Library / Income-tax Act, 2025: The Professional's Master Guide

63. Case Study 16: Partition of an HUF

Facts. The Sharma HUF, with karta Ramesh, his wife and two adult sons as members, owns commercial property and investments yielding total income of Rs. 18 lakh a year (after house property deductions). In Tax Year 2026-27 the family effects a total partition, dividing the assets equally among the four members.

63.1 Tax before partition

HUF total income (new regime)	18,00,000
Tax: 20,000 + 40,000 + 60,000 + 20% of 2,00,000	1,60,000
Cess	6,400
Annual tax of the HUF	1,66,400

63.2 Tax after partition

Each member receives assets yielding about Rs. 4.5 lakh a year. As resident individuals in the new regime, each member's tax on Rs. 4.5 lakh (Rs. 2,500) is covered by the section 156 rebate, provided they have no other income taking them above Rs. 12 lakh. Total tax falls from Rs. 1,66,400 to nil, assuming each member's other income is modest.

63.3 Points to check

The partition must be a total partition, recognised by the Assessing Officer after inquiry; partial partitions are ignored for tax.
Distribution of assets on total partition is not a transfer, so no capital gains arise; each member takes the HUF's cost and holding period.
Income from the wife's share is her own income; clubbing does not apply because she received it on partition as a member, not by transfer from her husband (unless the property was originally converted by her husband into HUF property).
Stamp duty and registration on a partition deed are governed by state law.
After partition, the HUF's PAN is not used; the final return of the HUF covers income up to the date of partition.

APPENDICES

Quick reference tables, calendar, practice questions, checklist and glossary

The appendices are for quick reference: section mapping, calendar, practice questions, checklists, landmark rulings, glossary, rates at a glance, specimen formats and a section index.