A PAN Card is a very important document for Hindu Undivided Families (ḪUFs), second only to the HUF Deed. It establishes the HUF as a financial entity that can open bank accounts, buy property and make investments, among other things. In this article, we’ll examine how an HUF can get a PAN Card, open a bank account, the tax benefits available to it and go over the HUF concept, too.
How to Get a PAN card for an HUF
An HUF is a separate entity, like a company or partnership. It can, therefore, apply for a PAN card all by itself. Without a PAN card, it would not be able to do any of what an HUF is set up to do, which is to enter into financial transactions.
Details for HUF PAN Card Application
1. The name of the HUF (or the name of the Karta [patriarch of the family], followed by ‘HUF’)
2. HUF’s address and residence proof
A. Copy of Karta’s Aadhaar card;
B. Copy of Karta’s Voter ID;
C. Copy of Karta’s driver’s license or passport;
D. Copy of Karta’s Ration card;
3. Source of income to the corpus;
4. Names, father’s name and addresses of all coparceners of the HUF, with affidavit made by the Karta;
5. Signature of the Karta on the completed Form 49A.
If the documents are in order, the PAN card would arrive around 21 days after submission. You can check its status here.
How to Open an HUF bank account
Once the PAN card has arrived, the HUF can finally open a bank account. The necessary documents/information required are:
1. The name of the HUF;
2. Photograph of the Karta;
3. Proof of address and identity of the Karta;
4. PAN card and PAN number of the HUF;
5. The list of coparceners and members;
6. A declaration by the Karta as to which members and coparceners are authorised to operate the bank account;
7. Any further details as demanded by the bank, at the time of the opening of the account;
The bank account will be in the name of HUF and the Karta, and only those authorised by the Karta may operate it. An HUF bank account is a current account, which would attract higher charges from the bank.
HUF Eligibility & Deed Creation
Hindu Only: Hindu, as per the law, includes Sikh, Jain or Buddhist families, in addition to Hindu.
Creating a Corpus: It must be set up first by forming a corpus. Any assets transferred to a will or ancestral property or any gifts from a relative can be used to create a corpus. Once you have established the corpus, the deed for HUF can be created.
Stamping the Deed: A deed is a stamp paper document, with the name of the Karta, coparceners, and members. The deed also should include the address, bank details and the source of income from where the corpus will be funded. A declaration (by the Karta) of all coparceners and members authorised to perform financial transactions is to be attached to the deed.
Who can be included in an HUF?
1. An HUF can be created by a joint family of, say, for instance, a father and two sons, all married and doing business together. Anyone by birth is included in the family.
2. A husband and wife can also form an HUF for tax benefits and to share the income earned from collective and ancestral properties. The eldest male member becomes the Karta (or the head) and has the authority to operate the accounts and other assets details under the HUF.
The members of the family that can be included in an HUF are:
a. Sons and daughters (Married and unmarried)
b. Husbands and wives
c. Grandsons and great-grandsons
Both sons and daughters are termed coparceners (according to Hindu Succession Act, all daughters are now also classified as coparceners) and have the right to become the next Karta, in the event of the death of the present one.
Anyone by birth or marriage will become a member of the HUF. However, only coparceners can succeed the Karta. Members do not have this privilege.
Tax benefits available to HUFs
An HUF, as it is a separate entity, is taxed separately from its members and coparceners. Thus, the deductions and exemptions under Section 80 can be claimed by the HUF as well, thereby lowering individual tax liability. Similarly, rebates can be sought on loans taken, rent paid and other expenses.
This is why chartered accountants generally advise all Hindu married couples to form an HUF. Generally, HUFs end up paying 30% less tax than others.