India is the world’s most populous democracy. Traditional Indian society is sometimes defined by social hierarchy. Family values are important in the Indian tradition and considering this there is a concept of HUF (Hindu Undivided Family). Let us understand what HUF is and how it can be formed / created?
Hindu Undivided Family (HUF) is not defined under the Income Tax Act but is covered under the Hindu Law. HUF consists of all individuals who are lineally descended from a common ancestor and also comprises of unmarried daughters. HUF is not formed by a contract but by the status of a family i.e., it is created automatically in any Hindu Family. Having a common ancestor is a prerequisite to form a HUF.
Minimum two members are required to form a HUF, constituting a joint family. A HUF is automatically formed when a person marries and start their family. It is not compulsory for the couple to have kids. Owning an estate or a property is also not mandatory to form a HUF. The income is then taxed in the hands of the HUF. Naturally, HUF is treated as a distinct entity for tax purposes. HUF need to have a separate PAN card and need to file separate IT returns. Also, Hindu Undivided Family (HUF) helps in saving tax.
The HUF Deed is a formal written document on a stamp paper stating the name of the karta and Co-Parceners of the HUF. The eldest male member of the HUF becomes the Karta. The name of the HUF on the HUF Deed is usually the name of the Karta followed by the word HUF. Creating a HUF Deed is not mandatory but it’s recommended.
A HUF is a separate legal entity, different from its members, so it is required to apply for a separate PAN Card. An application for the same is required to be made online / manually.
An HUF is required to open a Bank a/c, in which it receives all the payment. At the time of opening of HUF, the HUF would also be required to have a Rubber Stamp of the HUF and all the documents of the HUF shall be properly stamped. This rubber stamp should be rectangular in shape as round stamps not allowed.
Also read: Benefits of HUF Registration
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