The HUF (Hindu Undivided Family) also includes certain castes and religions, primarily Hindus, Sikhs, Jains, and Buddhists. Families belonging to these specific castes and religions are permitted to obtain a separate PAN card, called the HUF PAN card. From an income tax perspective, the HUF PAN card identifies not just one individual but a joint family, for which the person responsible for making all decisions and actions is called the Karta. Before obtaining a PAN card for a HUF, a legal document is prepared among the family members, which includes the identities of the family members and coparceners, details of ancestral movable and immovable property, and necessary rules. This legal document is called the HUF Deed. In this blog, we will discuss the conditions for HUF registration, documents required for HUF registration, preparation of HUF deed format, step-by-step process of HUF registration, and opening a bank account for HUF.
"Conditions for HUF Registration"
It is important to know these things before HUF registration;
The date of marriage of the Karta is considered the date of formation of the HUF, is a HUF can only be formed after marriage.
HUF registration requires a minimum of two or more members and coparceners. An HUF can exist for up to four generations.
Not all castes in India are eligible to form a HUF. Only Hindus, Jains, Buddhists, and Sikhs are eligible to avail the benefits of a HUF.
A HUF cannot earn salary, commission, freelance work, or any other income that is only possible for a single individual.
A HUF requires a corpus to earn income from business, capital investments, capital gains, interest, and rent, which can be generated through family inheritance, gifts from relatives, and other legal means.
"Documents required for HUF registration"
According to the checklist, these documents are required to HUF registration:
The HUF deed is a legal document prepared on stamp paper. It contains the name of the HUF, the identity of the family members and coparceners included in the HUF, the terms and conditions governing the management and operation of the HUF, and details of the corpus, gifts, loans, and movable and immovable assets, as per Hindu law.
PAN card, Aadhaar card and any one proof of the Karta’s date of birth:
(Birth Certificate / Voter ID / Passport / Driving License / Class 10 Mark Sheet)
Date of marriage of the Karta (Marriage certificate not required)
An active email ID and mobile number are required in the HUF PAN card application form.
The reason for HUF registration and the activities to be undertaken by the HUF in the future disclose the sources of income of the HUF.
"Preparation of HUF Deed Format"
The following information is included while preparing the format of HUF deed in Word file;
The Karta taking the oath identifies themselves and verifies all the information and rules stated.
To establish the identity of the HUF, a name is given by adding the word ‘HUF’ to the Karta’s name.
The names, addresses and relationship of the members and coparceners of the HUF with the Karta are disclosed.
The family’s ancestral property and the legal sources available under Hindu law and the Income Tax Act are declared.
HUF is allowed to receive gifts, whether movable or immovable, including money, securities or property, from its members or relatives specified under the Income Tax Act and such receipts form part of the corpus of the HUF.
An HUF may obtain interest-free or other loans or advances from family members coparceners, or third parties, subject to the terms and conditions of the agreement, and legal compliance. The income generated by such loans will be assessed in the hands of the HUF under the Income Tax Act.
HUF can carry on business, profession, investments including shares, securities, fixed deposits, mutual funds, real estate and other legal economic activities for its own benefit.
- Applying for a PAN card for the HUF.
- Opening and operating bank and demat accounts in the name of the HUF.
- Filing income tax returns, replies, appeals, and representations.
- Authorizing GST registration, MSME (Udyam) registration, and other necessary statutory registrations.
- Signing cheques, applications, contracts, and all related documents on behalf of the HUF.
Under Hindu law, the date of marriage of the Karta is considered the date of formation of the HUF, which exists as a Joint Hindu Family.
The place and date of signing are mentioned.
The Karta signs the HUF deed to verify the details mentioned in it.
Legally, a ₹100 stamp paper (depending on the state) is purchased, and all documents are notarized by a certified lawyer.
"Step-by-Step Process of HUF Registration"
The following steps must be completed for HUF registration process in India;
Prepare a HUF Deed Format as per Hindu Law and Income Tax Act.
Acquire the stamp paper according to the state regulations (standard 100 rs.) and have it notarized together with the HUF deed..
Fill out the PAN card application form from the official Income Tax website and pay the applicable fees. After the fee is paid, an acknowledgement generated form will be issued.
Submit via courier all the documents (PAN card application form, identity, address and date of birth documents of the Karta, and a copy of the HUF deed) signed by the Karta to the Income Tax PAN Service Office.
After receiving the HUF deed and PAN card, make a rubber stamp in the HUF’s name from a nearby rubber stamp maker or online. A rubber stamp is required when opening a bank account for the HUF.
Open a bank account at any local and nearest branch using the HUF PAN card and the HUF deed.
Register on the portal to file income tax returns (ITR) if required.
You can apply for Udyam Registration and GST Registration for HUF as per requirement.
"Opening a bank account for HUF"
The following documents are required to open a bank account for HUF;
PAN card is considered the most important identification of HUF.
Through the HUF deed, the bank get information about the members, coparcener and assets of the HUF.
Karta details are required for operating the HUF account, bank KYC, identity and address verification and legal compliance requirements.
Passport-sized photos of the Karta
The document is required to authorize the Karta to open and operate a bank account.
To open an account, the bank requires a cheque from any active account of the Karta, the amount mentioned in which is reflected in the HUF account after the account is opened.
The bank needs this to authenticate the documents.
Email ID and mobile number are required to contact the bank. This is necessary to keep track of all transactions taking place on the account.
To open a demat account for a HUF, bank statement of the HUF’s savings or current account are also required.
"HUF deed format"
Format of HUF deed creation
- Oath by the Karta: I, _____(Name of Karta) son/daughter of Shri_____(Karta’s Father Name), aged ___ (Karta’s age) years, resident of ____(Karta’s Address as per Aadhaar card/Voter Id/Passport) being the Karta of my Hindu Undivided Family (HUF), do hereby solemnly affirm and declare on oath as under:
- Declaration of HUF: That I am the Karta of a Hindu Undivided Family known and styled as: “______” (Name of HUF).
- Members and coparceners of HUF: That the following are the coparceners and members of the said HUF as on the date of this affidavit:
S. No. Name Address Relationship - Source and nature of HUF property/asset:_________________________________________________________________________________
Gifts to HUF: _____________________________________________________________________________________________________________
Interest-free Loans and Borrowings: ______________________________________________________________________________________
Nature of business and investment: ______________________________________________________________________________________
Powers of Karta: _________________________________________________________________________________________________________
Date of Existence: That the HUF has been in continuous existence since DD/MM/YYYY (Karta’s Date of Marriage), as a joint Hindu family.
Place: __________
Date: ___________ Deponent
Verification
I, _____ (Name of Karta), the above-named deponent, do hereby verify that the contents of this affidavit are true and correct to the best of my knowledge and belief and nothing material has been concealed therefrom.
Verified at ________ on _________. (Place and date of notarization)
Deponent
“The draft of HUF Deed is prepared keeping in mind the legal terms and conditions, hence E-Tax World would advise you to get the work of preparing HUF Deed format done by an experienced and knowledgeable person.”
Conclusion:
With proper guidance and legal compliance, you can complete the HUF registration and HUF deed creation process. Under the Income Tax Act in India, HUFs are subject to the same income tax slabs as individuals. HUFs prove to be a valuable tool for tax savings and efficient management of family ancestral property.