HUF

What is HUF?

The HUF full form is Hindu Undivided Family. This is a legal separate entity that was formed for tax purposes under the Income Tax Act. An HUF has the right to own property, earn income, and claim tax benefits that do not depend on the number of family members.

It helps the families to legally reduce their tax liability because they have the benefit of splitting the income among all the members. Apart from Hindus, Jains, Buddhists, and Sikhs are also covered under HUF.

Who Can Be Members of HUF?

The members in HUF are the common ancestor, lineal descendants, their wives, and unmarried daughters. A HUF can be formed by a minimum of two members who belong to the same family. These members are:

1. Karta: It is considered the head of the Hindu Undivided Family.
2. Coparceners: It includes all the male and female lineal descendants of the same ancestor.
3. Other members: It includes the wives of the coparceners; they have maintenance rights but can not demand partition.

How to form an HUF?

The conditions to form an HUF are given below:

1. Family Members: A HUF can only be formed by a family; it is not possible to form a HUF by an individual. It includes all the ancestors, lineal descendants, including their wives and unmarried daughters.
2. Eligibility: The Buddhists, Hindus, Sikhs, and Jains are eligible to form a Hindu Undivided Family.
3. Formation: After marriage, a HUF is automatically formed because it includes the husband, wife, and their children.
4. Assets: The HUF typically holds assets that are inherited through a will, gift, or ancestral property.
5. Registration: After the HUF is formed, it is necessary to register it in its name formally.
6. Legal Deed: Every HUF should have a legal deed, and it should contain all the details about the members of the HUF and the business of the HUF.
7. PAN Number: A PAN number is necessary to obtain in the name of the HUF.
8. Bank Account: A bank account should also be opened in the name of the HUF.