Use a capital asset to establish the corpus of the HUF. This can be ancestral property, assets gifted by relatives and friends, or received by the HUF through a will. If you give a personal asset to the HUF, the income will be clubbed with your own. Gifts of over 50,000 a year received by HUF will be taxable. The best way is for the HUF to receive assets as part of a will.
2. Make a deed
You have to prepare a deed on stamp paper declaring the formation of the HUF. It should have all the details, including the name of karta, co-parceners , address and source of funds in the corpus. Once the declaration deed is made, the karta should apply for a permanent account number (PAN) for the HUF. This is mandatory because all financial transactions must carry PAN.
3. Open bank A/C
After you are allotted a PAN, open a bank account in the name of the HUF. It is also advisable to get some stationery printed for official communication. The HUF is now functional . The karta will have to invest in taxsaving instruments and file tax returns on behalf of the HUF.
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