Hindu Undivided family

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What is HUF ?

The term HUF stands for ‘Hindu Undivided Family’ and comprises all successors of a common male ancestor and includes their wives and unmarried daughters. A HUF Consists of a Karta, coparceners, and members. Karta manages the entire business and makes the final decision. Normally, the eldest member (Male or Female) of the family takes the position of Karta. A HUF, as such, can consist of a very large number of members including female members as well as distant blood relatives in the male line. However, out of this, coparceners are only those males and females who are within 4 degrees of the lineal descendent from the common male ancestor. The relevance of the concept of the coparcener is that only coparceners can ask for partition in the property. The other family members; i.e., other than coparceners in the HUF, have no direct claim over HUF property, but can claim only through the coparceners.

An Overview

The term ‘Hindu Undivided Family’ (HUF) is governed by the Hindu Law. It is not possible to create a HUF by an agreement between two parties, nor can it be formed by a group of people who do not constitute family.

The HUF even continues to exist after the death of the common ancestor, and the next eldest male or female member becomes the head of the family and is known as “Karta”.

By creating HUF, you can save taxes by creating a family unit and pooling in assets, since HUF is taxed separately. Income of a HUF is assessed in the hands of the HUF alone and not in the hands of any of its coparceners or members.

Advantages

Separate Legal entity
HUF is a separate legal entity in the eyes of the law. This entitles HUF to obtain a separate PAN card, file separate Income tax returns and open bank accounts in the name of the HUF.
Tax-Free Gift
Monetary gifts up to INR 50k may be received in cash, cheque, draft, etc. by an individual/ HUF. It is not taxable as per the income tax act. Also, a gift by Karta to his daughter on her marriage is exempted from taxation.
Tax Savings
A HUF is taxed separately from its members, therefore, deductions or exemptions allowed under the Income tax laws can be claimed by it separately. For example, if you and your spouse along with your 2 children decide to create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C.

Conditions to be fulfilled to create an HUF:

One person cannot form a HUF, it can only be formed by a family.
A HUF is automatically created at the time of marriage.
HUF in general consists of a common ancestor and all of his descendents including their unmarried daughters and wives,
Buddhists, Jains, Hindus and Sikhs are eligible to form HUF.
A HUF should have a legal deed. The deed shall contain details of HUF members and the business of the HUF.
Once the HUF is registered, PAN number and a bank account should be opened in the name of the HUF.

Steps to form a HUF

Step 1: Create an HUF deed
HUF deed is a written formal document on a stamp paper stating the names of Karta (Eldest member of the family) and the Coparceners (Family Members). The name of the HUF is the name of the Karta followed by HUF.

Step 2: Apply for PAN & TAN

Step 3: Open Bank Account

Requisite Documents

For Registered Office
Registered document of the title of premises or notarized copy of lease/rent agreement in the name of the company along with a copy of rent paid receipt not older than one month;
NOC from landlord to use the premises by the company as its registered office.
Utility bills like telephone, gas, electricity, etc. showing the address of the premises in the name of the owner, which is not older than two months.

Compliances for HUF

Accounting and Book Keeping
It is always advisable to maintain records for business activities of a Partnership firm on cash or accrual basis in order to judge whether these operations are generating a profit.
Tax Audit
There is no obligation for a partnership firm under any law to get the accounts except in cases where the turnover of the business in any financial year exceeds 1 Cr. Rupees and gross receipt from profession exceeds 50 Lakh Rupees. In both cases, the audit of accounts is compulsory for a partner under the Income Tax Act, 1961.
Income Tax Returns
Income tax filing must be filed by all partnership firms having a taxable income.
GST Registrations and returns
You have to get yourself registered under GST if your annual turnover is more than Rs. 40 lakhs. Also, if you are doing online business (selling through amazon, flipkart etc.), you are required to get a GST number under goods and service tax Act. Once you have registered under GST, then you are required to file monthly or quarterly details of sale and purchases.

Register a HUF with ICI

By following the steps listed below, you can start your own Company,

Submit a request by clicking here.
Our Corporate Manager (CM) will get in touch with you to collect your documents along with a simple checklist.
Submit the filled checklist along with your documents for verification. Your documents will be verified by our team of expert’s here at ICI, and we shall take the process further. The CM shall keep you informed throughout the process.
Once your documents along with the Checklist are submitted and verified, our team will draft a comprehensive HUF deed for your Hindu Undivided Family. HUF deed will be sent to you for your verification. Once you verify, we will get the same executed
Upon payment of stamp duty and notarizing the HUF deed, your Hindu Undivided Family is incorporated
Once this is done, we will proceed to apply for PAN and TAN for your HUF. On receipt of PAN, we will proceed to open your HUF’s bank account.

FAQs

a. Who is the Karta of an HUF?

The senior-most male member of the family is called the Karta. He heads the HUF.

b. Can a Woman be a Karta?

Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF.

c. Who are HUF Coparceners?

All the members of the Karta family can be members of the HUF. The male members are called coparceners, while the females are referred to as just members. The difference between the two is that any of the coparceners can demand partition of the HUF.

d. When is a HUF said to be a Non-resident?

In case the control and management of the HUF are situated outside India, the HUF would be a non-resident.

The residential status of a HUF is determined not on the basis of where the Karta resides but on the basis of where the HUF is managed from.

e. Can the members of the HUF and the HUF separately claim deduction under Section 80C?

Yes. However, the member and the HUF cannot claim a deduction in respect of the same investment made or expense incurred.

f. Does HUF arise from a contract?

No HUF arises only from status.

g. What is ancestral property?

It is the property, which a man inherits from any of his three immediate male ancestors, i.e., father, grandfather, and great-grandfather.

h. Who can claim a share in the partition?

All members;

A son in the womb of his mother at the time of partition;

Mother;

Wife.

i. Whether a single person can constitute HUF?

No. A single person cannot constitute HUF. There have to be minimum of two members to constitute a HUF.

j. Which Cities do you provide your services to?

ICI provides HUF services all across India. You can obtain HUF in Ahmedabad, Mumbai, Pune, Bangalore, Chennai, Delhi, Kolkata, Kanpur, Nagpur, Jaipur, or any other cities easily with us.

k. Still Confused?

Speak to our experts who shall solve all your doubts. Call us at +91 7738 066 334 or Mail us at info@indiacompanyincorporation.com

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