Table of Contents
- What is a partition deed?
- When do you need a partition deed?
- How is property divided through a partition deed?
- Application of inheritance laws on partition deed between family members
- Partition of property under Hindu law
- What happens to a property after a partition deed is executed?
- Stamp duty on partition deed
- Impact of non-registration of partition deed
- Is it compulsory to register a partition deed?
- Difference between partition deed and partition suit
- Word of caution
- Treatment of verbal partition of property or family settlement under the law
- Income tax on partition deed
- Partition deed format
In case of properties that are jointly owned by several members of a family, the division of the said property and granting of each member’s share, could be done by way of executing a partition deed. In this article, we are going to talk at length about partition deed.
What is a partition deed?
Joint ownership of a property by many people is quite common, especially if it is an immovable estate that is owned by a family. The need for partition arises, when the co-owners decide to go their own way, as the combined ownership over the property limits their rights. The legal instrument that is used to affect this change, is known as the deed of partition or partition deed in legal parlance.
A partition deed is mostly used by families, to divide members’ shares in inherited properties. After the division, each member becomes the independent owner of his share in the property and is legally free to sell, rent or gift his asset, according to his will.
When do you need a partition deed?
Co-owners enjoy limited rights over a property, as their undivided shares leave a lot of scope for uncertainty. Even though all of these people are joint owners, they are not free to rent, sell or gift the property on their own accord, unless each party agrees to such a proposition. Basically, the consent of each co-owner is required to carry out any such transaction. The need for a partition deed arises, when it becomes important to create a clear division of shares in the property.
See also: Types of joint ownership of property
How is property divided through a partition deed?
If a property is being divided between two people who have invested in the purchase, the division is based on their respective contribution. If two siblings bought a property for, say Rs 1 crore and each contributed Rs 50 lakhs, the property will be divided equally between the two parties through a partition deed. If the ratio of their contribution is 60:40, the division would be in this manner. However, the law assumes each member to have an equal share in an undivided property, unless documentary proof stating otherwise is produced.
In case of inherited property, co-owners would get their share in a property based on their treatment in the inheritance law governing their religion.
Application of inheritance laws on partition deed between family members
Partition of any property is subject to the laws of inheritance. This brings into picture inheritance laws governing property division among Hindus, Muslims and Christians. At the time of partition, the share of each member is determined, based on his entitlement under the applicable inheritance laws.
Partition of property under Hindu law
According to the Hindu Succession Act, 1956, a deceased Hindu’s assets are divided among his legal heirs, either according to his will, or under the rules stated in the Act if the person has died without leaving a will – i.e., intestate. While the Hindu Succession Act, 1956, is applicable on the partition in a Hindu Joint Family, the Hindu Partition Act of Property, 1892, is applicable on partition of a property that is jointly owned.
What happens to a property after a partition deed is executed?
Once the partition deed comes into effect, each share in the property becomes an independent entity. Each divided share of the asset gets a new title. Also, members surrender their claim in the shares that have been allocated to the other members.
For example, if Ram, Shyam and Mohan divide a property through a partition deed, then, Ram and Shyam would give up their right in the part that has been allocated to Mohan. Similarly, Mohan would give up his right in the shares allotted to Ram and Shyam. Apart from the common areas where easements rights are applicable, each one has an independent property within an estate, after its partition. This also provides them the right to deal with their share in a manner they like.
After the partition, each party must also complete the property mutation process, to make the change legally valid.
Stamp duty on partition deed
To attain legal validity, a partition deed must be registered with the sub-registrar of the area in which the immovable asset is located. This is mandatory under Section 17 of the Indian registration Act, 1908. This means that the parties involved in the partition, will have to pay stamp duty charges (under the provisions of the Indian stamp Act, 1899) and registration charge, to get the partition deed registered.
Stamp duty on partition deed varies from state to state. For example, in Delhi, 2% of the value of the separated share of the property has to be paid as the stamp duty on a partition deed. The same rate is applicable on registration of partition deeds in Maharashtra, along with a 1% registration charge. (However, it is not mandatory for the co-owners to register the partition deed in the state.)
The manner of calculation of stamp duty would be better explained through an example:
Suppose a father, through partition, divides his estate worth Rs 5 crores into three parts, keeping 40% share with himself, while allocating 30% each to two of his sons. In this case, the stamp duty will be applicable on the 60% of the property value, i.e., Rs 3 crores. Supposing this property is located in Delhi and the applicable stamp duty levy is 2%, then, the brothers will have to pay Rs 6 lakhs, to register the partition deed.
Impact of non-registration of partition deed
If the partition deed is not registered by paying the applicable stamp duty and registration charges, it will have no legal validity. Consequently, the unregistered partition deed will not be admissible as an evidence under Section 49 of the Registration Act, 1908.
Is it compulsory to register a partition deed?
In 2018, the Maharashtra government said that the process of partition of properties belonging to a Hindu Undivided Family (HUF) and the receipt thereof by a coparcener, do not fall under the definition of ‘transfer’. Consequently, it is not compulsory to register such partition deeds. Note here that in case the partition has been affected through a partition deed, which has not been registered, the deed will not be admissible as a proof in a court of law.
Difference between partition deed and partition suit
Under the provisions of the law, a property would be divided, either by way of a partition deed or by a partition suit. The need to go for the second option arises, in case of a dispute or in cases where the co-owners do not mutually agree to the partition. In this case, a partition suit must be filed in an appropriate court of law.
Before one can file a suit, they will have to issue a request to all the co-owners, demanding partition. In case the parties refuse to entertain your request, you are within your legal rights to move court over the matter. Under the Indian laws, the aggrieved party must approach the court within three years, from the date when the right to file a partition suit accrues.
Both the instruments, however, serve the same purpose – they create and extinguish rights of co-owners in a jointly owned property.
Word of caution
The text of the partition deed must be such that it explicitly mentions each aspect of the division. Aside from the names of the parties concerned, the deed must have a clear mention of the date on which the partition is affected.
In case there are any ambiguities in the language or any errors in the text, a partition deed could be challenged in the court of the law. Co-owners are thus advised to first reach an agreement and clearly set the terms and conditions of the partition. All aspects of the division must be considered by each party, so as to avoid any inconvenience in future. Once the partition deed document is prepared, all parties concerned must read it thoroughly, to ensure that there are no ambiguities and that it is error-free. Once the text is final, the deed must be drafted on a stamp paper and the parties involved must proceed with the registration.
Treatment of verbal partition of property or family settlement under the law
Under the laws governing inheritance among Hindus, Jains, Buddhists and Sikhs, Class-I heirs of a property can enter into a verbal memorandum of family settlement and divide the property on mutually agreeable terms. Since this oral agreement has been reached without using the partition deed as an instrument, the need to register the transaction is entirely avoided.
While delivering its verdict in the case of Nitin Jain versus Anju Jain and others, a division bench of the Delhi High Court, in 2007, ruled that no stamp duty is payable in case of a verbal division of property.
“It’s legally permissible to arrive at an oral family settlement dividing/partitioning the properties and thereafter, record a memorandum in writing, whereby the existing joint owners, for the sake of posterity, record that the property has been already partitioned or divided,” the bench held.
“Courts have recognised oral partitions in cases of joint families. An oral partition is not an instrument of partition, as contemplated under Section 2(15) of the Stamp Act. Therefore, as it is not an instrument, no stamp duty is payable on an oral partition,” the HC further said.
However, in the absence of a partition deed, the shares of the co-owners remain undivided in this kind of arrangement. This also means, they are not free to sell, gift or transfer their share in their property on their own.
Income tax on partition deed
Since no transfer has taken place as such through the partition, the beneficiaries are not liable to pay any capital gains tax after the division.
Partition deed format
Provided below is a general partition deed format. Note here that this partition deed format is only to give the readers a general view of the deed.
This deed of partition made at __________this _________ day of
(1) Mr._________________, S/o._____________, Age ______years, Occupation__________, Residing at__________________________. Hereinafter referred to as the first party.
(2) Mr_________________, S/o._____________, Age ______years, Occupation__________, Residing at__________________________. Hereinafter referred to as the second party.
(3) Miss_________________, D/o._____________, Age ______years, Occupation__________, Residing at__________________________. Hereinafter referred to as the third party.
- The parties are the members and coparceners of their joint and undivided Hindu Family and a house property situated at ________________, the details of which are given in Schedule ‘A’. Each party hereto is entitled to a share in the said property.
- The parties desire to implement a partition of the said properties amongst themselves as they no longer desire to continue as members and coparceners of their joint family property.
- The parties have agreed that the said property will be divided in such a way that:
(a) The property described in the first schedule shall be allotted to the first party exclusively.
(b) The property described in the second schedule shall be allotted to the second party exclusively.
(c) The property described in the said third schedule shall be allotted to the third party exclusively.
- The parties hereto have proposed to effect and record the said partition in the manner following:
Now this deed witnesseth that
- Each party hereto grant and release all his/her undivided share, right, title and interest in the property allotted to the other so as to constitute each party the sole and absolute owner of the property allotted to him/her.
- Each party agrees that they will get the deed executed and registered and will equally share expenses involved in the process.
- Each party agrees that they will not cause any hindrances or claim and right on the share they have agreed to give up through this partition deed.
(Details of Undivided properties belongs to Joint Family)
Description of the property
(Property allotted to the share of Sri.__________________________First party)
(Property allotted to the share of Sri.__________________________Second party)
(Property allotted to the share of Miss_________________________Third party)
- FIRST PARTY
- SECOND PARTY
- THIRD PARTY
Can partition deed be challenged?
Yes, a partition deed can be challenged.
What is partition in a house?
A partition deed can be used as a legal instrument, to divide a property among the co-owners.
Is verbal partition of property legally valid?
The partition will be valid, as long as a written memorandum of agreement has been signed among the family members pertaining to the partition. This document need not be registered.