How to Create an HUF: Deed, PAN and Bank Account in Order

To create an HUF on paper, you draft a deed that names the Karta and the family members, sign it on stamp paper of the value your state requires, apply for a PAN in the HUF's name, open a bank account, and then bring in capital from the right sources. The deed comes first. Everything else asks for it.

Before you start: do you qualify?

You need a family, which in practice means you are married, and the family must be Hindu, Jain, Sikh or Buddhist. If you are not sure what an HUF is or whether it suits you, read what is an HUF first. The steps below assume you have decided to go ahead.

The steps, in order

1. Fix the name and the Karta. The usual name is the Karta's name followed by "HUF", for example "Ramesh Gupta HUF". The Karta is the manager, normally the senior-most coparcener. A coparcener is a person born into the family, son or daughter, who has a share by birth.
2. Draft the deed. The deed is a declaration. It states the HUF's name and address, the Karta, each coparcener and member with their relation to the Karta, and the money or property the HUF starts with. The Karta and the adult members sign it.
3. Print it on stamp paper. Stamp duty is a state tax on documents. Each state's stamp law fixes the value for a declaration of this kind, so the figure in Maharashtra is not the figure in Uttar Pradesh. Ask a local stamp vendor or check your state's stamp schedule. Getting the deed notarised is common practice, and banks expect it.
4. Prepare the Karta's affidavit. The PAN application for an HUF needs an affidavit by the Karta listing the coparceners as on the date of application.
5. Apply for the HUF's PAN. Until 31 March 2026 this was Form 49A. From 1 April 2026 the forms changed, and Indian non-individual applicants, which includes an HUF, apply in Form 94. You apply through Protean (earlier NSDL) or UTIITSL. The Karta signs, and the Karta's proof of identity, address and date of birth go with it. The new form also makes the mobile number and office address compulsory and asks for the details of the person who represents the HUF, which is the Karta.
6. Open a bank account in the HUF's name. Banks typically ask for the deed, the HUF's PAN, the Karta's KYC papers and a declaration signed by the members. All HUF money must move through this account, never through your personal one.
7. Bring in capital. This is the step that decides whether the HUF saves any tax. See the table below.
8. File the first return. Register the HUF's PAN on the e-filing portal. Use ITR-2 if the HUF has no business income, ITR-3 if it runs a business, and ITR-4 if it uses the presumptive scheme. Our guide on which ITR form to file explains the difference. The new tax regime is the default.

Where can the HUF's capital come from?

You are probably asking: can I just transfer money to it? You can, but look at who pays tax on the income afterwards.

Why does the clubbing rule exist? Without it, anyone could halve their tax by moving savings into a family entity they control. So the law looks through the transfer and taxes the income where the money came from.

One caution on gifts from relatives. For an individual, "relative" covers parents, siblings and others. For an HUF, the law defines relative as a member of that HUF. A gift from an uncle or a family friend is a gift from a non-member. Advisers differ on whether a gift from the Karta's own father is safe, so take advice before accepting a large one.

A worked example

Assumptions: FY 2025-26, new regime, the HUF has no other income, and the Karta is in the 30% slab.

• Case 1. The Karta moves Rs 10 lakh of his own savings to the HUF. The HUF books a fixed deposit at 7% and earns Rs 70,000. That Rs 70,000 is clubbed with the Karta's income. He pays 30% on it, Rs 21,000, plus 4% cess: Rs 21,840. The HUF has saved nothing.
• Case 2. The same Rs 10 lakh comes to the HUF under the grandfather's will. The Rs 70,000 interest is the HUF's own income. It is below the HUF's Rs 4 lakh basic exemption, so the tax is nil.

Same deposit, same interest, a difference of Rs 21,840 a year. The source of the capital is the whole story.

The mistakes people usually make

• Treating one state's stamp value as universal. A deed on under-valued stamp paper can be questioned by a bank or impounded when produced as evidence. Check your own state's rate.
• Using the old PAN form. Many guides still say Form 49A. Applications on the old form are not accepted after 31 March 2026.
• Funding the HUF from a personal account and expecting lower tax. The income is clubbed. If you report it in the HUF's return anyway, you risk tax, interest and a penalty for under-reporting.
• Mixing accounts. Paying personal bills from the HUF account, or receiving HUF rent in your own account, makes it hard to prove what belongs to whom.
• Forgetting the return. Once the HUF's income crosses the basic exemption, a return is due every year. Missing it means a late fee and lost carry-forward of losses.

Should you do this yourself? The PAN and bank account are form-filling, and you can do them. The deed is worth getting drafted properly, because every later step relies on its wording. What to do next: collect the Karta's PAN, Aadhaar and address proof, and the Aadhaar or PAN of each family member.

Frequently asked questions

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