Contents Covered
- What is HUF
- Who can create HUF
- How to Create HUF
- What Business or Activities can be done in HUF
- Conclusion
What is HUF
HUF stands for Hindu Undivided Family. It is a legal entity recognized under Indian law that allows a family to do business. The concept of HUF came because of the joint family system in our country. HUF simply helps the family for the continuity of the business.
Let us understand it with an example
Suppose there is a person, Mr. X
He is doing business in his own name or in proprietorship.
And it is an contractual business and the contract is with him.
In this case if Mr. X wants to secure business for his family then he should have some legal constitution which works even in the absence of Mr. X
Here comes the role of HUF
Mr. X can create his HUF
And HUF is working as long as the Karta and co-parceners are willing to continue it
Who can create HUF
A Hindu Undivided Family (HUF) can be created by Hindu, Sikh, Jain, or Buddhist family.
There must be at least three person to formulate HUF
Karta – Head of the family
Coparcener – At least one
Member – Wife
*in case there are two or more coparcener, there is no need to add member to it
How to Create HUF
Step 1: Arrange the basic KYC docs for Karta, Coparceners and Member (PAN and Aadhar)
Step 2: Prepare the Affidavit for HUF
Step 3: Affidavit needed to be printed and notarized on stamp paper
Step 4: HUF Stamp needed to be created for Karta Signature
Step 5: Apply for the PAN Card for HUF
Step 6: Open the Bank Account for HUF
Step 7: After getting the PAN Card and Account opening, the HUF is ready for business
What Business or Activities can be done in HUF
A HUF is a distinct legal entity that allows families to do business and pool assets and manage them collectively. A HUF can engage in various businesses and investment activities and at the same time there are some restrictions as well
Let us understand them
✅ Businesses Allowed for HUF
(These are a few examples, there are lots of other business as well, that can be done)
- Trading & Investments
Stock Market Investing (long-term holdings, but speculative trading is discouraged)
Mutual Funds & Bonds
Real Estate Investments (buying, selling, and renting properties)
Gold & Commodity Investments
- Retail & Wholesale Business
Grocery Stores, Kirana Shops
Wholesale Trading (FMCG, Electronics, etc.)
Textile & Clothing Business
- Manufacturing & Small-Scale Industries
Handicrafts & Artisanal Products
Food Processing (spices, packaged foods, etc.)
Furniture Making
- Service-Oriented Business
Rental Income from HUF-Owned Properties
Consultancy & Advisory Services (within legal limits)
Contractual Workings such as designing, development etc
Tuition & Coaching Services
- Agriculture & Farming
Farming, Horticulture, Dairy Farming
Selling Agricultural Produce
❌ Businesses NOT Allowed for HUF
Profession-Based Income (HUF cannot practice professions like medicine, law, or chartered accountancy)
Partnership in Professional Firms (HUF cannot become a partner in CA, CS, or legal firms)
Salary-Based Income (HUF members can earn a salary, but the HUF itself cannot be employed)
Conclusion
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