HUF Formation in India Online Registration Services

A HUF is a family unit recognised as a separate legal entity under Hindu Law and the Income Tax Act, 1961. It is formed automatically by operation of law, typically upon marriage of a Hindu. It consists of all persons lineally descended from a common ancestor, including their wives and daughters (both married and unmarried).

No. According to Hindu law, only one person can be the Karta for the HUF. While responsibilities can be shared informally among coparceners, this doesn't make them Karta. For all legal purposes, including tax filings, bank operations, and official representation, there can be only one Karta at a time.

According to the Hindu Succession (Amendment) Act, 2005, and the Delhi High Court ruling in Mrs Sujata Sharma vs. Shri Manu Gupta (2016), the Karta is the senior-most coparcener, regardless of gender. A junior coparcener can also become Karta with the consent of all coparceners.

No. A HUF as a family unit comes into existence automatically by operation of law (e.g., upon marriage). It does not require registration for its creation. Formalisation through a PAN card and declaration deed is done later to create a corpus and for tax/banking purposes.

Yes. Post the 2005 Hindu Succession (Amendment) Act, daughters (both married and unmarried) are equal coparceners in the HUF with the same rights as sons. They have a birthright to ancestral property and can demand partition. Wives are members but not coparceners.

Ancestral property is automatically HUF property - the Karta has no discretion to exclude it. Self-acquired property (such as fixed deposits or property purchased from personal income) can be kept separate or voluntarily gifted to the HUF by an explicit written declaration with the appropriate stamp duty.

An initial corpus is essential. This can be formed by receiving ancestral property, by a member gifting their self-acquired property via a declaration/deed, or by receiving gifts from relatives (within specified limits). This initial capital must be clearly documented in the HUF deed.

Yes, absolutely. Self-acquired property remains your individual property unless you voluntarily give it to the HUF through an explicit written declaration. You have complete discretion whether to include self-acquired property in the HUF or keep it separate.

The declaration should: (1) Clearly mention the initial corpus amount/source (even if a small gift), (2) Specify any self-acquired assets being contributed, (3) Acknowledge ancestral assets (if any), (4) Be signed by the Karta and ideally other coparceners as witnesses. This ensures transparency.

Yes! A HUF can be the proprietor of multiple companies. Income earned belongs to the HUF and is taxed in the HUF's hands. The ONE designated Karta represents the HUF in business matters. The Karta can also represent HUF as a partner in partnership firms under Section 5 of the Partnership Act.

Stamp duty varies by state. For a simple HUF declaration/affidavit, typically, ₹100-500 stamp paper is required. However, for property transfer to an HUF, the gift deed stamp duty ranges from 2% to 7% of the property value, depending on the state. For Delhi, the rates are 2% (for female donees) or 3% (for male/HUF donees).

Yes. Suppose you're transferring property or funds into the HUF. In that case, that transfer requires its own document (gift deed/conveyance deed) with separate stamp duty (typically 3-7% of property value) and registration requirements as per your state's laws. This is in addition to the basic HUF deed.

While not strictly required by statute, having an affidavit or declaration by the Karta (in addition to the deed) is highly advisable for opening a bank/investment account and for ensuring clarity of documentation. This helps establish apparent authority and prevents operational issues.

The HUF deed must clearly state the initial contribution that forms the corpus (even if it's a small gift from a member/relative) and specify that the HUF will hold investments. This is crucial for establishing the HUF as a tax entity and avoiding future disputes about when the HUF became operational.

Best practice sequence: (1) Execute HUF deed on appropriate stamp paper with explicit initial contribution mention plus Karta's declaration, (2) Open PAN early using Form 49A, (3) Open bank account in HUF's name with proper documentation, (4) Ensure all transferred assets are documented adequately with separate transfer deeds if required.

Yes, under the Finance Act 2023, the new regime under Section 115BAC is now the default regime for HUFs from FY 2023-24 onwards. However, the HUF can opt out and choose the old regime if it files Form 10IEA before the due date.

No, income tax slab rates for HUF are the same as those for individuals under Section 115BAC. A tax-saving benefit arises from creating an additional taxable entity, enabling better income distribution and utilising the extra fundamental exemption limits.

No. The Section 87A rebate is only available to resident individuals. HUFs are excluded from this benefit under the law. This rebate provides tax relief up to ₹25,000 for individuals with income up to ₹7 lakh, but it does not apply to HUFs.

Splitting income saves tax by dividing a larger single taxable income into two smaller ones (individual and HUF). This allows for the use of fundamental exemption limits and lower tax brackets twice. A lower total family income is pushed into a higher 30% bracket, resulting in significant savings.

No! As per Section 10(2) of the Income Tax Act, any sum received by an individual from an HUF of which they're a member is fully exempt from income tax. This prevents double taxation of the same income.

Yes, a HUF can pay a reasonable wage to one Karta or member for services rendered to the HUF's business. This salary is a deductible business expense for HUF under Section 37 and taxed as salary income in the recipient's hands.

HUF continues to exist after Karta's death. The next senior-most coparcener (regardless of gender) automatically becomes the new Karta. HUF property and assets remain with HUF, managed by the new Karta. A new declaration is not required; however, banks and tax authorities must be notified.

Yes, while only ONE person can be the legal Karta, responsibilities of HUF management can be shared informally among other coparceners. However, for all official purposes (tax filings, bank operations, legal representation), only the designated Karta has authority.

Yes, as per the Supreme Court in Gowli Buddanna vs CIT (AIR 1966 SC 1523), a HUF can legally exist with even a single coparcener and other members who aren't coparceners (like the coparcener's wife). The family doesn't dissolve merely because coparceners reduce to one.

Partition means dividing the HUF property among coparceners. Only coparceners can demand partition. After a whole partition with physical property division, the HUF ceases to exist. Post-1978 partial partitions aren't recognised for tax purposes under Section 171(9) of the IT Act.

Following the 2005 amendment to the Hindu Succession Act, a daughter is a coparcener by birth in her father's HUF. Her marriage does NOT sever this coparcenary right. She continues to be a coparcener in her father's HUF with the right to demand partition, while also being a member of her husband's HUF.

No. A daughter-in-law is a 'member' of her husband's HUF, but not a 'coparcener'. She's entitled to maintenance and residence from the HUF property, but doesn't acquire a birthright in the property and cannot demand partition as per Mitakshara law.

Yes. As per the Hindu Succession (Amendment) Act, 2005 and the Delhi High Court ruling (2016), the senior-most coparcener can be Karta regardless of gender. Daughters with coparcener rights can become Karta if they are the senior-most coparcener. A junior coparcener (male or female) can also be Karta with the consent of all coparceners.

Yes, legally adopted children have identical rights as natural-born children as per the Hindu Adoption and Maintenance Act, 1956. They become members and coparceners of the adoptive family's HUF with all associated rights, including demanding partition.

SetIndiaBiz provides comprehensive, end-to-end services, including drafting a legally compliant HUF declaration on appropriate stamp paper according to state requirements, identifying the sole Karta, documenting the initial corpus, assisting with PAN card application, providing guidance on bank account opening, and ensuring smooth formalisation with expert support throughout the 8-12 day process.