Zerodha HUF account
Zerodha HUF account is a trading and demat account opened in the name of a Hindu Undivided Family (HUF) by Zerodha for the purpose of managing the HUF’s investable surplus in Indian financial markets. The account is operated by the Karta, the senior-most male member of the HUF, or in certain circumstances the senior-most female member, who acts as the authorised signatory and representative of the HUF entity. The HUF is a distinct legal person under the Hindu law and under the Income Tax Act, 1961, and is therefore entitled to hold a separate demat account, obtain a separate PAN, and file an independent income tax return.
The HUF account at Zerodha enables the family to build an investment portfolio separate from the personal portfolios of individual coparceners, thereby allowing legal income-splitting that can reduce the aggregate family tax burden within the bounds of the Income Tax Act.
The HUF as a legal entity
A Hindu Undivided Family is a body of individuals connected by common ancestry who are governed by the Mitakshara or Dayabhaga school of Hindu law. For income tax purposes, the HUF is treated as a separate assessable entity under section 2(31) of the Income Tax Act, 1961. Key features:
- Coparceners, Male members within four degrees of descent from the common ancestor (under Mitakshara law), plus daughters of coparceners (following the Hindu Succession (Amendment) Act, 2005).
- Members, All persons related to coparceners by blood or marriage who are part of the joint family, including spouses of coparceners. Members who are not coparceners have no right to demand partition.
- Karta, The senior-most coparcener who manages the HUF’s affairs, enters into contracts on its behalf, and has the authority to operate bank accounts and investment accounts.
The HUF exists from the moment of marriage of the senior-most member; no formal registration is required to constitute it. However, for investment and tax purposes, the HUF must obtain a PAN and an HUF savings bank account before opening a Zerodha trading and demat account.
Eligibility
The following conditions must be satisfied to open a Zerodha HUF account:
- The HUF must be a Hindu, Buddhist, Jain, or Sikh joint family (Sikh and Jain HUFs are recognised for income tax purposes even though Mitakshara law per se applies to Hindus).
- The HUF must have obtained a PAN in the name of the HUF (format: “[Family name] HUF”).
- The HUF must maintain a dedicated HUF savings bank account in a scheduled commercial bank.
- The Karta must be an Indian resident (not an NRI). An HUF with a non-resident Karta cannot open a standard HUF account; separate provisions under FEMA may apply.
- The Karta must personally satisfy the standard KYC requirements.
Documentation required
| Document | Notes |
|---|---|
| PAN card of the HUF | Issued by the Income Tax Department in the HUF’s name |
| HUF deed / declaration | A declaration on stamp paper listing the Karta, all coparceners, and the nature of the HUF; typically notarised |
| HUF bank account proof | Cancelled cheque or bank statement from the HUF’s savings account |
| PAN card of the Karta | Personal PAN of the individual acting as Karta |
| Aadhaar card of the Karta | KYC and address verification |
| Identity proof of the Karta | Passport, voter ID, or driving licence |
| Address proof of the HUF | Utility bill, bank statement, or property tax receipt in the HUF’s name |
| Passport-size photograph of the Karta | Account records |
| Specimen signature of the Karta | Authorisation for trading and demat account operations |
| Income proof (for F&O activation) | ITR of the HUF, or net worth certificate, or bank statement |
The HUF deed need not be registered but must contain sufficient detail to identify the family and the Karta’s authority. Many families use a simple notarised affidavit on INR 100 stamp paper.
KYC process
Zerodha accepts HUF account-opening applications through a partially online workflow. The Karta may complete the personal KYC portion (Aadhaar OTP, PAN verification, and bank account linking) online. However, the HUF-specific documents (HUF deed, HUF PAN, HUF bank account details) are submitted as a separate offline component, either physically or via email with digitally signed or notarised copies.
In-person verification is conducted for the Karta. The Karta must be available for a short video call (IPV) where they hold the HUF’s PAN card and the Karta’s own PAN card simultaneously, or submit a recorded video with a handwritten code.
Segments available
The Zerodha HUF account has access to the same trading segments as a resident individual account, subject to the same income-proof requirements for derivatives:
| Segment | Available | Notes |
|---|---|---|
| Equity delivery | Yes | |
| Equity intraday | Yes | |
| Equity F&O | Yes | Income proof of HUF required |
| Currency derivatives | Yes | Income proof required |
| Commodity derivatives | Yes | Income proof required |
| Mutual funds (via Coin) | Yes | Direct plans available |
| IPO applications | Yes, via ASBA | UPI ASBA is not available for HUF accounts |
The absence of UPI ASBA for HUF accounts follows from the NPCI’s linkage of UPI to individual savings accounts; an HUF savings account does not qualify as an individual’s account for UPI ASBA purposes. The HUF must apply for IPOs through the net banking ASBA channel via its designated bank.
Account opening fees and charges
| Fee head | Amount (INR) |
|---|---|
| Account opening fee | 200 |
| Demat AMC | 300 per year |
| Brokerage | Identical to resident individual account |
Tax treatment
The HUF’s investment income is taxed in the HUF’s hands as a separate taxable entity under the Income Tax Act, 1961. This is the primary tax planning benefit of the HUF structure:
Income tax slab for HUF
The HUF is subject to the same income tax slabs as an individual. For financial year 2024-25 under the new tax regime:
| Total income | Tax rate |
|---|---|
| Up to INR 3 lakh | Nil |
| INR 3 lakh to INR 7 lakh | 5% |
| INR 7 lakh to INR 10 lakh | 10% |
| INR 10 lakh to INR 12 lakh | 15% |
| INR 12 lakh to INR 15 lakh | 20% |
| Above INR 15 lakh | 30% |
The INR 12,500 rebate under section 87A (for income up to INR 5 lakh under the old regime) and the INR 25,000 rebate under the new regime are available to the HUF in the same manner as an individual.
The HUF benefits from the same basic exemption limit as an individual (INR 3 lakh under the new regime), providing a separate income block that is not taxed even if the Karta is in the highest individual tax bracket personally.
Capital gains
STCG, Listed equity and equity-oriented mutual funds held for 12 months or less: 20 per cent (Finance Act 2024).
LTCG, Listed equity and equity-oriented mutual funds held for more than 12 months, gains exceeding INR 1.25 lakh: 12.5 per cent without indexation (section 112A, as amended by Finance Act 2024).
LTCG gains up to INR 1.25 lakh per year are exempt, giving the HUF an additional INR 1.25 lakh of LTCG headroom separate from the individual coparceners’ personal accounts.
F&O income
Profits from the HUF’s F&O account are treated as non-speculative business income of the HUF, taxed at the HUF’s applicable slab rate. F&O losses can be carried forward for eight years and set off against other business income of the HUF.
Dividend income
Dividends received by the HUF on its demat holdings are taxable in the HUF’s hands at the applicable slab rate. TDS at 10 per cent is deducted by the declaring company (section 194).
Tax-planning note
The HUF structure legally allows income from the HUF’s investments to be taxed in the HUF’s hands rather than the Karta’s or coparceners’ hands, provided the HUF has its own separate corpus (capital contributed to the HUF by members, or property inherited jointly). Contributions from the Karta’s personal income to the HUF are treated as gifts to the HUF and are not deductible; however, subsequent income on those contributions is taxable in the HUF’s hands, not the individual’s, creating a legitimate deferral or splitting effect.
Section 64(2) of the Income Tax Act provides that if an individual member converts personal property into HUF property, the income from that property is clubbed back with the individual’s income. This provision prevents outright tax avoidance through property transfers to the HUF and must be considered in any HUF investment planning.
Investment strategy considerations for HUF accounts
Building an independent corpus
The tax advantage of the HUF account depends on the HUF having an independent corpus that is not attributable to the individual contributions of the Karta or members from their personal income. The most effective ways to build an HUF corpus without triggering clubbing under section 64(2) are:
- Ancestral property, Immovable or movable property inherited jointly by the coparceners constitutes the HUF’s natural corpus. Income from such property (including capital gains on sale and reinvestment in securities) is clearly in the HUF’s hands.
- Gifts from non-members, Gifts received by the HUF from persons who are not members of the HUF (e.g., a grandparent, uncle, or family friend) are taxable under section 56(2)(x) only if the aggregate gift value from all non-relatives exceeds INR 50,000 in a year and the donor is not covered under the relatives definition. However, gifts from members’ relatives defined under section 56(2) are exempt.
- Business income of the HUF, If the HUF carries on a business through its Karta, the business profits constitute HUF income. Surplus from business reinvested in the market through the Zerodha HUF account is clearly HUF corpus.
- Life insurance proceeds, Life insurance policy proceeds payable to the HUF (where the HUF is the proposer and beneficiary) are HUF income.
Asset allocation across HUF and individual accounts
Financial advisers commonly recommend that the HUF account be used primarily for equity delivery investments targeted at LTCG tax efficiency, because:
- The HUF’s INR 1.25 lakh LTCG exemption per year is an additional layer of tax-free gains beyond the individual’s own exemption.
- The HUF’s separate income tax slab means that dividends and short-term gains below the HUF’s basic exemption threshold (INR 3 lakh under the new regime) are taxed at nil in the HUF’s hands.
- F&O trading in the HUF account creates business income in the HUF’s hands; if combined with individual F&O accounts, this can complicate overall tax planning.
Loan to HUF
A member may lend money to the HUF at market rates (up to 12 per cent per annum under section 40(b) norms applicable to firms, though HUFs are not firms). The HUF can deduct the interest paid as a business expense if it uses the borrowed funds for business purposes (including market-making activities). The interest is taxable as income in the lending member’s hands. This structure does not create a tax exemption but may assist cash-flow management.
Platform access
HUF account holders at Zerodha use Kite and Zerodha Console in the same manner as resident individual account holders, with the login credentials issued in the Karta’s name for the HUF account. The Karta must use a separate Zerodha login for their personal individual account; the HUF account and the Karta’s personal account are entirely separate accounts with separate client IDs, separate demat accounts, and separate P&L statements.
Tax P&L reports, capital gains statements, and contract notes for the HUF account are downloadable from Console in the HUF’s name and PAN, facilitating separate ITR filing for the HUF.
Partition and winding up of HUF account
If the HUF undergoes a partial or total partition, either by mutual agreement or through a court decree, the demat holdings must be divided among the coparceners. The process involves:
- Off-market transfer of securities from the HUF demat account to the individual demat accounts of each coparcener, in proportion agreed upon in the partition deed.
- Closure of the HUF trading account at Zerodha.
- Filing of a return of partition with the Income Tax Department (section 171 of the Income Tax Act) to formally dissolve the HUF’s assessable status.
The off-market transfers are treated as capital gains events in the hands of the HUF (or the transferee coparceners, depending on the nature of the partition) at the fair market value as on the date of transfer.
Operational considerations
Change of Karta
The Karta typically changes only upon the death or incapacity of the existing Karta, at which point the next-senior coparcener assumes the role. To reflect this change in the Zerodha account:
- A notarised affidavit from the new Karta and remaining coparceners confirming the change of Karta.
- Death certificate (if applicable).
- Fresh specimen signature of the new Karta.
- Zerodha updates its records and informs CDSL or NSDL.
Pledging
HUF equity holdings may be pledged as margin for F&O trading in the HUF’s account, following the same CDSL/NSDL pledge mechanism applicable to individual accounts.
Nomination
Nomination in an HUF demat account is permissible, but the nominee receives the securities as a trustee for the HUF and its legal heirs, not as an outright personal beneficiary. The legal position of nominees in HUF accounts has been clarified through various high court decisions and SEBI guidance.
Frequently misunderstood aspects of HUF accounts
The “two HUF accounts” misconception
Each HUF is a separate assessable entity and may hold only one set of PAN-linked accounts. The Karta is an individual and separately holds their own personal resident individual account at Zerodha (or another broker). These two accounts, the Karta’s personal account and the HUF’s account, are entirely separate in law and in Zerodha’s systems. The Karta cannot commingle the HUF’s funds with personal funds. Zerodha issues different client IDs for the personal account and the HUF account, even if both are held by the same Karta.
HUF and BSDA
An HUF demat account does not qualify for the BSDA (Basic Services Demat Account) framework because BSDA is available only to resident individual account holders. The HUF pays the standard demat AMC of INR 300 per year regardless of the holding value.
Women as Karta
Following a Delhi High Court ruling in Sujata Sharma v. Manu Gupta (2015), daughters (as coparceners under the amended Hindu Succession Act, 2005) may be eligible to serve as Karta. The legal position, while evolving, has not been fully settled by the Supreme Court. For the purposes of opening a Zerodha HUF account, the practical position is that the Karta named in the HUF deed (which may be a daughter-coparcener) is accepted, subject to the family’s internal agreement and documentation.
References
- Income Tax Act, 1961, sections 2(31), 64(2), 87A, 112A, 171, 194.
- Finance Act, 2024, amendments to STCG and LTCG rates.
- Hindu Succession Act, 1956, as amended by the Hindu Succession (Amendment) Act, 2005.
- Hindu Minority and Guardianship Act, 1956.
- SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.
- SEBI (Depositories and Participants) Regulations, 2018.
- SEBI Master Circular on KYC, SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37, dated 8 March 2023.
- Depositories Act, 1996.