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 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)]
1 Like
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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. 

10 Likes
63

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 ?