HUF is the acronym for Hindu Undivided Family. A HUF can be formed by members of a family, wherein the members are lineal ascendants or descendants of Hindus, Buddhists, Jains, and Sikh religions. The eldest member becomes the Karta of HUF. Other members of the family are called coparceners. The coparceners share equally with the other members of the family about the inheritance of an undivided estate or the rights to it. Till 2005, daughters were not coparceners of their father’s family (only sons, used to become coparceners at birth). The female members were only members of the family at birth and ceased to be members of their father’s family after their marriage. The 2005 amendment to the Hindu Succession Act 1956 gave equal rights to daughters as to the sons. The said amendment allows the daughters to become coparceners or Karta of their father’s family on birth in the same manner as sons, and have the same rights as sons in the family properties. On the demise of a male Karta, it is now possible for a daughter to become a Karta of the HUF under the circumstance that she is the eldest adult coparcener in the family. However, a widow of Karta cannot act as Karta of the HUF after the death of her husband as she is not a coparcener of the HUF. In cases where the surviving coparceners were minors, the courts took a view that the widow can be a manager of the HUF while distinguishing the position of a manager from that of a Karta.
A HUF needs to have income-generating assets out of the inheritance of an undivided estate or through a gift or will. The name of the HUF is usually registered in the name of Karta followed by the word HUF. For example, if Mr. Ganesh Jain is the Karta of a HUF. The name of the HUF will be Ganesh Jain HUF.
Reasons for opening a HUF account
HUFs are treated as separate entities, with separate PANs, and get tax benefits under various sections of the Income-tax Act 1961. The main advantage is that the income earned through HUF will not be clubbed with a member’s individual income for assessment of his/her tax liability. Thus, the concerned individual gets away from paying tax at higher slab rates or the income shown under HUF may be fully exempt from tax.
Opening Bank Account:
The bank account can be opened in the name of HUF with the following details
- Photograph of Karta
- Proof of identity and proof of address of the Karta (same as KYC applicable to individuals)
- PAN number in HUF’s name/Form 60 of HUF
- Declaration signed by Karta and by all the major coparceners of HUF. The declaration shall state that the bank account is vested in the hands of Karta and he has the right to govern all the transactions of the HUF accounts on behalf of the family members.
- Rubber stamp in the rectangular format (the name of HUF, down as Karta with a gap for the signature of the Karta).
- HUF deed (not mandatory for the opening bank account) written on a stamp paper. The deed shall state the name of the Karta (Manger) of HUF and all the coparceners of the HUF. The deed shall also state the various sources of its capital with which the HUF has been initiated. Such a deed is useful.
HUF can be the proprietor of a business entity :
HUF can be the proprietor of a business entity in any name which the HUF wants. The bank account can be opened for the Proprietorship business of which HUF is the Proprietor. The best way would be to have a trade licence in such a name wherein it is clearly indicated that the HUF is the Proprietor of the business concern. Once the trade licence is obtained, the other formalities like the opening of the account can be done, and then the business as usual can be carried on. Further, it is advisable to make a declaration signed by Karta as well as all the co-parceners of the HUF declaring that HUF carries on business in the firm’s name (ex: Best Construction) and HUF as its Proprietor. In the rubber seal, it may be clarified that the HUF is the proprietor. The description in the rubber stamp can be as under.
For Best Construction
Per Pro Satyanarayana Rao HUF
Proprietor
HUF cannot be a partner of a Partnership firm:
The partner should be a natural person or legal person as in the case of companies registered under the Companies Act 1956. However, H.U.F is not a ‘person’ as it is a group of persons of the same family carrying on the family business. Hence H.U.F cannot be a partner of a partnership firm.
Related Posts:
we are going to form HUF for construction business.
Can we start the business in the name of Ganesh Properties HUF
HUF can be the proprietor of business entity in any name which the HUF wants. Bank account can be opened for the Proprietorship business of which HUF is the Proprietor.The best way would be to have a trade licence in such a name wherein it is clearly indicated that the HUF is the Proprietor of business concern. Once the trade licence is obtained, the other formalities like opening of the account can be done and then the business as usual can be carried on. Further, it is advisable to make a declaration signed by Karta as well as all the co-parceners of the HUF declaring that HUF to carrying on business in the firm’s name (ex: Ganesh Properties) and HUF as its Proprietor. In the rubber seal it may be clarified that the HUF is proprietor. The discription in the rubber stamp can be as under.
For Ganesh Properties
Per Pro Neelesh Kumar HUF
Proprietor
Respeced Sir,
I am working in Co-Operative Bank. As you Know that every bank have to become a member of cibil. we are also a member of cibil. we send the data every month to cibil. In the cibil report they rejected some of our a/c. data. The reason is that, we opened a/c. in the name of HUF. In CIF and account category we defined the HUF a/c. as a ” individual “. because it is a saving a/c. and also opened a current a/c. in the name of HUF and also category defined as a ” Individual.” so, the cibil rejected our this type data with remark that ” Consumer Name Invalid.”
So, I want to know that
1] In which category I have to defined this type of account ?
2] Whether it is a current/ saving a/c. then we have to defined it ” Individual”
3] In Which category cibil defined this type of a/c.
HUF is not an individual, it is a group of individuals. Supreme Court has held that HUF is an association of persons is “not a person”. It is not a partnership firm. You may try the account under association or in the name of Karta as individual instead of HUF. I’m not sure, in this matter, as I am retired now, do not have access to CIBIL reporting system to verify.
Hi,
Can I open an HUF account by funds from my own saving bank account.
Say I have 5 Lac. fund in my saving account, can I give a cheque to open the HUF account of whole 5 Lac.
If YES, whether it will be considered as income to HUF account?
Further, the interest income generated from this account opening amount, whether it will be considered as my individual income and will be clubbed with my earning and will be taxed as per my tax bracket?
The purpose for which the transactions of gifts are proposed has not been indicated. Apparently, this type of transactions is done as a matter of tax planning with the object that the proposed transferee (HUF) will be liable to tax at a lesser rate. However, such transaction should be legally tenable, even in the light of the law, that tax planning is legitimate. I am not qualified to guide on this matter. Consult a Charted Accountant for proper guidance.
I had a huf account in my past place, that was very far away from current place. So I closed it. Now I am going to open new account in city.
I have all the documents (like ITR of HUF from past years to current years , my HUF profile on income tax department portal, adhar card, indudal pan card, passport rest of all documents.
But the bankers stuck only on the pan card of HUF.
I applied doublicat copy it will take some time. But I need to open account earlier.
Please suggest me.
Without a PAN card, it would not be able to do any of what a HUF is set up to do, which is to enter into financial transactions. Please try whether they can accept form 60 till you get a duplicate card.
WILL FEMALE WILL BECOME HUF KARTA IN APPLY OF NEW COMPANY WHERE THERE IS NO HUF OF HER HUSBAND
On the demise of a male Karta, it is now possible for a daughter to become a Karta of the HUF under the circumstance where she is the eldest adult coparcener in the family. However, a widow of Karta cannot act as Karta of the HUF after the death of her husband as she is not a coparcener of the HUF. In cases where the surviving coparceners were minors, the courts took a view that the widow can be a manager of the HUF while distinguishing the position of a manager from that of a Karta. HUF cannot be a partner of a company, as HUF is defined as a group of people , not an individual.