HUF account refers to Hindu Undivided Family account. A Hindu Undivided Family is a the one where the husband, wife, children and children’s spouses (if any) all live together on the ancestral property. A legally declared HUF runs on a particular set of laws governing the marriages, ownership of the property, taxation and so on.
In this type of a bank account, an entity is created where all the members of the HUF can pool their income. This entity is handled by the Karta i.e. the senior most member of the family. For every transaction at the bank, the signature of the Karta will be required.
Features of a HUF account
There are some important features of a HUF account that makes it different from a savings account. They are:
- All the members of a HUF are allowed to deposit their income within a common entity.
- While all others member are allowed to participate, the authority of the account remains in the hands of the Karta
- There are various tax benefits available under different sections.
- The division of this entity can only happen at the approval of all the co-participants.
Documents required
- The HUF should have a unique PAN card, which is to be produced along with the PAN card of the karta.
- A declaration form, signed by all the members of the family is to be submitted to the bank.
- Residential proof of the karta
- ID proof of the karta
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This is a really sweet way of controlling shared finances such as rent/mortgage contributions, contributions for food and for health insurance. I am wondering if that while the fund is controlled by the karta, can others in the family access the fun to spend money for the family? Is there a joint ATM card, for example, that can be used by any member to buy shared resources such as food.
The various tax benefits and the security both financial and emotional is the plus point of the HUF account. But with the coming up of the nuclear family these types of accounts would be non-existence. This type of account tris to revive the age old joint family system. But what about the personal expenses? Can one take educational loans from these accounts?
An interesting form of the bank account. Quite an unusual for the ˝outsiders˝ - non-Indian residents might I add. Every country has its specialities, HUF account is definitely one of the Indian specialities. I think it´s a quite bold decision as we very well know how love for the close ones and finances may go wrong. An interesting article with a lot of interesting information.