What is HUF? What are the advantages of opening a trading/demat account which is a HUF?

Zerodha Zerodha trivia
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HUF

​HUF as name suggests means HINDU UNDIVIDED FAMILY. As soon as an hindu individual gets married he can open an HUFand his spouse and children can become the member of the HUF. It is not an agreement between two parties but it is a right attained by birth. ​Only one member has to be male ,that is enough.Male members are called coparceners while females are called members.and the most male member is called KARTA,(head)

Under income tax HUF is treated as seperate income ,So one can divide the income in two parts.On sale of proeprty one can transfer the money to this HUF account. Income from HUF can be invested in shares/ MFS/ and can be assessed under HUF. Gifts received in this account are treated as assets.

Documents For HUF account

1. HUF BANK ACCOUNT

2. HUF PAN CARD

3. HUF DEED

HUF account opening requirements

  1. Duly filled Account Opening Form with photograph of Karta affixed and signed  across. Account is opened in name of Karta.
  2. Proof Of Address and PAN card copy in the name of Karta.
  3. PAN Card and bank passbook/bank statement of HUF indicating its existence.
  4.  Bank statement should be of the recent quarter and contain the logo or seal of the bank. It should also be self-attested by the Karta.
  5. Declaration by the Karta giving details of the family members of the HUF with their names, date of birth, sex and relationship with the Karta.
  6. All the KYC docs are to be self-attested.
  7. The Karta should sign the AOF and other documents under the stamp of HUF
  8. HUF account cannot be opened with joint holders.
  9. No nomination can be made in HUF account
  10. Cancelled cheque with clients name preprinted on the same is required. In case of a/c opening if clients name is not visible on cancelled cheque then we either require bank statement/ bank passbook with same bank a/c number reflecting on the same 

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HUF : Hindu undivided family, all the family members are part of it and head of the family is known as Karta
the main advantage of HUF is saving tax legally, new pan card will be allotted to the whole family, main disadvantage of HUF is all assets in the name of HUF are assets of family and not of a specific individual, all members have right in the assets of HUF

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  1. What are the benefits of opening a demat account for investors?
    A demat account has become a necessity for all categories of investors for the following:
    a. SEBI has made it compulsory for trades in all listed scrips to be settled in demat mode. Although,
    trades up to 500 shares can be settled in physical form, physical settlement is virtually not taking
    place for the apprehension of bad delivery on account of mismatch of signatures, forgery of
    signatures, fake certificates etc.
    b. It is a safe and convenient way to hold securities compared to holding securities in physical form.
    c. No stamp duty is levied on transfer of securities held in demat form.
    d. Instantaneous transfer of securities enhances liquidity.

HUF stands for Hindu Undivided Family. It is a demat account opened for managing securities of a
family. The account is managed by a ‘Karta’ who is a male member of the family and other members of
the family are termed as ‘Co-parceners’. Karta manages the HUF account on behalf of the Co-parceners.
e. It eliminates delays, thefts, interceptions and subsequent misuse of certificates.
f. Change of address, registration of Power of Attorney – can be effected across companies by one
single instruction to the DP.
g. Market lot of one share for the purpose of transactions - so no odd lot problem.
h. Any number of securities can be transferred / delivered with one delivery instruction. Therefore,
paperwork and signing of multiple transfer forms is done away with.
i. It facilitates taking loans / advances against securities.
j. Immediate credits in case of any allotment in Non cash corporate actions such as bonus, rights
issues and IPOs.

Basically it is for tax saving purpose…

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 HUF , Hindu undivided family,is a separate entity in itself and qualifies for all tax benefits under Section 80C (up to Rs 1 lakh), 80D (health insurance premium), 80G (donation), 80L (income from bank account), Section 54 (capital gains) and so on.

Documents required:

Bank account should be in the name of HUF
Photograph of Karta
Proof of identity (same as stated for Individuals)
Proof of address of the Karta (same as stated for Individuals)
Pan number in HUF's name
Proof of Bank Account: Any one of the following may be submitted
Copy of Bank Statement
Copy of first page of the Bank Pass Book.
A canceled cheque (only if the account holder's name is printed on it)
List of coparceners in the HUF, along with an authorization given to the Karta by the said coparceners to open and operate the DP and Trading accounts.
DP should be HUF DP A/c.

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The question of HUF status for a Hindu buyer or seller of any property assumes importance because of certain tax advantages attached with HUF under the income tax and wealth tax laws. Thus, if an individual has personal income and has also HUF income, he would be entitled to have an exemption of Rs 150,000 for his individual income and another Rs 150,000 for his HUF income.

Besides, he would also be eligible to a further income tax deduction or exemption of Rs 100,000 under Section 80C in respect of LIC premia, PPF contribution, NSC, etc., both on individual and HUF income separately.

Besides, under the Wealth Tax Act, 1957 too, separate exemptions are available for individual property and HUF property.

Thus, where the taxable individual wealth is eligible to a general exemption of Rs 150.000, the HUF’s taxable wealth is also eligible to a further general exemption of Rs 150,000. Hence, persons having immovable property and jewellery and motorcars under HUF status stand to gain from the extra exemption under Wealth Tax Act as well.

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HUF (Hindu Undivided Family) People open this account to save tax and the family members are a part of the account.

Check this link and read from Q 27 to Q 39 to know more.

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An HUF, or a Hindu Undivided Family, is a separate tax entity in addition to individual persons who are members of such a family. If you are Hindu, Buddhist, Jain or Sikh, you can have an HUF as a separate tax entity. You can claim all tax benefits under Wealth Tax and Income Tax. An HUF is eligible for those exemptions that are available to a resident Indian who is not a senior citizen. It can own property and also have its own business.

Advantage :

As HUF enjoys separate tax benefit under sec 80C, one can use the income of HUF for buying Life & health insurance for family ,trading and the permissible deductions can be availed for tax purpose in hands of HUF, so if the total premiums for insurance requirement of family is Rs.50,000 per year, then It can go from HUF income and also the individual can exhaust his 1 lac limit separately via PPF, ELSS and other tax instruments. while trading is done by used from HUF income and hence it will leave other members with more disposable income which one can use to if required.

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HUF(Hindu Undivided Family), Karta of a HUF is the senior most male member of the family and in financial terms he can also be called manager of the family. In this account a corpus is created where every family member can pool their income. The corpus will be handled by or authorized to handle by Karta (head of the family). Signature of karta will be required for every transaction from the bank. These accounts are similar to individual saving bank accounts; there will be various tax benefits that are available for an individual’s account while the income of members is being pooled in HUF account.

Features of HUF account:-

There are a few features of HUF account that makes it different from regular saving bank accounts.

  • Every member of the family can deposit their income in the common corpus
  • Single person’s authority while participation from entire family
  • Tax benefits on deposits under various sections
  • Corpus can be divided only on agreement of every coparcener of the family 

Tax benefits on a HUF account:-

  • Since the account is equivalent to an individual’s account there are various tax benefits and a few of them are mentioned below.
  • According to IT act, tax rebates and deductions can be availed under sections 80C, 88 and 80L for HUF account

Documents required for opening HUF account:-

There are few documents that will be required for opening an HUF account.

  • HUF will have a unique PAN card; this PAN card along with the PAN of Karta should be produced.
  • A declaration form will be provided where every member has to make a signature stating the name of Karta and declare
    1. They are the only members of HUF.
    2. Karta to have sole authority over HUF account
    3. Every transaction on behalf of HUF account, made by each member of the family is governed by karta.
  • Residential proof of Karta
  • Identification proof of Karta
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HUF is Hindu Undivided Family. All the family members are part of it and the head(usually husband/father) is the Karta. It is additional entity that can help to save taxes. From taxation perspective it is taxed similar to individual except that PPF cannot be opened in HUF name.

Documents required to open HUF account.

  • Duly filled Trading/Trading & Demat/Commodity form with photograph of Karta affixed and signed across.
  • PAN Card copy of the HUF.
  • Bank Passbook/Bank Statement of HUF indicating its existence.
  • PAN Card copy & Address Proof of Karta.
  • Declaration to be given by Karta & all major co parceners of the HUF – Annexure 1C (For Equity Account) and Annexure 2C (For Commodity Account). [(T),(T+D),(C)]
  • HUF Declaration for Demat account.[(T+D)]
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HUF: Hindu Undivided Family 

What is it? 

One of the advantages of being a married man and if you are covered Hindu personal law ( Hindu, Sikh, Jain, or Buddhish) in India is of creating an entity called HUF.

Let me tell you how it works, 

I am Nithin, like everyone else I have my individual PAN and file my returns based on my income. 

Along with this, once I get married I can create a distinct entity called Nithin HUF, which can include my wife and my kids. The head of the family or the senior most person i.e Nithin is called the "Karta". Everyone who forms part of the HUF is called as the "member of HUF". Some of the members of the HUF are designated as "Coparceners". 

A HUF is a distinct entity and will have its own PAN, Bank accounts, address proofs. 

Why create a HUF?

The reason people create an HUF is mainly for tax benefits. Assume my salary is Rs 10lks/yr and have 2lks/yr of other income.

The tax slabs in India: upto 2lks no tax,  2 to 5lks 10%, 5 to 10lks 20%, and above 10lks 30%. 

My salary of 10lks/yr, I am already in the 30% bracket, if I showed my other income of 2lks under my income I will have to pay 30% of 2lks as taxes. But instead if I showed this other income in the name of my HUF which is still in the 0 -2 lks bracket, I don't have to pay any taxes and hence save this Rs 60,000 which I would have paid otherwise.

But remember that you cannot really show your salary as earned by the HUF, as it is you who has worked to earn the salary and not your family.  :) 

Documents required?

1.Duly filled Trading/Trading & Demat/Commodity form with photograph of Karta affixed and signed across.
2.PAN Card copy of the HUF.
3.Bank Passbook/Bank Statement of HUF indicating its existence.
4.PAN Card copy & Address Proof of Karta.
5.Declaration to be given by Karta & all major co parceners of the HUF.
6.HUF Declaration for Demat account.

Karta should sign the Account Opening Form and other documents under the stamp(seal) of HUF.
All KYC documents to be attested by the Karta. 

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Very nice roopa :), it will be nice to have you as the Tax-expert on TradingQ&A

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Thank you very much for your support and encouragement :slight_smile:

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For a trading / demat account held by a HUF ( say ex.Nithin HUF) can any family member be mentioned as Nominee , or it has to be either coparcner( other male of a HUF)or member ( Female from that HUF)

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Can anyone share format of HUF deed? I searched online but all formats vary…

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SIMPLY 1 declaration of HUF formation has to be made on plain paper ( format available on net) or else reply to this mail , I will jot it down for you
Neither is need of getting it typed on stamp paper . franking of Rs100/- nor of getting it notarized ,
but still banks ask for it and many do it
For me , and for my friends it worked on plain paper

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A post was split to a new topic: Https://tradingqna.com/t/is-it-mandatory-to-have-a-major-coparcener-to-open-hufs-demat-account/54218

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Which DP charges lowest AMC for HUF Demat+trading account?

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I have a HUF . There are nil transactions throughout the year.
Do I need to file the I.T. RETURNs ?
What if I don’t do it ?
@Quicko

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Hey @RLM

It is mandatory to file ITR if the gross total income of a Hindu Undivided Family (HUF) exceeds the basic exemption limit. As mentioned by you there are nil transactions and assuming there is no other income, it is not mandatory to file an income tax return.

However, if you fall into any of the below conditions it is mandatory to file an income tax return even if the gross total income is less than the basic exemption limit:

  1. Deposited amount or aggregate of amounts exceeding INR 1 Crore in one or more current accounts during the previous year.
  2. Incurred expenditure of an amount or aggregate of an amount exceeding INR 2 lakhs for travel to a foreign country for yourself or for any other person
  3. Incurred expenditure of amount or aggregate of an amount exceeding INR 1 lakh on the consumption of electricity during the previous year

Hope this helps! :slight_smile:

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My profession business is intraday trading in share market .

I trade in my individual account .

Can i pay salary commission etc to my huf account ?

If this is not possible . then . I trade in my huf account . And pay salary commission etc to my individual account . Is this possible ?