You must have an individual demat account in which you can hold securities to create long-term wealth. But most of you are not aware of the HUF demat account in which you can manage the investment as the head of your family, known as “Karta”. Using this account, you can create wealth for your family.
In today’s blog post, we will give you an overview of an individual and an HUF demat account, along with the differences.
What is an Individual Demat Account?
An individual demat account is a personal demat account opened by an individual to hold, buy and sell securities, including shares, bonds, etc., in electronic form. Only the account holder in whose name the demat account is opened can operate it. An individual bank account can be linked with this demat account.
Key Features of an Individual Demat Account
The key features of an individual demat account are as follows:
- Nominee: The individual demat account holder can nominate various individuals in their demat account so that in case of the death of the account holder, the securities can be easily transferred to the near ones.
- Multiple Accounts: One can open multiple demat accounts with different stock brokers, using the same PAN Card.
- Taxation: All the gains earned from this demat account are taxed as per the norms of individual capital gain.
- Unique ID: As an individual can open multiple demat accounts, all the demat accounts have a separate user ID and identification number.
Read Also: Can I Have Multiple Demat Accounts in India?
What is a HUF Demat Account?
When a Hindu Undivided Family is considered a legal entity registered under the Hindu Law, opening a demat account to invest in shares, mutual funds, bonds, etc, is known as an HUF Demat Account. However, the account is opened in the name of HUF, but the Karta of the family operates it. All gains earned from investments in the name of an HUF are taxed as a separate entity.
Key Features of HUF Demat Account
The key features of an HUF demat account are as follows:
- HUF Name: The HUF account is opened only in the name of the HUF and PAN, and not opened in the name of an individual.
- Separate Entity: An HUF is considered a separate legal entity, and all the income is taxable as an independent entity.
- Eligible Investment: An HUF can invest in almost all kinds of investments, such as shares, mutual funds, bonds, etc.
- One Demat Account: An HUF can open only one demat account against its PAN, but individual members can still have their own separate demat accounts using their personal PANs.
Difference Between an Individual and an HUF Demat Account
The key differences between an individual and an HUF demat account are as follows:
| Particular | Individual Demat Account | HUF Demat Account |
|---|---|---|
| Owned By | An individual account can be owned by an individual. | This account can be owned by a Hindu Undivided Family. |
| PAN Card | An individual’s PAN Card is linked to it. | HUF Pan Card is used in it. |
| Operation By | This account is solely operated by an individual. | A HUF demat account can only be operated by the head of the family, known as “Karta”. |
| Taxation | All the incomes generated from this account are taxed in the hands of the individual. | All investment income is taxed separately in the hands of HUF. |
| Number of Demat Accounts | An individual can open multiple demat accounts using the same PAN Card with different brokers. | Only one demat account is allowed to be opened using an HUF Pan Card. |
| Transmission | In case of the death of the account holder, the securities are transferred to the nominee. | In case of Karta’s death, a new Karta is appointed instead of transferring units. |
| Objective | The objective of an individual demat account is to create an individual’s wealth. | A HUF demat account is generally used to create wealth for the family. |
| Document’s | Only the document of the individual is required. | Along with the document of the HUF Karta’s documents are also required. |
Read Also: Top 10 Demat Account in India
Which Account Should You Consider?
If you are looking to create wealth for your family or create a legacy for them, then you can consider opening an HUF demat account and operate it as the Karta of the family. However, if you are looking to create wealth for yourself, then you can open an individual demat account and manage your investment accordingly.
Conclusion
In conclusion, both the individual and the HUF demat account facilitate the holding of securities, such as shares, bonds, and ETFs, in electronic form. However, both of these accounts differ in terms of ownership and operation. Having an individual demat account helps in creating wealth for an individual, whereas an HUF demat account builds wealth for a Hindu Undivided Family, and it is operated by the Karta, who will be the head of the family. Choosing among these demat accounts totally depends on the objective of creating wealth.
Frequently Asked Questions (FAQs)
Is there any difference between an individual and an HUF demat account?
An individual demat account can be opened and operated by only an individual, whereas the HUF demat account can only be operated by the head of the Hindu Undivided Family, known as Karta.
Can a person who is a Karta open a separate individual account?
Yes, a person can open an individual demat account if they are already operating an HUF demat account as Karta.
Can any member of HUF directly operate a HUF demat account?
No, a HUF member cannot directly operate a HUF demat account; only the Karta of the family operates the HUF demat account.
Can a HUF demat account be converted into an individual demat account?
No, a HUF demat account cannot be converted into an individual demat account.
Can an NRI open a HUF demat account?
No, an NRI cannot open a HUF demat account; only a resident individual or Karta can open a HUF demat account.
