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May 7, 2020

Steps for formation of HUF by Affidavit & Gift and Get PAN Card

by Mahesh Mara in Compliance Law, Income Tax

Steps for formation of HUF by Affidavit & Gift and Get PAN Card

Hindu undivided family is treated as a separate entity for assessment under the Income Tax Act. Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract; it is created automatically in a Hindu Family. You can save taxes by creating a HUF. Buddhists, Jains, and Sikhs can also form a HUF. HUF has its own PAN and files tax returns independent of its members.

Benefits of Forming an HUF

1) A Separate Legal Entity, get benefit of Basic Slab Rates at the time of filing of returns of income and Deduction on investment by HUF

2) The Family Business can be structured in such a way so that one can do Tax Planning for Income Tax and GST

3) The Moment HUF is formed all the members has equal rights in HUF property

4) To Start HUF by receiving GIFT, always receive gift from members who are not Coparcener in HUF. Like from Father or Mother who is not a member of small HUF of Son his spouse and Childrens. The gift received by HUF from non-relatives is exempt up to Rs. 50,000 in a year. 

5) One Should Ensure clubbing provision are not attracted as per Income Tax Act

6) You can think of buying a residential house property in the name of the HUF by taking loan and claim Home Loan Interest deduction

Procedure to form HUF:

By following below steps one can create a HUF:

Step 1: Creation of HUF document

The first step in creation of a HUF is by preparing an Affidavit. HUF deed is a formal document which provides the details of the Karta and Co-parceners of the respective HUF. A declaration provided by each member of the family where they declare that the Karta has the authority of the accounts vested in his hands, that the members are the only members of the HUF, the karta holds the right to govern all the transactions of the HUF accounts on behalf of the members. The deed also states the capital has been introduced in the HUF.

Below is the format of HUF affidavit:

AFFIDAVIT

I __________________ (Name of Karta) Son of                                                  (Name of father) Resident at    _________________________  (Address) of ____Years. Adult do hereby declare:-

  1. That I am Karta of ________________ HUF
  2. That I have received on behalf of the H.U.F gift of Rs 1000 by way of CASH from my brother _______________ this formed a corpus of the HUF.
  3. That the HUF at present is consisting of the following members :-
    • ___________________________ Residing at _________________________________________________________ (Detail of Karta)
    • ___________________________ Residing at _________________________________________________________(Detail of Co parcenur)
    • ___________________________ Residing at _________________________________________________________(Detail of Co parcenur)
    • ___________________________ Residing at _________________________________________________________(Detail of Co parcenur)

That the above statement is true to the best of my knowledge and belief.

Declare this on Date: DD/MM/YYYY

__________________

WITNESS:

1.

2.

DECLARATION OF GIFT MADE

Gift made by ______________ to the HINDU UNDIVIDED FAMILY of _______ HUF

I __________________, Residing ______________________________,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 in words) by cash to _______________ HUF
  2. The above gift has been duly accepted by  _______________, Karta of his Hindu Undivided Family and has been duly acknowledgement hereunder.
  3. This declaration of Gift is made to record the fact that I have made this Gift in favor of the donee as above, who now has the absolute right, title and interest in the gifted amount.

Date:

                       _______________

ACKNOWLEDGEMENT OF GIFT I _______________ hereby acknowledgement having received the above gift made to my Hindu Undivided family by _______________(Name of the person giving gift )

_______________

Signature of Karta

Step 2: Applying for HUF PAN

HUF is treated as a separate legal entity from its members; hence HUF is required to apply for a separate PAN card. HUF can apply for pan card in Form 49A either online or offline. Once the PAN is allotted to the HUF than it would require to file a separate Income Tax Returns. The application for PAN card and the Income tax return is to be signed by the Karta.

The following is the steps for applying PAN online:

1. Go to https://www.onlineservices.nsdl.com/paam/endUserRegisterContact.html

2. Select application type as New PAN- Indian Citizen and Category as HINDU UNDIVIDED FAMILY

3. Provide Name of HUF in last name column and date of incorporation of HUF

4. Enter mail id and mobile no

5. Enter Captcha and click on “Submit” button

It will redirect to PAN application form

  1. Now, fill the details in the application. Personal details will be filled automatically. Fill Source of income, contact details and Communication address of the HUF and click on “next” button
  2. Now, Fill the AO Code and click on “Next Button”
  3. Enclose the details of documents to be submitted as proof of identity, address and Date of birth. For applying PAN of HUF Aadhaar card of Karta and Affidavit of HUF is required.

Now submit the form and make payment online. After submission take print out of the application and send the application form to below mentioned address:

INCOME TAX PAN SERVICES UNIT
4th Floor, Mantri Sterling, Plot No. 341,
Survey No. 997/8, Model Colony,
Near Deep Bungalow Chowk,
Pune – 411 016

You will receive the PAN within 15 days

Step 3: Opening a separate Bank Account for HUF:

HUF is required to open a Bank account where it will receive all income. HUF can open bank account in any bank account.

Once all the above steps are performed the HUF can start making investments.

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