openings in this sector.
What does a HUF Demat Account entail?
The members of a Hindu Undivided Family (HUF) are free to open a Demat account and invest in bonds, mutual funds, and equities in the stock market under its functioning and structure, under the leadership of the Karta. The Karta is fully responsible for operating the Demat account of the HUF and making decisions. The Karta has full authority to manage this account. It is the responsibility of the Karta to make the right decisions for the property of the HUF and provide it with an opportunity to grow and earn profits, which also includes the permission of other family members.
The HUF is considered a separate taxable entity with its own Permanent Account Number (PAN) and a separate Income Tax Return (ITR) filing. The Karta has signed all the documents required for the HUF Demat account. This system differs from individual Demat accounts, where one can establish an account and conduct trades or hold securities independently, rather than on behalf of the family or as a collective group.
Important Advantages of Establishing a HUF Demat Account
A HUF can earn a lot of benefits after opening a HUF Demat account.
Tax efficiency – HUFs can benefit from tax advantages since they are recognized as a distinct entity, which reduces the overall tax liability of the family. They are taxed according to the same Income Tax slab rate as personal taxpayers. This allows for greater tax savings through income splitting.
Consolidation of assets – Investments can be overseen together for the family using one Demat account, making it simpler to monitor.
Joint Partnership – Through the Demat account, all the members of the HUF get an opportunity to participate in the business.
Which companies open Demat accounts in India?
Currently, there are many companies providing Demat account services in India; the main ones among them are Zerodha, Upstox, Angel Broking, and Kotak Securities, etc. However, you may have to pay annual maintenance charges to them as per their policies.
Documents required to open an HUF Demat account
The documents required for opening an HUF Demat account are as follows:
- PAN card of HUF
- PAN and Aadhaar card of Karta
- Cancelled cheque
- Latest bank statement
Final Words
HUF Demat accounts represent intelligent and tactical investment choices for family members aimed at collaboratively enhancing and overseeing wealth. They are excellent options for streamlining family investments across different securities while possibly reducing tax liability.
Best HUF Registration Consultants Online in India through Online
E-Tax World is the only tax consultancy firm in India that provides the fastest, easiest, simplest, hassle-free, and lowest-cost HUF registration facility. You can contact us from the comfort of your home or office and receive your HUF PAN card and HUF deed at your address within just 5 working days without going anywhere.