Partition of an HUF

A family divides. The brothers sign a deed, each takes his share, and each starts filing his own return. Under Hindu law the family has partitioned. Under the Income-tax Act it may not have. The Act keeps assessing the HUF as a family until the Assessing Officer records a finding of partition. It has its own definition of partition, stricter than Hindu law’s. And it does not recognise a partial partition made after 31 December 1978 at all. A family that divides only some of its property, or divides the income without dividing the assets, goes on being assessed as one. This guide explains what the Act recognises, the procedure, and the capital gains and clubbing consequences of a partition.

Which Act governs which year

• Assessment year 2026-27 and earlier. Partition is governed by section 171 of the Income-tax Act, 1961. Section 536(2)(c) of the Income-tax Act, 2025 keeps the 1961 Act’s provisions alive for proceedings for any year beginning before 1 April 2026, “including notices, assessment, reassessment”. A claim of partition made in an assessment for AY 2026-27 or earlier is therefore inquired into under section 171.
• Tax year 2026-27 onwards. The provision is section 315 of the 2025 Act. Section 171(9), the bar on partial partitions, is section 315(8). The Explanation defining “partition” is section 315(10).
• Capital gains. A distribution on partition is not a transfer under section 47(i) of the 1961 Act or section 70(1)(a) of the 2025 Act.
• Section 536(2)(a) saves “orders or anything duly done or suffered” under the 1961 Act. A finding of total partition recorded under section 171 stands.

The HUF continues until a finding is recorded

Section 171(1) is a deeming provision:

“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 in so far as a finding of partition has been given under this section in respect of the Hindu undivided family.”

Section 315(1) uses the same words. In Kalloomal Tapeswari Prasad (HUF) v. CIT (12 January 1982, (1982) 133 ITR 690), the Supreme Court held that, as long as no finding is recorded, “the Hindu undivided family should be deemed for the purposes of the Act to be the owner of the property which is the subject matter of the partition and also the recipient of the income from such property”. On its words, the deeming applies to a family “hitherto assessed as undivided”.

What the Act counts as a partition

Hindu law does not require property to be divided by metes and bounds. A declaration of intention to separate brings about severance of status, and the members can hold the property as tenants-in-common. The Act asks for more. The Explanation to section 171, and section 315(10), define “partition” as:

• "(i) where the property admits of a physical division, a physical division of the property, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition; or
• (ii) where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition".

Kalloomal shows how strictly this is read. The family consisted of ten members and held eighteen immovable properties, worth about Rs 7 lakh, in different places. In December 1963 the members effected an oral partial partition of those properties, and thereafter held them as tenants-in-common. They kept separate accounts and divided the net rent among themselves. They argued that the properties could not be divided physically into ten shares, and produced an arbitrator’s award saying so. The Supreme Court rejected the claim. It is not necessary to divide each item into as many shares as there are members. Where there are many items, they are “usually apportioned on an equitable basis and if necessary by asking the parties to make payments of money to equalise the shares”. Such an apportionment “is also a kind of physical division”. Here “no attempt to divide the properties was made” though they “could be conveniently so divided”. The case fell under sub-clause (i), and it failed that sub-clause. Severance of status under Hindu law “is not sufficient”. The income from the eighteen properties stayed in the HUF’s assessment.

The procedure for a finding

Under section 171(2) to (6), and section 315(2) to (6):

1. The claim. At the time of an assessment under section 143 or 144 (section 270 or 271 of the 2025 Act), a member, or someone on a member’s behalf, claims that a partition has taken place.
2. The inquiry. The Assessing Officer “shall make an inquiry thereinto after giving notice of the inquiry to all the members of the family”.
3. The finding. On completing it, he records “a finding as to whether there has been a total or partial partition of the joint family property, and, if there has been such a partition, the date on which it has taken place”.
4. The year of partition. If the partition took place during the year, the family’s income up to the date of partition is assessed “as if no partition had taken place”. Each member or group of members is jointly and severally liable for the tax on it, in addition to his own tax and despite section 10(2) or Schedule III, Sl. No. 1. If the partition took place after the end of the year, the family’s income for the whole year is assessed as the HUF’s (section 171(4) and (5); section 315(4) and (5)).
5. Partition discovered later. If the Assessing Officer finds, after completing the HUF’s assessment, that the family had already partitioned, he recovers the tax from every person who was a member before the partition. Each is jointly and severally liable (section 171(6); section 315(6)).
6. Extent of liability. Each member’s several liability is computed by the portion of joint family property allotted to him or it (section 171(7); section 315(9)). The rule extends to penalty, interest, fine and other sums for the period up to partition (section 171(8); section 315(7)).

The Act prescribes no form for the claim. It is made in the assessment proceedings, with the partition deed and evidence of the physical division. After a finding of total partition, notices about the family’s income are served on the last manager or, if he is dead, on all adults who were members before the partition (section 283(1) of the 1961 Act; section 503(1) of the 2025 Act).

Partial partitions after 31 December 1978 are ignored

A partition can be partial “as regards the persons constituting the Hindu undivided family, or the properties belonging to the Hindu undivided family, or both” (Explanation (b) to section 171; section 315(10)(b)). Section 171(9), which itself refers to 18 June 1980, the date the Finance (No. 2) Bill, 1980 was introduced, provides that where a partial partition has taken place after 31 December 1978:

• "(a) no claim that such partial partition has taken place shall be inquired into … and any finding recorded … to that effect whether before or after the 18th day of June, 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".

Section 315(8) of the 2025 Act re-enacts all three clauses. It drops the reference to 18 June 1980 and says any such finding recorded “at any time, shall be null and void”.

The High Courts of Madras and Karnataka struck section 171(9) down. A Constitution Bench of the Supreme Court reversed them in Union of India v. M.V. Valliappan (27 July 1999, (1999) 238 ITR 1027). In the lead petition, the karta of a family of himself, his wife, a minor son and a minor daughter had partially partitioned certain assets by deed on 13 April 1979. The Income-tax Officer recognised the partial partition by an order of 28 December 1979, and the family’s return for AY 1980-81 left out the income from those assets. The assessment was reopened in 1983 and the income was added back to the HUF. The Court held that “for the purposes of income-tax partial partitions taking place on or after 1-1-79 are not to be recognised”. The earlier recognition order “has no significance”, because the sub-section makes such a finding null and void. On hardship, the Court said that “it is for the Legislature to recognise or not to recognise partial partition of HUF property”, and that if the HUF finds hardship, it is for the members to partition the entire estate.

The practical effect is that only a total partition is recognised, and only if it meets the Explanation’s test of physical division. A family that divides some assets and keeps others joint stays an HUF for tax. It is assessed on the income of the divided assets as well, and every member is jointly and severally liable.

Hindu law requirements that sit alongside

The Income-tax Act’s definition is additional to Hindu law, not a substitute for it. Two points of Hindu law affect who takes what on a partition.

• Daughters. Under section 6 of the Hindu Succession Act, 1956 as substituted in 2005, a daughter of a coparcener is a coparcener by birth, with the same rights as a son. In Vineeta Sharma v. Rakesh Sharma (11 August 2020), the Supreme Court held that this applies to daughters born before or after the amendment. The father need not have been living on 9 September 2005.
• Proof of partition. In the same case, the Court held that because of the Explanation to section 6(5) of that Act, “a plea of oral partition cannot be accepted as the statutory recognised mode of partition effected by a deed of partition duly registered under the provisions of the Registration Act, 1908 or effected by a decree of a court”, save in exceptional cases supported by public documents. That holding concerns a daughter’s claim. A registered deed, combined with the physical division the Income-tax Act requires, meets both tests.

Capital gains and gifts on partition

No transfer. Section 47(i) says that section 45 does not apply to “any distribution of capital assets on the total or partial partition of a Hindu undivided family”. Section 70(1)(a) of the 2025 Act says the same. The family pays no capital gains tax on distributing its assets.

No income for the member. Receipts “by way of transaction not regarded as transfer under clause (i)” of section 47 are excluded from section 56(2)(x) by clause (IX) of its proviso. Section 92(3)(g) of the 2025 Act excludes receipts by way of a transaction under section 70(1)(a).

Cost and holding period carry over. When the member later sells, his cost is the cost to the previous owner, under section 49(1)(i). Under the 2025 Act it is entry (f) of Sl. No. 1 of the Table in section 73(1), which refers to section 70(1)(a). The previous owner’s holding period is included, under Explanation 1(i)(b) to section 2(42A) and section 2(101)(c)(B)(I) of the 2025 Act. See Capital Gains on Selling Property.

Clubbing follows converted property. If property a member had thrown into the HUF is partitioned, the income from the part allotted to that member’s spouse is clubbed with the member’s income (section 64(2)(c); section 99(3)(ii)). See Gifts to an HUF and the Clubbing Rules.

What to have ready

• The partition deed, registered, dividing the whole of the joint family property among all the members entitled to shares.
• Evidence of physical division for every asset that admits of it: separate title or mutation for each portion of land or building, transfer of shares and units into each member’s own name, and separate bank accounts. Where an item cannot be divided, the deed records the division it admits of, such as allotment to one member with an equalising payment to the others.
• A family tree as on the date of partition, including daughters who are coparceners.
• The HUF’s income up to the date of partition, separately from the members’ income after it.
• For each asset received: the HUF’s (or earlier previous owner’s) cost and date of acquisition.

In order

1. The family effects a total partition by registered deed and divides each asset physically, or as far as it admits of division, with equalising payments where needed. A partial partition after 31 December 1978 achieves nothing for tax.
2. At the next assessment of the HUF, a member claims the partition. The Assessing Officer gives notice to every member and inquires.
3. The Assessing Officer records a finding of total partition and its date. Until then, the HUF is assessed on all the income.
4. The HUF is assessed on its income up to the date of partition. The members are jointly and severally liable for that tax, each to the extent of the share allotted.
5. From the date of partition, each member reports the income from the assets allotted, with the HUF’s cost and holding period carried over, and with clubbing where the assets came from a spouse’s converted property.

This is the last guide in the HUF set. The first, Forming an HUF: Deed, PAN and Bank Account, covers how an HUF comes into existence for tax purposes.