KEY POINTS IN CREATION OF HUF AND FORMAT OF DEED FOR CREATION OF HUF
- Under the Income Tax Act, an HUF is a separate entity for the purposeof income tax return.
- The same tax slabs are applicable to HUF as to individual assessee.
- You can not transfer your own assets/money into HUF.
- If you have ancestral propertyand earning some income from thisproperty, then it is better to transfer this asset to HUF and savetax up to exemption limit applicable to individual.
- You can transfer the money received on sale of ancestral property /assets into your HUF.
- The income from property of HUF can be further invested in instruments such as shares, mutual funds, etc. and will be assessed under HUF.
- Existence of property or multiple members is not a pre-requisite to create HUF. A family which does not own any property may still have the character of Hindu joint family. This jointness is understood in terms of faith and food. This is because as a Hindu is born as a member of the joint family.
- Any gifts received by the members of HUF (birthday, marriage, etc.) can be treated as assets of HUF.
- The HUF is taxable as separate person under income tax hence one can save tax from basic exemption of Rs. 1.5 lakh. HUF will also gain from the tax slab structure of computing income tax.
- Apart from basic exemption of Rs. 1.5 lakh, section 80C deduction up to Rs.1 lakh is also available.
- For example, if you are in 30% tax bracket, then approx tax saving by creating an HUF will be as follows:
- Basic exemption up to Rs. 1,50,000 = nil
- Rs. 1,50,000-3,00,000 @10% = Rs. 15,000
- Rs. 3,00,000-5,00,000 @20% = Rs. 20,000
- 80C deductions Rs. 1,00,000
- Therefore total tax payable for HUF on income of Rs. 5,00,000 is only Rs. 35,000.
- If this income of Rs. 5,00,000 is taxed in individual hand @ 30% tax due is Rs. 1,50,000.
- Hence, you can save a total of Rs. 1,15,000 by creating an HUF and transferring ancestral property income and other income under HUF.
FORMAT OF HUF CREATION DEEDS FORMAT-I
DECLARATION
I, ________________ son Of __________________ Residing at ______________________ aged ___Adult do hereby declare-
1. That I am Karta of ___________________________________________ .
2.That I received on behalf of the H U F gift of Rs. ___________ by way of CASH/CHEAUE from my FATHER ___________________________(name of relative of karta of HUF) on dt. _______________ this formed the corpus of the HUF.
3. That the HUF at present is consisting of the followings members- I) Shri _____________________, Adult, Residing at _________________ II) Smt. _____________________, Adult, Residing at _________________ III) Kumari _________________-Minor, Residing at ___________________
4. That the above statements are true to the best of my knowledge & belief. Declare this on _________________
WITNESS: Signature 1. ————————————–
——————————— 2. ————————————– (_____________________)
FORMAT- II
[To be executed on Rs. 100 Stamp Paper in Maharashtra] DECLARATION OF
GIFT MADE BY ________________________ TO THE HINDU UNDIVIDED FAMILY OF ___________________ I,_____________________________, residing at_________________________________________________, do hereby declare and affirm as under:
1. That out of natural love and affection borne by me towards the Hindu Undivided Family of_______________, I have made a gift of Rs.______ (Rupees _________________ only) as per the following details: By Cheque No.________, dated __________, drawn on Bank ____________________, ________________ Branch, in favour of ________________________ HUF.
2. The above Gift has been duly accepted by ________________________, as Karta of his Hindu Undivided Family and has been duly acknowledged hereunder.
3. This Declaration of Gift is made to record the fact that I have made this Gift in favour of the Donee as above, who now has the absolute right, title and interest in the gifted amount. Date: ___________, 200__
___________________ (Signature of the Donor)
ACKNOWLEDGEMENT OF GIFT I, ________________________, hereby acknowledge having received the above gift made to my Hindu Undivided Family by _________________________. Date: ___________, 200__
___________________ (Signature of the Donee as Karta of his HUF) •
Sir,
This detailed topic on HUF gave me great knowledge on creation of HUF. I m practicing CA here in jammu.
sir
this is grateful ifo………….
thanks
Dear Mukesh,
Thanks for sharing this. I was looking for the HUF deed draft for some time and this is definitely very useful
I have read a number of articles around the benefits of setting up a private discretionary trust if the beneficiaries are minors. In such a case too, the trust is treated as a separate tax identity and one can avail of the Rs. 1.5 lakh basic exemption etc. But the difference compared to HUF is that you can transfer your own assets/money into the trust which would not be allowed in the case of an HUF. But there are some questions which remain open for which I am not able to get answers. Specifically
1. Is it possible to set up a private discretionary trust if there is only one minor beneficiary? Logically, it doesnt seem possible as there wouldnt be any ‘discretion’ in the way the benefits are distributed as there is only one beneficiary. But I still want to check.
2. Is it possible to set up a private discretionary trust with one minor and one unborn child as beneficiaries?
3. If answer to Q2 above is Yes, then suppose the unborn child does not exist at the point of dissolution of the trust, how do we get affected from taxation point of view.
I spoke to a few CAs but no one could give me any concrete information about the same. I was wondering if you have any information on the same and could help me?
Thanks,
Siddharth
This is my comments w.r.t Siddharth’s question on Pvt. Trust vis-a-Vee HUF.
1) You can set up a Prive “Specific’ trust when there is only one ‘identified’ (minor) beneficiary.
Please note, Pvt. Discrition Trust attracts Maximum Applicable IT slab rate.
It is good and handy to explain some body about HUF and declaration. Thanks a lot.
can a ladies member after death of male can create new huf
mukesh, hi information on your site is useful but some questions are there..
1.who can gift money/others to huf and how much for no tax
2 a person having PAN NO and relative of KARTA but younger ,Can gift how much
money if he is not the member of huf
Sir, information is very useful but there are still some question in my mind. Hope I get answer of this.
1. Can Karta of HUF give gift to his HUF at inception of creating HUF? If no, how to get opening capital in HUF?
How we can open a HUF account
First you apply PAN card of the HUF and then open a savings account with any bank. HUF can be created with full partition of the biger HUF or to create a corpus of the HUF you can take gift from your relatives. A format of the gift deed is given on our blog.
I got crushial information for creation of HUF, I am begineers in this field of profession, satisfied with the information.
I also need information about how to manage the HUF according to tax planning in this present day scenario.
Service class can divert his other sources income and income from shares to the HUF account. Business class can use HUF fund as borrowed fund and save tax by paying interest. If you owned immovable property in the name of HUF then you can save tax on rental income also.
sir
this is very useful information.
thanks
realy excellent information
my father has 10 acre ancestor agriculture land and earning 2 lacs per yearfrom it.he is getting 7000 pension also and not paying tax as individual. now atage of 75 he wants to open huf. at present he is getting 3 lacs annual intrest income from earned agriculture income.he has landed rs 15 lacs on loan to public without cheques.how can this 15 lacs amt and 60 tola gold can be shown in huf pls reply
The topic is very interesting.
The first time I have come to know about the huf deed.
I am also a member of huf.
Recently, Our firm is facing some legal challange. huf has raised a commission bill to a firm where the member of huf is also partner of one firm. Is the transaction not legal? The karta cant raise a bill to a firm?
I like the information provided in the site. they are educative.
i am unmarried son, can i with my widow mother form an huf. if yes, kindly mail me the format of creation of huf if possible
regards
jsg
its important information for me to forming HUF & opening account in the name of huf.
thanks & regds,
vdshelke
it is very important information for the created of new HUF account but how to get opening capital in HUF Account ? ……………………………….
I WANT TO KNOW WHETHER SURAJMAL HUF CAN BE A PROPRIETOR OF SHREEJEE TEXILES. IF YES HOW THE STAMP SHOULD BE FOR OPENING A CURRENT ACCOUNT IN A BANK.
You can use stamp as
FOR SHREEJEE TEXTILE
Proprietor
Through Karta of Surjamal HUF
Hi Sir,
I want to know the format of HUF deed for opening an Demat account in the name of karta.
Thnks
i want to create my huf , in my family my wife son marride daughter marride please kindly inform me whose name should be writtern in deed reply immideatly
lalit shah
Sir,
Please clarify, in a situation where one person having a own HUFconsisting of his children also becomes of Karta of HUF created by his father on the demise of his father by virtue of being the eldest surviving male member of HUF created by his father.
NSDL guide lines stipulates that on death of Karta , d- mat account has to be closed and all the stocks standing in the name of deceased are to be transferred to a new account which is to be opened in the name of new Karta of HUF. In this situation one person will be karta for two HUF’s having same name and style, but I T laws prohobits ONE name having two different PAN.
Your early clarifcation will be very much appreciated.
Thanking you.
Sir,
Please clarify whether property that my father inherits from his father [my grandfather] becomes property of HUF.
Thanking you.
Sir,
Please clarify, in a situation where one person having a own HUFconsisting of his children also becomes of Karta of HUF created by his father on the demise of his father by virtue of being the eldest surviving male member of HUF created by his father.
NSDL guide lines stipulates that on death of Karta , d- mat account has to be closed and all the stocks standing in the name of deceased are to be transferred to a new account which is to be opened in the name of new Karta of HUF. In this situation one person will be karta for two HUF’s having same name and style, but I T laws prohobits ONE name having two different PAN.
Your early clarifcation will be very much appreciated.
Thanking you.
What is the minimum gift to receive to form an huf and for the DECLARATION form. Second question who can gift the said ammount.
IS THERE ANY SITE FOR VIEWING THE REGISTERED PARTNESHIP FIRMS IN INDIA BECAUSE I AM GOING TO MAKE A PARTNERSHIP FIRM WITH A PARTICULAR NAME WHICH WILL BE REGISTERED WITH REGISTRAR OF FIRMS. PLEASE LET ME KNOW THE SITE SO THAT I CAN WRITE PARTNERSHIP DEED WITH THAT PARTICULAR NAME
HI I LIKE YOUR ARTICLE I AMI CA STUDENT
I want to know whether the wife of the son (daughter in law) can also be member of father in Law HUF or not ?
i am practising as tax and accounts consultants and its a great material to advice my clients and serve them more better. excellent……
Sir,i am government servant my incom is 350000 RS. through salary & other income aprox 130000 RS. Through insurance & mutual fund commision i divert commision income through HUF ? From salary income?
Hi
This is real valuable information.I will be greatful if You can elaborate where this HUF deed format I needs to be submitted or notified ,is there some fees to paid while creating it & mention all the formalities to be completed.
You need not to submit anywhere this HUF deed. This is just for evidence for creation of HUF or corpus of the HUF required for income tax purposes. So keep this document for income tax purposes.
Thanks sir for such useful info
Sir, I need a deed of partion of father’s HUF by which creating new HUFs of sons. How we can draft full partion at the same time cration of son’s HUFs.
Regards!
Dear Sir,
Thanks for your valuable information on HUF. I am a NRI & would like to invest (partly in equity shares and partly in interest bearing loan) in my friend’s private limited company. I have 2 minor daughters and a wife. is it advisable to create a HUF and invest through it ??.
if yes, please let me know
1.) naming of HUF – is it necessary to be in Karta’s name or I can decide on any name.
2.)Apply for PAN – As no registration required for formation of HUF, how do i apply for PAN card
3.) Is it necessary to receive some money from my father to show the corpus/Seed Capital.
4.) Can the Karta transfer properties in his name to HUF later ??
5.) Is it possible to specify sharing ratio of HUF income and capital between the members of HUF in the HUF deed?
Thanks in advance for your kind help.
Sir,
We r two brothers and three sisters who have inherited an ancestral property. The property was given for development and the sisters shares duly given in cash. the two brothers received o0ne flat each in lieu of the development agreement and cash consideration. The developer has breached certain conditions, like installation of telephone towers, selling of parking spaces, and not giving rent. Since my brother is not interested in pursuing the above matter , will my interests be harmed if he signs the conveyance as the karta of the HUF. Possession of the bldng is given with full O.C and society formed but first meeting still not held. There is no HUF deed done and no HUF account. How should I proceed. The D.A mentions the exixtence of HUF property duly signed by me. How should i proceed.
Dear Sir: Would you help me understand if an apartment in my name can be transferred to HUF in which I am the karta and then the HUF can take the rental income which I can provide to HUF? Appreciate your help.
If you convert your property into HUF property then as per section 64 of the Income tax Act, income from that property will be clubbed in your income as an individual. So you will get any benefit from that directly. But any income on the income will the income of the HUF, means if deposit this rent in fixed deposit with bank then interest received on such deposit will be the income of HUF
Sir,
Can a HUF be created and started after death of the wife of the karta. Originally there were 3 members in the family i.e. Karta, Wife of Karta & Daughter, however at that point of time HUF was not created. Now the wife of karta has deceased and there are only two people in the family i.e. Father & daughter, can father now create HUF ?
HUF exists by nature as soon there is a karta and a coparcener in the family. So you can create HUF even the wife of the karta died.
what we creat a huf firm if i lived in ahmedabad(Gujarat),my big brother live in Gandhidham(Gandhidham and my father live in Ballia(U.P.)