HUF (Hindu Undivided Family) PAN & TAX Doubts

[350modena]

Just another thing I recall reading about HUFs.

While HUFs made the most sense 50 years ago when there were large joint families with Head of Household earning, some ancestral properties and large number of members.

However the ITD appears to be considering to phase off this type of entity soon. So those who are thinking of this do some research on the longevity of this and the main aim to have an HUF.

 

[yolofino]

If any member transfers any assets as a gift then the income generated would be taxed to HUF.
Yeah if you intend to transfer the asset to get it back after time period then clubbing provisions would apply.
Am i right? @its_karan

Do we need to document any such transfers or make any deed to record the same? (Assuming a member transfers amount with no intention of getting it back and such transferred amount will be invested by HUF in mutual funds etc. - I guess the tax liability will be on HUF (for capital gains))

 

[Pradumya]

make any deed to record the same

Yes.. during formation of HUF it is better that you mention all of the transactions that will be done by karta and members.
It's not mandatory but better if you do.

 

[sadhunath]

I see that gifts to HUF by members are subjected to clubbing provisions and as such provides no tax incentives to tranfer Karta's excess income to HUF. So, what are the possible ways by which one can better utilize HUF for tax purposes?

1. Gifting real estate?
2. Gifting money from non-members? It has to be noted that it will be taxable as per HUF's slab after 50k.
3. Loan from members? It has to be at reasonable interest rate. Interest free loans from members are considered as gift and are liable to be clubbed.

Also, does any one knows how to fund HUF with initial capital with shares? I would rather transfer shares directly rather than selling my portfolio and creating a taxable event.

 

[yolofino]

Any 0 MAB bank account for HUF? Especially that allows online ASBA facility + debit card in HUF name.

 

[avikrish]

Any 0 MAB bank account for HUF? Especially that allows online ASBA facility + debit card in HUF name.

If you have HUF pan card , then simply provide karta aadhaar, HUF affidavit/deed, HUF Pan card , some banks also ask members aadhaar cards, and open a bank account. Almost all savings bank accounts and variants of all banks supports HUF. its just bank employess doesn't know.

HUF banking application cannot be done online, it has to be manual process and it will take time. So many bankers doesn't have knowledge, so better to check with bank managers if you get a response like its not possible.

In every banking account product, you can check the eligibility criteria section, whether that banking product supports HUF or not.

Once you have HUF savings account, simply open a demat from any discount broker.

ASBA facility is a basic banking feature where almost all top banks provide in net banking portal.

For savings account, almost all will support HUF.

I have faced a lot of issues with HUF current account, IndusInd rejected 2 times because of their shitty process and bankers mistakes.
ICICI, Axis also having issues.

IDFC First bank opened current account with shop name with HUF pan card in 2 days.

Other pointers:

I) A person can be part of 2 HUF's. E,g say the person name is Ram

1) Ram will have individual Pan card.
2) Ram's Father, Ram's Mother, Rams's siblings, and Ram under one HUF--> here Ram's father will be the Karta.
3) After marriage, Ram can create a new HUF deed with Ram as Karta , with his wife, children. --> Ram will be karta
Like this a person can be part of 2 HUF's.

II) It is always better to use HUF's for business entity/firms not for rents on real-estate. A business firm can be created or changed within short span on record.

III) For land registrations etc... never ever use HUF stuff it will just complicate things.

IV) The money flow direction should be like , From HUF bank account to HUF members, not the other way. because individual members pay tax and then transfer the amount then what difference/advantage is there by making a transfer from individual to HUF.


Open to correct the points if anyone has a better/different views

 

[NamanGupta]

Any 0 MAB bank account for HUF? Especially that allows online ASBA facility + debit card in HUF name.

Not a 0 balance but with ₹5k MAB you can check Federal bank Club A/c it has ASBA service and debit card in Name of HUF

Can be opened from branch only not online (usually it take 7-8 working days)

 

[APT]

HUF not a good choice for SB / FD interest taxation?

 

[avikrish]

HUF not a good choice for SB / FD interest taxation?

HUF itself acts a different pan card, which means complete new entity, where you can save taxes, so it is good choice to save taxes

 

[sadhunath]

HUF itself acts a different pan card, which means complete new entity, where you can save taxes, so it is good choice to save taxes

It's all fine and dandy... but the tricky part is funding the HUF. Members of the HUF can only fund 50k per year without paying tax. Members can't even lend money to the HUF as the IT act calls for "reasonable rate of interest", which may be construed to be over the repo rate of 6.5%.

 

[avikrish]

It's all fine and dandy... but the tricky part is funding the HUF. Members of the HUF can only fund 50k per year without paying tax. Members can't even lend money to the HUF as the IT act calls for "reasonable rate of interest", which may be construed to be over the repo rate of 6.5%.

I don't understand why the focus is on sending money to huf rather than generating income via huf and distribute to huf members

 

[sadhunath]

I don't understand why the focus is on sending money to huf rather than generating income via huf and distribute to huf members

Because not everyone here has a business under HUF, and an HUF cannot draw salary.

I'm a salaried individual with little to no ansestral property whcih can potentially yield rent.

 

[avikrish]

Because not everyone here has a business under HUF, and an HUF cannot draw salary.

I'm a salaried individual with little to no ansestral property whcih can potentially yield rent.

Thank you , got your view 😀

 

[APT]

HUF itself acts a different pan card, which means complete new entity, where you can save taxes, so it is good choice to save taxes

so we can avoid 40000rs FD as well as SB interest via HUF. is FD insured upto 5L for HUF also?

 

[avikrish]

so we can avoid 40000rs FD as well as SB interest via HUF. is FD insured upto 5L for HUF also?

HUF is just like another virtual human whose life is their in the deed and karta has full authority on fund management.

Yes , you can save the another Rs40,000 on your interest, in similar lines, you can open demat and save 1.2 lak ltcg separately for this huf demat.
Almost every financial product (90%) accepts huf. You can check this in eligibility criteria of any financial product.

FD insurance of 5 Lakhs will be there for each bank accounts not on pan cards.

 

[NamanGupta]

so we can avoid 40000rs FD as well as SB interest via HUF. is FD insured upto 5L for HUF also?

Yes, regardless of whether it's a Hindu Undivided Family (HUF) or an individual, amounts up to ₹5 lakh are insured.