Maximise Tax Savings Up to ₹1.5 Lakh: Your Complete Guide to Getting a HUF PAN Card

Managing family finances and optimising taxes can be a complex undertaking. One tool that can significantly simplify this process, especially for Hindu Undivided Families (HUFs), is a HUF PAN card. You might be wondering, "What exactly is a HUF PAN?" This comprehensive guide will break down everything you need to know about HUF PANs, from eligibility and application to the significant role they play in income tax saving. 

What is a HUF?

A Hindu Undivided Family (HUF) is a distinct legal entity recognised under Section 2(31) of the Income Tax Act of 1961. It consists of all lineal descendants from a common ancestor, along with their wives and unmarried daughters. You can think of it as a family unit for tax purposes, with its own identity separate from the individual members. Interestingly, even Sikh, Buddhist, and Jain families can form HUFs, even though they are not governed by Hindu Law.

What is a HUF PAN Card?

A HUF PAN card is a unique 10-digit alphanumeric identifier issued by the Income Tax Department specifically to a Hindu Undivided Family. It's like an individual PAN card, but for the HUF as a whole. This PAN allows the HUF to file its own income tax returns, conduct financial transactions, and manage its finances as a separate entity. The head of the family, known as the "Karta," applies for and manages the HUF PAN. 

HUF Eligibility: Who Can Form One?

Not just any group of people can form a HUF. There are specific eligibility criteria:

• A single individual cannot form a HUF. It requires a family unit.
• A HUF can be formed upon marriage, including the husband, wife, and their children.
• The HUF comprises a common ancestor and all their lineal descendants, their wives, and unmarried daughters.
• Hindus, Buddhists, Jains, and Sikhs are all eligible.
• HUF assets typically originate from ancestral property, gifts, wills, or contributions from family members.

Creating a HUF: The Essential Steps

Forming a HUF involves more than just family members living together. There are formal steps:

1. Creating a Corpus: The HUF needs a pool of assets. This can come from ancestral property, gifts, bequests, or joint family property.
2. Drafting a HUF Deed: This legal document outlines the HUF's members, its business activities, the source of the corpus, and who is authorised to manage its finances. It should be on stamp paper and signed by the Karta and coparceners.
3. Obtaining a HUF PAN: This is crucial for all financial and tax-related activities.
4. Opening a HUF Bank Account: This allows the HUF to manage its finances separately from individual family members. 

The HUF Deed: A Vital Document

The HUF deed is the foundation of the HUF's legal standing. It should include:

• Names and details of all coparceners and members.
• The HUF's address and bank account information.
• The source of the HUF's funds.
• A declaration by the Karta listing authorised individuals for financial transactions.

PAN in Tax Saving: The HUF Advantage

One of the most compelling reasons to form a HUF is the tax benefits. A HUF is treated as a separate tax entity, offering several advantages:

• Separate Deductions: HUFs can claim income tax deductions under various sections, including Section 80C. This means the HUF can invest up to ₹1.5 lakh in eligible instruments and reduce its taxable income, separate from the individual members' 80C limits.
• Other Deductions: HUFs are also eligible for deductions under sections like 54 (B, D, EC, F, G) and 47, relating to capital gains.
• Standard Deduction: HUFs, like individuals, can claim a standard deduction.
• Home Loan Benefits: HUFs can claim deductions for home loan principal repayment under Section 80C and interest paid under Section 24B.
• Capital Gains: Under Section 54F, HUFs can save on long-term capital gains by reinvesting the proceeds into a residential property, subject to conditions.
• Gift Benefits: Gifts received by the HUF up to ₹50,000 are tax-free.

It's important to remember that neither the HUF nor its members can claim the same deduction. Careful planning is essential to maximise tax benefits.

Who Can Be Included in a HUF PAN Card?

The HUF comprises specific family members:

• Sons and daughters (whether married or unmarried)
• Husbands and wives within the HUF
• Grandsons and great-grandsons

Both sons and daughters are coparceners, meaning they have a share in the HUF's property and can become the Karta. Membership in the HUF is by birth or marriage.

How to Apply for a HUF PAN Card

Applying for a HUF PAN card is a formal process. The Karta, as the head of the family, is responsible for the application.

Documents Required:

• Name of the HUF (or Karta's name followed by "HUF")
• HUF's address and proof of residence
• Copy of the Karta's Aadhaar card
• Other identity proof for the Karta (Voter ID, Driver’s License, Passport, Ration Card)
• Source of income for the HUF's corpus
• Names, fathers' names, and addresses of all HUF coparceners, along with an affidavit from the Karta.
• Signed Form 49A.

Opening a HUF Bank Account

After receiving the HUF PAN, the next step is to open a bank account. This allows the HUF to manage its finances as a distinct entity.

Documents Required:

• Name of the HUF
• Photograph and identity/address proof of the Karta
• HUF's PAN card and number
• List of coparceners and members
• Declaration from the Karta specifying authorised individuals for account operation.
• Any additional documents required by the bank.

HUF bank accounts are typically current accounts, which may have different fee structures than savings accounts. 

FAQs on HUF PAN Card

• Is a HUF PAN mandatory? While not strictly mandatory, it is highly recommended for tax benefits and financial transactions.
• Who manages the HUF PAN? The Karta is responsible for applying for and managing the HUF PAN.
• Can a HUF have multiple PANs? No, a HUF can only have one PAN.
• What form is used for HUF PAN application? Form 49A.
• How long does it take to get a HUF PAN? Typically, around 15-20 business days.
• How can I track my HUF PAN application? You can track it online through the Income Tax Department's website.
• What if HUF details change? You need to inform the Income Tax Department about any changes.
• Are there fees for HUF PAN application or updates? Yes, there are nominal fees.

Conclusion

A HUF PAN card is more than just a formality. It is a powerful tool for financial planning and income tax saving. Families can optimise their tax liabilities, manage their finances efficiently, and ensure a smooth transition of assets within the family by establishing a HUF and obtaining a PAN. It is crucial to understand the uses of PAN, specifically for HUFs, for maximising these benefits. Thus, you can get your PAN number if you are eligible, since it is an important step in managing family finances.

Also read:

• Your Comprehensive Guide to PAN Card Services: Apply, Check Status, Download, and More

• Tax Concepts Made Simple: A Guide for Beginners

• PAN 2024 Developments: Being Adaptable, User-Friendly and Efficient

• Uses of PAN Card: Essential Guide for Financial Transactions

• Unlock the Full Potential of Your PAN Card: Elevate Security and Accuracy

Story by Bruhadeeswaran R.

Bruhadeeswaran has 15+ years of experience as a content strategist, communication, and editorial professional. Currently, he is leading an innovative content development process, translating complex B2B products into engaging, user-friendly narratives.