HUF Incorporation

The term ‘Hindu Undivided Family’ (HUF) is governed by the Hindu Law. It is not possible to create a HUF by an agreement between two parties, nor can it be formed by a group of people who do not constitute family.

The HUF even continues to exist after the death of the common ancestor, and the next eldest male or female member becomes the head of the family and is known as “Karta”.

By creating HUF, you can save taxes by creating a family unit and pooling in assets, since HUF is taxed separately. Income of a HUF is assessed in the hands of the HUF alone and not in the hands of any of its coparceners or members.

Advantages of HUF Incorporation

Separate Legal entity
HUF is a separate legal entity in the eyes of the law. This entitles HUF to obtain a separate PAN card, file separate Income tax returns and open bank accounts in the name of the HUF.
Tax-Free Gift
Monetary gifts up to INR 50k may be received in cash, cheque, draft, etc. by an individual/ HUF. It is not taxable as per the income tax act. Also, a gift by Karta to his daughter on her marriage is exempted from taxation.
Tax Savings
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 decide to create a HUF, all 4 of you as well as the HUF can claim a deduction for Section 80C.

Conditions To Be Fulfilled To Create An HUF

One person cannot form a HUF, it can only be formed by a family.
A HUF is automatically created at the time of marriage.
HUF in general consists of a common ancestor and all of his descendents including their unmarried daughters and wives.
Buddhists, Jains, Hindus and Sikhs are eligible to form HUF.
A HUF should have a legal deed. The deed shall contain details of HUF members and the business of the HUF.
Once the HUF is registered, PAN number and a bank account should be opened in the name of the HUF.

Requisite Documents

Identity Proof

PAN (Indian Nationals) or Passport (Foreign nationals) And
Passport / Driver’s License / Election ID / Ration Card / Aadhar ID

Proof Of Residence

Bank Statement* / Electricity Bill / Mobile Bill

Passport size photographs
For Registered Office

Registered document of the title of premises or notarized copy of lease/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 by the company as its registered office.
Utility bills like telephone, gas, electricity, etc. showing the address of the premises in the name of the owner, which is not older than two months.