HUF Registration in India- Overview
The term HUF stands for ‘Hindu Undivided Family’ and consists of all persons directly descended from a common ancestor, and also the wives and daughters of the male descendants. A HUF comprises a Karta, coparceners, and members. Karta possesses the highest authority and manages the entire business and makes the final decision. Generally, the eldest member of the family takes the position of Karta. Hindu Undivided Family is governed and regulated by Hindu Law. HUF Registration is not possible by an agreement between two parties, nor can it be formed by a group of people who do not constitute a family.
The HUF has perpetual existence meaning that it continues to exist even after the death of the common ancestor acting as the Karta, and the next eldest male or female member becomes the head of the family and becomes the “Karta”. By forming a HUF, you can avail tax benefits by creating a family unit and pooling in assets, since HUF is taxed separately. The income of a HUF is assessed in the hands of the HUF and not in the hands of any of its members of the HUF family. Thus HUF is considered to be a separate entity. It has a separate PAN and a separate income tax return is filed for the same.
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HUF Registration-Advantages Package
- What we provide
- Documents required
- Drafting of HUF deed
- PAN card registration
- PAN Card
- ID Proof (Driving License/Passport/Voter ID)
- Electricity Bill or any other utility bill for the address proof
There are several advantages of forming a HUF.
- Monetary gifts up to Rs. 50,000 may be received in cash, cheque, draft, etc. by a HUF which is not taxable as per the income tax act. Also, a gift by Karta to his daughter on her marriage is exempted from taxation.
- 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 create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C.
- The head of the HUF has the authority to sign the pertinent documents on behalf of other members.
- Different taxable units of HUF can be formed easily.
- Any asset or savings made or insurance premium disbursed by the HUF will be subtracted from the Net Income for the tax purpose.
- Since HUF has a separate legal entity, one major benefit is creating two separate PAN Cards and file taxes separately.
- A wife can be a co-partner in the HUF with her husband as a Karta. And any additional income earned by the wife cannot be added to this.
- The official stature remains the same irrespective of death or disability of the Karta. Thus, the ancestral and the acquired assets of the HUF will stay in the hands of the widow and need not be partitioned.
- A child who is adopted can also become a member of HUF family.
- Women in the family can gift a property in her name which is owned by her or her family.
- Members of HUF can easily avail loans.
- This act is recognised in overall India except Kerala.
Following are some of the disadvantages of forming a HUF.
- One of the biggest disadvantages of the HUF is that all members have equal rights on the property. The common property or asset cannot be sold without the consent of all the members.
- Closing a HUF is a difficult job as compared to opening a HUF. Once the HUF is terminated, then the assets need to be distributed among all the members of HUF which can be quite difficult.
- HUF is considered as a separate legal entity by the income tax department. Nowadays, joint families are losing their importance. This is mostly due to the disputes over the property. In addition, divorce cases have augmented as well.All this is making HUF lose its amenity of a tax-saving tool.
Following are the requisite HUF Registration Documents.
- - PAN (Indian Nationals) or Passport (Foreign nationals) And
- - Passport / Driver’s License / Voter ID / Ration Card / Aadhar Card Proof Of Residence
- - Bank Statement / Electricity Bill / Mobile Bill (latest) For Registered Office
- - Registered document of the premise/ notarized copy of lease or 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 as its registered office.
- - Utility bills like telephone, gas, electricity, etc. showing the address of the premises in the name of the owner (not older than two months)
Following are the steps for HUF Registration Process in India.
Step 1: Create HUF Deed
The first step in creating a HUF is to create or draft the HUF Deed. The HUF Deed is a written formal document on a Stamp Paper stating the names of the Karta and the Co-parceners/members of the HUF. The eldest male member of the HUF becomes the Karta of the HUF. It also states the amount of capital invested in HUF initially.
Step 2: Apply for HUF PAN Card
A HUF is required to apply for a separate PAN Card because it is a separate legal entity. An application for HUF PAN Card is to be made in Form 49A which can be furnished online as well as manually.
Once the PAN Card has been allotted, the HUF would be required to file separate tax returns and can therefore claim tax benefits. It can also claim most of the income tax deductions which are available to an Individual. The application for PAN Card and the Income Tax Return must be signed by the Karta.
Step 3: Open HUF Bank Account
The last step is to open a Bank Account in the name of the HUF through which all the transactions will be made.
At the time of opening of HUF Bank Account, the HUF would also be required to have a Rubber Stamp. And all documents pertaining to the HUF should be properly stamped.
The duration for HUF Registration is approximately 7 to 12 working days.
TAX SEVA KENDRA is one of the most reputed organisations for offering different types of registration services in India. Tax Seva Kendra helps end-to-end incorporation, compliance, advisory, and management consultancy services to clients in India and abroad. Incorporating a HUF is easy, seamless, affordable and quickest with TAX SEVA KENDRA.
- We have professionals who have conducted different forms of registration activities with the priority of adding value to your business.
- We work with experienced and recognised Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
- We have experience in registering different types of companies
- Transparent operations
- Result oriented, time oriented approach
Can a woman be a Karta?
Until January 2016, a woman could not be the Karta of a HUF. But then, the Delhi High Court ruled in favour of a female being the Karta of a HUF.
When a HUF is considered a Non-Resident?
In case the control and management of the HUF is performed outside India, the HUF would be a non-resident.
Can a single person form a HUF?
No, a single person cannot constitute a HUF. Minimum two members are required to create a HUF.
Is it mandatory to register a HUF?
Yes, a HUF is required to be formally registered.
Can HUFs avail loans?
Yes, a HUF can easily avail loans.
What happens if Karta of HUF dies?
Upon the death of a Karta, the next senior most member automatically becomes the new Karta of the HUF. But at certain times, statutory authorities may require a declaration from all the members declaring the eldest coparcener as the new Karta of the HUF.
How does a HUF dissolve?
A HUF can be dissolved after the partition of the property. For this, all the members have to execute a deed of partition and distribute property among the members.
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