Hindu Undivided Family (HUF) is not defined under the Income Tax Act but is covered under the Hindu Law. HUF consists of all individuals who are lineally descended from a common ancestor and also comprises unmarried daughters. Under section 2(31) of the Income-tax Act, 1961, a HUF is considered a “person" and, therefore, is treated as a separate entity for the purpose of tax assessment. Often families that own ancestral properties and businesses obtain a separate Permanent Account Number (PAN) in the name of the HUF. HUF is not formed by a contract but by the status of a family i.e., it is created automatically in any Hindu Family. Having a common ancestor is a pre-requisite to form a HUF.