What do You Mean by Hindu Undivided Family (HUF)?
Hindu Undivided Family (HUF) can be formed by the Hindus, Sikhs, Jains and Budhists. HUF cannot be created by an individual. A Hindu undivided family is a separate entity that is created by members of a family, where the members are lineal ascendants or descendants. When a person gets married, Hindu undivided family comes into existence. It can also be formed via the transfer of ancestral assets or from the money received as gift. In this type of business the senior most male member is designated as the karta and is the authorized signatory of it.
Hindu Undivided Family (HUF) cannot be transferred or sold or broken into parts without the consent of all members, and even the karta cannot do anything without everyone’s consent.
Hindu undivided family (HUF) can maintain a bank account; in this account every family member can pool their income. The amount will be handled by or authorized to handle by Karta. Total amount is invested into the business and it gives return. The Income Tax Act and Wealth Tax Act treat the Hindu undivided family (HUF) as an independent taxable body for the purpose of investment and taxation. Thus, HUF enjoy all deductions and exemptions under the Income Tax Act free from the income and tax liabilities of its members. HUF has a separate PAN card and is also assessed accordingly.
Features of HUF Account:-
- Every member of the family deposits their income in the common account.
- Karta of the family handles the account
- It cannot be transferred or sold or broken into parts without the consent of all members
- Tax benefits under various sections