A Hindu Undivided Family (HUF) is a specific type of family recognized under Section 2(31) of the Income-tax Act, 1961. It considers a family—comprising individuals who are descendants of a common ancestor—as one single “person” for taxation purposes. Hindus, Buddhists, Jains, and Sikhs may constitute an HUF.
Structure of an HUF
An HUF consists of three main groups of people:
- Karta
The eldest member of the family who acts as the head and manages the HUF’s assets. - Coparceners
Family members (now including daughters, after the 2005 amendment) within four generations of the Karta. They have three key rights:- Right by birth to a share in joint family property
- Right to demand partition of the HUF assets
- Right to legal claim on property
- Members
Other family members who belong to the HUF but do not have coparcenary rights.
Each HUF has its own Permanent Account Number (PAN)—separate from the PANs of individual family members—so it can do things like open bank or demat accounts and invest in securities.
Marriage and HUF Membership
- When a male member marries, his wife becomes a member of his HUF but not a coparcener. She cannot demand partition or her own share.
- Their children automatically become coparceners of that HUF.
- When a daughter marries, she remains a coparcener in her father’s HUF and also becomes a member of her husband’s HUF.
Major Benefits of Forming an HUF
A. Tax Savings
- Separate Tax Entity
- An HUF gets its own basic exemption of ₹2.5 lakh—separate from each family member’s exemption.
- Exempt Income Sources
- Gifts or property transfers to the HUF without payment.
- Income from a woman’s personal property (“stridhan”).
- Income of an impartible estate (taxed to the estate holder, not the HUF).
- Deductions
- An HUF can claim all the same deductions as an individual (e.g., Sections 80C, 80D).
- Income Splitting
- Profits from family businesses or ancestral property can be taxed in the HUF, reducing each person’s individual tax liability.
B. Wealth Management
- Joint Management
All ancestral assets—like property, investments, or a family business—are managed under one roof. - HUF Demat Account
- You can open a separate HUF demat account (e.g., with Groww) to buy stocks, mutual funds, bonds, ETFs, or apply in IPOs.
- Income from this account is taxed in the HUF, not in each individual’s hands.
How to Create an HUF
- Draft an HUF Deed
- Statement by family members declaring the HUF’s creation
- Names of the Karta and all coparceners/members
- Details of contributions by each member
- Apply for an HUF PAN
- Complete Form 49A online to get a PAN for your HUF.
- Open an HUF Bank Account
- Open a new bank account in the HUF’s name to handle all its income and expenses.
Opening a Groww HUF Demat Account (Example)
- Fill out the Groww form online for an HUF demat account.
- Verify documents with the Groww team.
- Send back the account opening form, signed and sealed by the HUF’s Karta.
Conclusion
An HUF is a strong means for Indian families to accumulate resources, manage inherited wealth, and save taxes. Identified as its own legal entity, an HUF provides families with additional exemptions, allows income splitting, and provides a clear solution for managing joint investments. If you possess ancestral property or a family business, opening an HUF may be an intelligent decision for your family’s financial well-being.
