1. Opening a Bank Account / DEMAT Account for HUF
A HUF can open a Bank account in any bank. The types of Bank accounts that can be opened by a HUF are Savings Account, Current Account or Term Deposit Account. In addition to this, it is also possible for HUF to open Accounts relating to borrowings from bank by way of Cash credit, Term Loan or any other types of loan. Moreover, a HUF can also open Demat A/c or Depository Account for the purpose of holding shares of a Company.
The foremost thing to be done for opening a Bank account of a Joint Hindu family is to give a Joint Hindu Family letter, which is generally required to be given by HUF as per the format given by the Bankers. Each bank has its own format, which is generally developed by the bankers after consultation with its legal department.
A sample of such letter is given herein below.
As our HUF wishes to open an account with your bank in the name of XY HUF.
We beg to say that the first signatory to this letter i.e., XY is the Karta of the Joint family and other signatories are the adult co-parceners of the said family.
We further confirm that the business of the said joint family is carried on mainly by the said Karta as also by the other signatories hereto in the interest and for the benefit of the entire body of co-parceners of the joint family. We all undertake that claims due to the bank from the said family shall be recoverable personally from all or any of us and also for the entire family properties of which the signatory is the Karta including the share of minor-coparceners.
We hereby undertake to inform the bank Of the death or birth of a coparcener or any change occurring at any time in the membership of our joint family during the currency of the account.
Steps : Required for opening a Bank Account in case of HUF
While opening a Bank account, the following steps are required to be undertaken / followed: -
1. The style in which the Bank account is to be opened has to be decided and the style can be any one of the following styles: -
- X Y & SONS (HUF)
- X KUMAR Z KUMAR
In the above styles, X denotes the first name of the Karta of the HUF and Y denotes the family nam or title of the Karta. Further, in option d) hereinabove, the style X Kumar Z Kumar represents X as karta and Z as his son. Now that daughters have also become coparceners, there should not be a problem in keeping the name as X Kumar A Kumari, where A represents daughter of X.
2. After having decided the name in which the account is to be opened, the names of the members constituting the HUF is required which is generally as follows:
- Karta of the HUF
- Karta’s wife
- Karta’s son or sons
- Karta’s son’s wife or sons’ wives
- Karta’s son’s son or sons
- Karta’s son’s son’s wife or sons’ Sons’ wives
- Karta’s unmarried daughters
- Karta’s father
- Karta’s mother
The above list is not exhaustive and can further expand or reduce. The constitution of the HUF would depend upon the way HUF has come into existence. If the HUF comes into existence on’ receipt of inherited ancestral property by the Karta from his father, then all the members of his family including his father, son, son’s son, unmarried daughters become coparcener in such property and have therefore to be included as the members of the HUF. However, if the HUF comes into existence withOut any inherited property, but say by way of Gift, then in such cases, the HUF of the Karta would include the Karta himself, his wife, his son or sons, his unmarried daughters.
The names of the members of the HUF are generally required to be mentioned in the Account opening form.
3. The third thing that has to be decided as to who will be the signatory to the account to be opened in the name of the HUF. Generally it is the Karta of the HUF who operates the account. Sometimes, Karta may not want to operate the account and in such cases, it can be operated byany member or members of the HUF. There is no bar/restriction on any member or members of the HUF operating the account, if authorised. Depending upon the signatories who will be operating the account, a rubber Stamp is required to be prepared in the manner as follows: -
FOR XY HUF
If Karta is the sole signatory in the account or in case any other member or members operate the account, then the stamp is required to be prepared in the following manner:
FOR XY HUF
It is better to prepare the stamp in the following way so that either the Karta or any member is able to operate the account.
FOR XY HUF
KARTA / MEMBER
Now in the present new age banking, where banks are computerizing the operations, some banks do not require any stamp to be affixed at all since the manner in which the cheque will be signed is printed on the cheque itself.
Again, it is also possible that the account is signed not by Karta singly, but by any combination of members which can be either two or more. Such joint signatures can be used a tool for control.
4. After having decided the style and the signatory, the Account opening form has to be filled in which is generally very simple and contains usual details. A copy of the Permanent Account No. (PAN) card is required to be given while opening the account and the bankers also insist on Photographs of those persons who are given the authority to sign the account.
5. The funds for opening the account can be given out of the HUF funds. In case, the account is being opened for the first time, the cheques received by way of Gift (in case the HUF has been created by way of gift) can also be given for opening the Account. However, the bankers are generally reluctant to take third party cheques for the purpose of opening the account and prefer taking cheques from the membero1 the HUF or still prefer cash for opening the account. In such cases, the Karta or any other member can give the required cash or cheque as the case may be and later on whenthe account is opened, in the usual course, the money can be returned back to the member who has given the same. However care must be taken that the amount so taken by HUF (in cash) is less than Rs. 20000/- so as not to attract the provisions of Section 269SS of the Income-tax Act,1961.
6. After following the above procedure, the account is opened and the same can be operated like any normal bank account.
7. It is important to note that the Bankers do not allow any nomination in a HUF account and it is, therefore, important that the account is operated by more than one person, so that in case of any emergency/death of any member, the account can continue to be operated by the -remaining signatories without any break.