HUF (Hindu Undivided Family) is a separate entity and separate taxpayer in the Income Tax Act. It is a group of family members who earn income jointly, so it is difficult to divide the income among all the family members. Therefore, a HUF is formed in which the head of the family is referred to as the Karta and which also includes all lineal male descendants as well as their wives and daughters who are not yet married.
What is Hindu Undivided Family or HUF?
HUF stands for Hindu Undivided Family is a group of family members descended from a common ancestor. Under Hindu law, the HUF includes all male descendants including their wives and unmarried children. The eldest male member is the head of the family, known as “Karta” who is responsible for all family affairs. The HUF is recognized as a single entity and all transactions are made in the name of Karta HUF. All other male members of the family are referred to as co-heirs or coparceners who receive the right to ancestral property by birth. In the event of the Karta’s death, the next senior-most male family member shall be named or nominated as the Karta’s successor. If there is no male, the oldest female takes the role of karta.
HUF stands for Hindu Undivided Family is a group of family members descended from a common ancestor. Under Hindu law, the HUF includes all male descendants including their wives and unmarried children. The eldest male member is the head of the family, known as “Karta” who is responsible for all family affairs.
The HUF is recognized as a single entity and all transactions are made in the name of Karta HUF. All other male members of the family are referred to as co-heirs or coparceners who receive the right to ancestral property by birth. In the event of the Karta’s death, the next senior-most male family member shall be named or nominated as the Karta’s successor. If there is no male, the oldest female takes the role of karta.
HUF can hold any securities like shares, exchange-traded funds (ETFs), bonds, mutual funds etc. in dematerialized form. Any purchase or sale transaction will be processed through HUF's bank account.
To open a HUF demat and trading account, the duly signed account opening form (Equity and commodity) and the required documents must be sent to the broker’s office via courier. Karta must sign the account opening form and all other documents. The documents will then be checked or reviewed by the customer service team and if the information is found to be correct, the trading account will be opened in the name of HUF and you will be informed regarding the same.
A PAN card copy of the HUF with signature and HUF seal.
HUF address proof with seal and signature: Bank passbook or latest bank statement.
Self-attested PAN card copy of karta and coparceners.
Self-attested address proof copy of karta and coparceners: Driving license, voter ID, Aadhaar, passport, etc.
Self-attested copy of Coparcener or Member PAN card.
HUF bank account proof: Personalized canceled cheque with printed HUF name, bank statement, or bank passbook with the account number, MICR, and IFSC code.
HUF Income proof to trade in the derivative segment: the latest 6 months bank statement or passbook of the HUF account, latest ITR acknowledgment, HUF DP holding statement, and latest P&L statement.
HUF Trading Account Benefits
Income tax benefits: HUF holds a separate identity from their members and enjoys a tax exemption of upto Rs 2.5 lakh income earned on investment.
It helps to manage ancestral assets in a great manner.
HUFs are eligible or qualify for all tax benefits under 80C, 80D, 80G, etc.
HUF can own a residential house as a separate entity and can also take a loan to buy a residential house. HUF can avail of tax benefits up to Rs 1.5 lakh under section 80C for repayment of the loan and up to Rs 2 lakh deduction for interest on the loan.
HUFs are also eligible for capital gain tax exemption under sections 54 and 54F.
Investment in securities, shares, mutual funds, etc. in the name of HUF.
HUF can also apply for a buyback of shares in the name of the family.
HUF are the family assets and all the family members have an equal right on the joint property.
HUF being a separate identity in Income Tax Act has to file additional returns.
Only Hindu and Hindu Dissidents like Jain, Buddhist, and Sikh can form HUF thus, Muslim, Jewish, and Christian families cannot be a part of HUF.
HUF cannot open a Public Provident Fund (PPF) Account
Best Brokers to open HUF Account
Frequently Asked Questions
Who is the Karta of HUF?−
The oldest male coparcener of the Hindu Undivided Family is called Karta. Karta has the power or full authority to manage the assets of the HUF and all its affairs. Thus, the Karta is the sole representative member of the family. All the transactions placed from the HUF trading account are processed in the name of Karta.
However, in the event of the Karta's death, a new Karta is appointed who is the next most senior member of the family, male or female. There are no formal guidelines for the appointment of the Karta, and members may appoint any senior member they wish.
Can HUF open trading account online?+
What are the segments allowed for trading to HUF?+
Just like an individual trading account, HUF can trade in all segments, be it stocks, equity futures and options, commodities and currencies. HUF can also apply for IPOs and invest in mutual funds.
Is there minimum number of coparceners to create HUF?+
Yes, a joint family must have atleast 2 coparceners to treat the entity as HUF (Hindu Undivided Family).
What are Karta powers in HUF?+
Karta plays a fiduciary role in HUF and is authorized to take decisions for the family. He enjoys following rights:
Manage all family affairs.
Manage all finance including income and expenditures.
Borrow money on behalf of HUF.
Power to compromise all family disputes pertaining to property and their management.
Karta can enter into any contract to represent HUF.
Karta has the power to make partition family property.
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