Hindu Undivided Family or HUF consists of individuals from a common family tree or who have descended (lineally) from the same ancestor. It also includes wives and daughters who are unmarried. The “karta” is considered as the head of the HUF. He/she is legally allowed to take decisions for the HUF. Contrary to popular belief even a woman can be a karta! Hence if a HUF wants to invest in Mutual Funds, the karta needs to do the needful in his or her own name. The following steps need to be completed by the karta in order to make any investments.
The government has set up a central KYC registry with the objective to simplify the KYC process and ensure that it is required to be done only once. For any subsequent investments, data regarding the investor can be obtained from the central database. The karta will need to complete the required formalities with the central registration agency. While filling the KYC Form, the karta needs to opt for the “Non-Individual” category and mention HUF along with his or her name.
The following documents need to be shared with the agency:
The PAN Card of HUF and the karta
HUF’s Passbook or statement from the Bank
Identity Proof issued by a government body
Deed of declaration or the List with the names of the coparceners
Details of the karta (also referred to as Ultimate Beneficiary Owner)
Foreign Account Tax Compliance Act (FATCA) Form
All the above mentioned documents need to be self-attested by the karta and contain the HUF stamp.
Once the KYC process is successfully completed, a 14-digit unique number (referred as the KYC Identification Number) is generated. The KIN is e-mailed to the karta post 15 days of the verification process.
Application for investment in the Mutual Fund
Now the karta can fill in the application form for investment in the Mutual Fund. Some important points to note while filling up the application form.
The karta should explicitly mention “Hindu Undivided Family” after his or her name in order to differentiate it from personal investments.
HUF investments and portfolios (even demat accounts) are held and operated solely on a solo holder basis. An HUF is not allowed to allocate a nominee for any of its holdings.
Platforms for submission of mutual fund application
There are multiple channels through which one can apply for the mutual fund investments.
Website or digital portal of the concerned Asset Management Company
If the karta (or HUF) does not want to go through any intermediaries, he or she can directly apply for the mutual fund investment through the fund house’s website.
Registrar and Transfer Agents refer to institutions that handle the paperwork and other formalities involved in investor servicing. They register and maintain an extensive database of all transactions made by the investors. Some examples of RTAs that the karta can approach for the HUF’s mutual fund investments are Karvy and CAMS. One limitation of this platform is that one can invest in only those schemes which are registered with the R&T agents.
Mutual Fund Utilities
MF Utilities is a common infrastructure shared by the Asset Management Companies in our country. It significantly helps in improving process efficiency by reducing duplication. This aggregator portal enables investors to transact in different schemes across AMCs.
The karta can take this route to invest in mutual funds on behalf of the HUF. He or she would need to fill in the Common Transaction Form (CTF) post which a Common Account Number (CAN) will be issued. This can be accessed online by visiting the link - https://www.mfuindia.com/eCANFormFill
This is a convenient and economical way to make investments as one can choose from 33 participating AMCs.
These are online advisors that provide automated and customized investment plans without any human intervention. Many financial institutions provide this service these days. The USP of this platform is that it is devoid of any human error or bias. However, some investors prefer other platforms as they like to have some degree of human involvement in the whole process. If one wants to opt for this platform, one should ensure that the service provider has adequate domain experience, robust research background, database and goodwill in the industry.
Whatever be the platform or channel through which the karta decides to invest in Mutual Funds, the objective remains same – maximize the wealth for the HUF. There is no one right method. You need to choose the mode or platform which is right for you.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.