Partition of HUF

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Divya Singhvi

HUF
Income Tax
Income Tax Filing
Partition of HUF
Last updated on February 3rd, 2023

Hindu Undivided Family, commonly known as HUF is a separate entity from its members for the purpose of Income Tax. It is is treated as a ‘person’ under section 2(31)​ of the Income-tax Act, 1961 . The term is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. So basically a Hindu Undivided Family is not created by any Act but by status. Partition means ending the status of Joint Hindu family. Partition of HUF can be of two types under Hindu Law i.e. total and Partial.

Meaning of Partition

Partition means division of property. Under Hindu Law the Joint Family status comes to an end when there is division of property among the members and joint ownership of property comes to an end. The division will be such as that the share of each member will be determined physically. Further, a division of income from any property, without physical division of such property does not amount to partition.

Types of Partition

Partition under Hindu Law, can be total or partial.

Right to claim Partition of HUF

Under the Hindu law, the partition of a joint Hindu family may take place at the instance of the following persons:

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Procedure and Assessment after Partition of HUF

Partition of HUF takes place on the date the properties are physically divided. There must be physical division of the properties. Physical division of income without physical division of properties does not amount to Partition. The following procedure is prescribed under section 171 of Income Tax Act for partition and assessment of HUF:

Responsibility to pay Tax

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

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Partition of assets of the HUF property

As per the Hindu Law, part distribution of some of the assets of the HUF, i.e. partial partition of the HUF, either in respect of certain assets or in respect of some of the members is fully valid. However, income tax law does not recognize such partial partition of the HUFs’ assets. The income tax laws require that partition of HUF should be full. So in case of partial partition of some assets, the income in respect of such assets, shall be clubbed and included in the income of the HUF. Even if such assets are received by the member/members.

Nature of the property received on partition

The nature of the joint family property on partition shall be of joint family property when the recipient person is married. Hence the character of the property shall remain that of the joint family property. Such property shall be considered as individual property, until the recipient is unmarried or is reduced to a single person. Thus individual property shall continue to be individual property on inheritance. Further, HUF property on partition shall be that of the joint Hindu family subject to the existence of family during the relevant assessment year

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FAQ

Whether the sum received by a member as and towards his share as coparcener of HUF, on its partition is taxable as income?

The sum received by a member as and towards his share as coparcener of HUF, on its partition cannot be brought to tax as income. As partition is not considered as a transfer.

What will be the treatment of assets after partition, as per Income Tax Act?

Treatment of capital gains on distribution of assets on partition of HUF shall be as under:
– Section 47: No capital gains shall arise to HUF on distribution of assets on partition of HUF.
– Section 49(1): Cost of acquisition of such assets to the member shall be the cost of acquisition of such asset in the hands of HUF.
– Period of holding of assets of transferor shall also be considered for computing the period of holding of assets in the hands of transferee.

Can HUF receive gift from its members?

Earlier HUF could not give or receive gift to or from its members beyond a sum of INR 50,000/-without making the donor liable to tax u/s 56(2). However Finance Act, 2012 extended the definition of a relative to include gift from any member of an HUF to HUF. Thus an HUF can now receive a gift from its member exceeding INR 50,000/- without any liability to pay tax u/s 56(2) of Income Tax Act.

Got Questions? Ask Away!

  1. Hi @Dixita

    As per section 64(2)​, when an individual, being a member of HUF, transfers his property to the HUF otherwise than for adequate consideration or converts his property into the property belonging to the HUF, then it will attract the provisions of clubbing. Entire income from such property will be clubbed with the income of transferor.

  2. Hi @smarty_pokemon, we recommend that you take the amount as a "gift’ into your own account and then introduce it as a capital into the HUF. You can read more about “clubbing of income” in the artcle mentioned below. Always happy to help. Let me know if you have any other query. :blush:

  3. My profession business is intraday trading in share market .

    I trade in my individual account .

    Can i pay salary commission etc to my huf account ?

    If this is not possible . then . I trade in my huf account . And pay salary commission etc to my individual account . Is this possible ?

  4. Hello @HIREiN,

    Intraday trading is considered as a speculative business under the income tax act. Any expense that is incurred for the business activity can be claimed as a business expense.

    The onus to prove that business expenses claimed relates to the business activity is on the taxpayer.

    Here is an article for more clarity:

    Hope this helps!

  5. but my query was : Can i pay salary commission etc to my huf account ? as both the person is the same !

  6. Hello @HIREiN,

    If you pay a salary to HUF then Salary paid will be an expense for the trader and income for the HUF.

    Ideally, you can’t pay salary from an individual account to HUF even though both are separate legal entities since HUF has not contributed through any skills in the trading for which you pay them a salary.

    Hope this helps

  7. so , is it wise to do the vice-a-versa .
    i mean , i trade in my HUF PAN account and pay salary commission to my PAN account !

    it is ok ?

  8. Can husband and wife . Both open Huf accounts separately . one . in the karta name of husband . And . 2nd . In the karta name of wife ?

  9. for opening the HUF ;
    affidavit is required on the stamp paper !
    what is the amount value of the stamp paper ?
    is it judicial stamp paper or non-judicial stamp paper ?
    is it required to be notarized ?

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