December 30, 2022
Shreeja Ray

Hindu Undivided Family Act

What exactly is a HUF?

The abbreviation HUF stands for 'Hindu Undivided Family'. According to Hindu law, a HUF is a family made up of lineal descendants from a common ancestor. Their wives and unmarried daughters are included. A contract cannot be used to form a Hindu Undivided Family. In a Hindu family, it is produced automatically. In addition to Hindus, Jain, Sikh, and Buddhist families can form a HUF.

What is a HUF made up of?

An HUF can comprise a family's three generations as well as all of its members. It is made up of the karta, who is usually the male leader of the household, and the coparceners. Even after marriage, daughters remain coparceners in their father's HUF. They also become members of their husband's HUF.

How do you make a HUF?

An HUF is founded automatically after an individual marries, which is considered the beginning of a family. However, it will only be legally recognised if a HUF deed is created and performed according to procedure. This is something that can be done at any moment.

HUF formation procedure

Step 1: Prepare a HUF deed.

An HUF deed, written on stamp paper, lists the names of the HUF's karta, coparceners, and members.

Step 2: Obtain a HUF PAN card.

To apply for a PAN card, go to the NSDL website and fill out Form 49A.

Step 3: Open a bank account in HUF.

All funds received and spent by the HUF must come from this account.

An HUF's taxation

The income earned by HUF members belongs to the entire family, not to a single member. As a result, income is taxed in the name of the HUF rather than individual members.

An HUF is classified as a 'person' under Section 2(31) of the Income Tax Act, 1961. Under Indian income tax law, a HUF is taxed at the same rate as an individual.

However, in order for a HUF to be taxed in that capacity, it must meet two requirements:

1. Coparceners should be used.

2. It should have a shared family property that includes ancestral property, property gained with the assistance of ancestral property, and property transferred by its members.

Advantages of the HUF

1. It can create income by running its own business.

2. It has the ability to invest in the market.

3. HUFs are free from paying basic tax of Rs 2.5 lakhs.

4. It is possible to own a home without paying taxes.

5. It is eligible for a home loan.

6. An additional tax deduction of Rs 25,000 can be claimed on premiums paid for HUF members' health insurance. If the member is a senior citizen, the ceiling rises to Rs 50,000.

HUF Frequently Asked Questions

1. What exactly is a karta?

A karta is the HUF's head, usually the eldest male member of the family.

2. What exactly is a coparcener?

A coparcener is someone who shares an estate with others as a co-heir. A coparcener is a person who inherits a legal right to ancestral property by birth, according to Hindu succession law.

3. Can a woman be the HUF's karta?

After a historic decision by the Delhi High Court in 2016, a woman can be the karta of a HUF.

4. Is there a required minimum number of coparceners for an entity to be taxed as HUF?

A HUF can be founded with as little as two members, one of whom must be a coparcener. However, in order to be taxed as a HUF, an entity must have at least two coparceners. For example, if HUF just consists of the husband and wife, there is only one coparcener. As a result, it will not be taxed in the hands of a HUF unless the funds are received on the partition of a larger HUF. In the hands of a single coparcener, it will be taxed.

5. What happens if the family's eldest male member is an NRI?

A HUF is deemed a resident of India if it controls and manages its affairs entirely or partially in India. In some situations, the family's Karta may be a non-resident. The family's resident status will not shift to non-resident simply because the Karta is a non-resident until the family's decisions are taken outside of India.

6. Should a HUF always be an Indian resident?

A HUF does not have to be a resident of India at all times. If the HUF's control and administration are located outside of India, the HUF's affairs are controlled from outside of India.


Permanent Working Capital And Temporary Working Capital
Yarn of Vegetable Fibres - GST Rates & HSN Code 5308
No GST on Ocean freight under RCM in CIF contract – Part I