What is HUF?

HUF means Hindu Undivided Family. It is a special way for a Hindu family to manage money and property together. The family members share the money and assets, and the HUF is treated like a separate person for tax and legal matters.

History of HUF

HUF has been followed in India for a long time. It comes from old Hindu laws where families lived together and shared everything. The Indian government made it official in the Hindu Succession Act, 1956. This law says how property should be divided in a Hindu family. Over time, HUF became a legal way to save tax and manage family money.

Who Can Have a HUF?

HUF is mainly for Hindus, but also for Jains, Sikhs, and Buddhists. A HUF starts when a Hindu family has a common ancestor and stays together. The oldest male member is called the Karta, and other family members are called Coparceners.

Tax Benefits of HUF

Many people make a HUF because it helps save tax. Some key tax benefits are:

• Separate Tax File – HUF gets its own PAN card and can file taxes separately.

• More Tax Deductions – HUF can claim tax benefits just like a person. This helps to reduce tax.

• Income Splitting – If a family earns money from property or business, they can show it under HUF instead of a single person, reducing tax.

• Save Tax Under 80C – HUF can invest in LIC, PPF, NSC, fixed deposits, and mutual funds and get tax benefits.

• Tax-Free Gifts – A HUF can get gifts up to ₹50,000 per year without paying tax.

How is HUF Different from an Individual Account?

HUF is different from a normal personal account. Here is how:

HUF and Demat Account

A HUF can also open a Demat account to invest in stocks. This gives many benefits:

• Separate Investments – HUF’s stock investments are different from personal ones.

• Better Tax Savings – Profits from stock trading are taxed under HUF, which can help save tax.

• More Investment Options – The family can invest together and earn more.

Open Demat Account and Start Trading!

How to Create a HUF?

Creating a HUF is easy. You need to follow these steps:

1. Make a HUF Deed – This is a paper that lists all family members.

2. Get a PAN Card for HUF – Since HUF is separate, it needs its own PAN card.

3. Open a HUF Bank Account – The Karta (head of the family) opens a bank account in the name of the HUF.

4. Start Investing and Managing Money – The HUF can buy property, invest in shares, or do business.

Things to Know Before Making a HUF

• All money in HUF belongs to the whole family.

• It is not easy to close a HUF because all assets must be divided among family members.

• Before 2005, only male members could control HUF, but now daughters also have equal rights.

• A single person cannot make a HUF. It must be a family.

If you want to invest in stocks and save tax, you can open a separate Demat account for HUF with Motilal Oswal. This will help you manage family investments separately, enjoy tax benefits, and grow wealth efficiently.

Related Blogs - Can a HUF open a demat account? | How HUFs can actually help you save on taxes? | What happens to the demat account of HUF on the death of Karta? |