As people are all aware, the Income Tax Act treats Hindu Undivided Families as a separate legal entity. HUF is not permitted to conduct business under its own name using the bank accounts of its members (Karta and co-parceners). Since HUF is not a real person and cannot sign on its own behalf, a rubber stamp with Karta’s signature is required. This article focuses on opening a bank account for HUF.
The HUF stand for Hindu Undivided Family under Hindu Law and is made up of all living individuals who share a common ancestor, as well as the wives and daughters of those individuals.
According to a section of the Income-tax Act of 1961, for the assessment purposes under the Act, the Hindu Undivided Family is considered as a “person.” HUF is an independent tax-filing entity with its own Permanent Account Number (PAN). An HUF is made up of the “karta,” who is often the oldest person or family head, and the other family members.
The HUF’s daily operations are managed by the “karta.” Children are coparceners of their father’s HUF. When a daughter marries, she continues to be a coparcener in her father’s HUF while joining her husband’s HUF. Although Jain and Sikh families can create HUFs even if they are not governed to Hindu law.
The required documentation to open a bank account for an HUF:
Only individuals authorized by the Karta may manage the bank account, which will be registered in the names of HUF and the Karta. An HUF bank account is a current account, hence the bank will charge you more fees for it.
An HUF is taxed independently from its members and co-owners since it is a separate legal entity. Therefore, the HUF can also claim the deductions and exemptions under Section 80, which reduces individual tax burden. The same goes for reimbursements for loans taken out, rent paid, and other expenses. Because of this, chartered accountants often advise all married Hindu couples to create a HUF. HUFs often pay 30% less tax than other taxpayers. HUFs can be created by Jain, Buddhist, and Sikh families as well as by Hindus. Hindu Undivided Families (HUFs) were originally recognized as a separate entity for taxation in 1917. And as a result, many families have came up with the relaxation from taxation over the years.
Regular tax payment is important for being a law-abiding citizen. However, it doesn’t mean you can’t take advantage of the various tax breaks the government offers. You can maximize your long-term tax benefits by establishing a HUF.
A family must have a minimum of 2 co-parceners in order to be considered as an HUF.
Daughters are permitted to join HUF as coparceners. In 2005, the Hindu Succession Act, 1956, was amended to include the allowance of daughters.
Kerala does not recognize HUF. The Kerala State Legislature abolished it in 1975 with the Joint Family System (Abolition) Act.
Muslims cannot form HUF. HUF can only be formed by Hindus, Sikhs, Jains and Buddhists.
No. It is not possible to open a Personal Provident Fund account under HUF’s name. HUF can make contributions to its members’ PPF accounts and receive tax benefits.
Yes, just like an individual trading account, HUF Karta can trade and invest in the stock, commodities, and currency markets. On the name of HUF, a trading and demat account may be opened. A HUF PAN Card and HUF Bank Account are required for HUF Trading and demat accounts.
A check written on Karta’s name can be deposited into Karta’s HUF Bank Account. It is considered as the earning for HUF. It should be avoided because it might result in extra accounting and tax issues.
No. The HUF Trading Account’s brokerage is the same as that of a standard trading account.
Each individual receives an Aadhar card. They do not apply to entities like company, Sole Proprietorships, HUFs, etc. In case of requirement, the HUF account must have Karta’s Aadhar Number connected. It’s a step in the KYC procedure.
No, BSDA (Basic Service Demat Account) is only allowed to be used with individual demat accounts (Excluding HUF accounts).
Compliance Calendar for the Month of August 2025 As we step into August 2025, it’s important for businesses, professionals, and…
LUT Renewal FY 2025-26: GST Exporter's Checklist Introduction If you're an exporter in India, you need to submit a Letter…
Cross-Border Compliance: Global Business Regulations Introduction Taking your business international can open exciting opportunities. But with that growth comes the…
Penalties from Non-Compliance in OPC Annual Filing Introduction An One Person Company (OPC) is a type of business in India…
Comply with FDI Norms During Registration Introduction If you're planning to register a business in India with foreign investment, it's…
USA-Registered LLC Penalties Despite No Activity Introduction Just because your US LLC hasn’t started doing business doesn’t mean you can…
Leave a Comment