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. :)
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.