Partition of Hindu Undivided Family (HUF)

Partition of HUF (Hindu Undivided Famility)- This Page explains when and how it can be partitioned and what are the Tax Implications before and after Partition HUF.

An HUF can be partitioned both as regards to persons and as regards to property. This partition can be of two types:

(a)        Total or complete partition;

(b)        Partial partition.

Total/Complete partition:

Where all the properties of the family are divided amongst all the constituents of the family, and the family ceases to exist as an undivided family, it is known as a total or complete partition.

Partial partition:

On the other hand, if some of the constituents of the HUF go out of the fold, others remaining joint, or some of the properties are divided and balance remain joint, it is known as partial partition.

Partial partitions after 31.12.1978 are not recognised for tax purposes.

Persons entitled to claim partition:

Partition can only be claimed by a coparcener. But, when there is a partition of HUT the following persons are entitled to a share in the assets of the HUF:

(i)   All coparceners.

(ii)   Mother is entitled to a share equal to the share of a son in case of death of the father.

(iii)   Wife gets a share equal to that of a son if a partition takes place between her husband and his sons. She enjoys this share separately even from her husband.

(iv)   A son/daughter in the womb of the mother at the time of the partition.

1. Procedure to effect Partition and Consequences after such Partition [Section 171]

(1) HUF continues to be assessed as HUF unless partition is recognised by the Assessing Officer [Section 171(1)]

A Hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a Hindu undivided family, except where and insofar as the partition has been recognised by the Assessing Officer under this section.

(2) Assessing Officer to make an inquiry where Clam is made regarding Total Partition [Section 171(2)]

Where, at the time of making an assessment under section 143 or section 144, it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a total partition has taken place among the members of such family, the Assessing Officer shall make an inquiry thereinto after giving notice of the inquiry to all the members of the family.

(3) Assessing Officer to record the Finding of the inquiry [Section 171(3)]

On the completion of the inquiry, the Assessing Officer shall record a finding as to whether there has been total partition of the joint family property, and, if there has been such a partition, the date on which it has taken place.

(4) Assessment after Finding of Total Partition which took place during the Previous year [Section 171(4)]

Where a finding of total partition has been recorded by the Assessing Officer under this section, and the partition took place during the previous year,—

(a)   the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and

(b)   each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding anything contained in clause (2) of section 10, be jointly and severally liable for the tax on the income so assessed.

(5) Assessment after Finding of Total Partition which took place after the Expiry of the Previous Year [Section 171(5)]

Where a finding of total partition has been recorded by the Assessing Officer under the section, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place; and each member or group of members shall be jointly and severally liable for the tax on the income so assessed.

(6) Every Member of HUF to be Jointly and Severally Liable for Tax Liability of HUF if Partition has already been effected [Section 171(6)]

Notwithstanding anything contained in this section, if the Assessing Officer finds after completion of the assessment of a Hindu undivided family, that the family has already effected a partition, whether total or partial, the Assessing Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed.

(7)   Several Liability of Member to be computed according to the portion of Joint Family property allotted on Partition [Section 171 (7)]

For the purposes of this section, the several liability of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial.

(8)   The Provisions of Levy and Collection of any Penalty / Interest / Fine, etc. to apply as they apply in relation to Provisions of Levy and Collection of Tax [Section 171(8)]

The provisions of this section shall, so far as may be, apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to the date of the partition, whether total or partial, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period.

2.  Effect of Partial Partition of HUF [Section 171(9)]

Where a partial partition has taken place after the 31 St day of December, 1978, among the members of a Hindu undivided family hitherto assessed as undivided, the effect of the same shall be as under:

(a)        no claim that such partial partition has taken place shall be inquired into and no finding shall be recorded that such partial partition had taken place and any finding recorded to that effect whether before or after the 18th day of June, 1980, being the date of introduction of the Finance (No. 2) Bill, 1980, shall be null and void;

(b)        such family shall continue to be liable to be assessed under this Act as if no such partial partition had taken place;

(c)        each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under this Act by the family in respect of any period, whether before or after such partial partition;

(d)        the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition.

It may however, be noted that where a person relinquishes his interest in the joint family property, he may no longer be a member of the joint family and it may not be necessary to the assessee that he would continue to be a member as there is no violation of section 171(9) in such a case. In this case, the question of levying gift tax shall also not arise as gift tax is not applicable on gifts made on or after 1.10.1998. Moreover this is not a gift of sum of money which can be covered under section 56(2)(v).