HUF
Hindu Undivided Family
Distinct legal entity under Indian tax and personal law. Has its own PAN, files its own ITR. Frequently appears on Indian cap tables as a separate shareholder.
A Hindu Undivided Family (HUF) is a separate legal entity recognized under Indian personal law (Hindu Law) and tax law (Income Tax Act 1961). It comprises persons lineally descended from a common ancestor and includes wives and unmarried daughters. The HUF is managed by the Karta (the senior-most male member, or in the absence, a female member post the *Vineeta Sharma v. Rakesh Sharma* (2020) judgment).
Why HUFs appear on Indian cap tables:
- Separate PAN, separate ITR — the HUF is taxed independently of its members, qualifying for the same basic exemption limit and slab rates as an individual. This creates a planning opportunity to split family income.
- Holding ancestral property and family business stakes — many family businesses' founder shareholdings are held by the family HUF.
- Wealth distribution to coparceners — HUF property devolves on partition, providing a structured succession mechanism.
Tax treatment:
- HUF income is not clubbed with the Karta's individual income (unlike spouse/minor child income under Section 64).
- HUF gets the basic exemption limit (₹2.5 lakh under the old regime; revised amounts under the new regime) and slab rates.
- HUF can avail Section 80C deductions, holding period benefits for capital gains, etc.
- However, HUF cannot have salary income — only business / capital / other-source income.
As a shareholder:
- Shares are held in the name of the HUF (through Karta) — e.g., 'Arun Sharma, HUF'.
- PAN of the HUF (different from the Karta's individual PAN) is used in the Register of Members.
- For private companies, transfer of shares from individual to HUF is permitted but considered a gift for tax purposes (taxable under Section 56(2)(x) above thresholds, with exemptions for transfers from relatives).
- For CCPS / CCDs allotted to an HUF investor, FDI / FEMA implications need to be checked if the HUF includes non-resident coparceners — generally HUFs are resident, but the question can arise.
Pitfall: Treating the Karta's individual PAN as the shareholder PAN when the shares are actually HUF property creates messy reconciliation issues with PAS-3 / MGT-7 / Beneficial Ownership (BO) returns.
Kapitalyze's Cap Table supports HUF as a first-class shareholder entity type.
10-character tax ID issued by the Income Tax Department. Mandatory for opening bank accounts, filing returns, and high-value transactions.
Ledger of every security issued by a company — equity, preference, options, warrants, convertibles — and the ownership percentages they represent.
Category of shares with distinct rights — equity vs preference; voting vs non-voting; ordinary vs Class A/B/DVR. Governed by Section 43 and the AoA.