Important Keyword: HUF, Income Tax, Income Tax Filing, Partition of HUF.

Partition of HUF

An HUF, or Hindu Undivided Family, is a distinct legal entity recognized under income tax laws in India. According to Section 2(31) of the Income-tax Act, 1961, an HUF is considered a ‘person’ for taxation purposes. This entity is formed based on Hindu Law and comprises all members who are lineally descended from a common ancestor, along with their spouses and unmarried daughters. Unlike other entities created by specific legislation, an HUF is established by the status of its members.

Partition refers to the dissolution of the joint status of an HUF. Under Hindu Law, there are two types of partitions: total and partial. Total partition involves the complete separation of the family’s assets and liabilities among its members, effectively ending the joint family status. Partial partition, on the other hand, entails the division of certain assets or rights among the family members while maintaining the joint status for other aspects.

Meaning of Partition

Partition under Hindu Law refers to the division of property within a Hindu Undivided Family (HUF), signifying the conclusion of its joint family status. This division involves a physical separation of assets among the members, determining the individual shares of each member. It’s important to note that the division must include the actual distribution of property to constitute a valid partition. Simply dividing the income generated by a property without physically dividing the property itself does not qualify as a partition under Hindu Law.

There are two main types of partitions recognized under Hindu Law:

1. Total or Complete Partition: In this scenario, all assets of the Hindu Undivided Family are physically divided among its members. Consequently, every member ceases to be part of the Hindu Undivided Family, and all properties cease to be considered Hindu Undivided Family property.
2. Partial Partition: A partial partition can occur in various ways. Firstly, it can be partial concerning the members of the HUF, where some members opt to separate while others remain part of the family. Secondly, it may be partial regarding the properties owned by the HUF, where only specific assets are divided among the members, while the rest remain undivided HUF property.

Right to claim Partition of Hindu Undivided Family

Under Hindu law, the partition of a joint Hindu family may occur at the behest of various individuals, including:

1. Coparceners: These are family members who share joint ownership of inherited property. They can initiate a partition to divide the family’s assets among themselves. Coparceners typically include male descendants up to four generations, starting from the eldest male ancestor.
2. Unborn Sons: Even a son in the womb of his mother at the time of partition is considered legally existent and entitled to a share equal to that of his brothers upon birth.
3. Female Family Members: While female members cannot demand a partition themselves, they are entitled to receive their share when the family property is divided. For example, a mother is entitled to an equal share if there is a partition among sons after the death of the father. Similarly, a wife is entitled to a share equal to that of a son during a partition between the father and sons.
4. Daughters: Daughters have rights equivalent to sons in certain aspects. For instance, they can claim a share in the parental dwelling house and have the right to reside there. Additionally, they have the same rights as sons to demand partition of the family property.

Procedure and Assessment after Partition of HUF

The partition of a Hindu Undivided Family (HUF) is recognized under Section 171 of the Income Tax Act. Here’s an overview of the procedure and tax implications:

1. Recognition of Partition:
   • HUF is considered undivided unless a finding of partition is given under Section 171.
   • If members claim partition to the Assessing Officer (AO) during assessment under Section 143 or 144, an inquiry is conducted.
   • The AO records a finding of total or partial partition and specifies the date of partition.
2. Tax Liability:
   • If partition occurs during the previous year:
     • The total income of the HUF until the partition date is assessed as if no partition occurred.
     • Each member or group of members is jointly and severally liable for the tax on this income.
   • If partition occurs after the end of the previous year:
     • The total income of the previous year is assessed as if no partition occurred.
     • Each member is jointly and severally liable for the tax on this income.
   • The liability is based on the portion of joint family property allotted to each member at the partition.
3. Recovery of Tax:
   • The AO can recover tax from every person who was a member of the family before partition.
   • Each person is jointly and severally liable for the tax on the assessed income.
   • This liability extends to penalties, interest, fines, or other sums related to the period up to the partition date.

Partition of assets of the HUF property

Under Hindu Law, partial partition of Hindu Undivided Family assets is recognized, allowing distribution of certain assets or among specific members. However, income tax regulations do not acknowledge partial partition. According to tax laws, Hindu Undivided Family partition must be total. In the case of partial partition, income from those assets remains clubbed and included in Hindu Undivided Family income, even if distributed among members.

Nature of the property received on partition

On partition, joint family property retains its character as such, especially when the recipient is married. Until the recipient becomes unmarried or reduces to a single person, the property maintains its joint family property status. Similarly, individual property remains as such upon inheritance. Hindu Undivided Family property, upon partition, retains its joint Hindu family status, provided the family exists during the relevant assessment year.

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Official Income Tax Return filing website: https://incometaxindia.gov.in/