Under Hindu Law, a Hindu Undivided Family (HUF) is a family which consists of all family members lineally descended from a common ancestor and also includes their wives and unmarried daughters. A HUF cannot be created under a contract. Jain and Sikh families even though are not governed by the Hindu Law, but they are treated as HUF under the Act.

A HUF consists of a Karta, who is the eldest member of the family. The Karta manages the general affairs of the family. The descendants of the Karta are known as the coparceners. Often, the principal requirement for commencing a HUF is the existence of ancestral property.

The coparceners, by way of their rights, are entitled to a share in HUF property. A HUF is usually involved in any form of business and has an income disposable to it. Hence, under section 2 (31) of the Income Tax Act, the HUF is considered to be a person. It is taxed as a separate entity as well. The Karta must obtain a Permanent Account Number (PAN) and a bank account in the name of the HUF. This way, the tax liability of the family comes down.