Section 329 of the Income-tax Act, 2025 — Joint and Several Liability of Partners for Tax Payable by a Firm

In plain language

What Section 329 says in plain English

Section 329 of the Income-tax Act, 2025 makes every partner of a firm jointly and severally liable, along with the firm itself, for the tax, penalty or any other sum the firm owes for a tax year. In simple terms, the firm's tax bill is not just the firm's problem — the Income-tax Department can recover the entire amount from any single partner, from some of them, or from all of them together, in whatever order it chooses.

The exact wording is that "every person who was, during the tax year, a partner of a firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the tax year." All the assessment and penalty provisions of the Act apply to recovering these amounts.

Who exactly is covered

• Anyone who was a partner at any time during the tax year — you do not need to have been a partner for the whole year. Even if you joined in the middle or retired before the year ended, you are covered for that year.
• Legal representatives of a deceased partner — if a partner has died, their legal heir/representative steps into the liability for that tax year.
• The firm remains liable as well; Section 329 adds the partners' liability on top, it does not replace the firm's.

What "joint and several" really means

"Joint" means all partners together are answerable. "Several" means each one is individually answerable for the whole amount. The crucial practical effect is:

• The Department is not required to first exhaust the firm's assets before chasing a partner.
• The liability is not limited to your profit-sharing ratio. A partner with a 10% share can still be asked to pay 100% of the firm's dues.
• A partner who pays more than their share can recover the excess from the other partners under general partnership law (contribution/indemnity), but that is a private matter between partners — it does not concern the tax authorities.

What amounts are covered

• Tax assessed on the firm for the tax year.
• Penalties levied on the firm.
• Any "other sum" payable by the firm — a deliberately wide phrase that pulls in interest, fees and other statutory dues.

How it fits with other provisions

Section 329 sits in Chapter XVII of the 2025 Act, which deals with special provisions for firms and other persons. It works alongside Section 327 (change in constitution of a firm), Section 328 (succession of one firm by another) and Section 330 (firm dissolved or business discontinued). Even after a firm is dissolved or its business is discontinued, the partners' joint and several liability under these provisions continues for the periods concerned. For Limited Liability Partnerships in liquidation, Section 331 applies a comparable liability on LLP partners.

Practical implications for taxpayers

• Do your due diligence before joining a firm. When you become a partner, you take on exposure to the firm's tax liabilities for that entire tax year, including for periods and past acts you may know little about.
• Retiring does not clean the slate for that year. If you retire in, say, September 2026, you remain liable for the whole of tax year 2026-27.
• Get a proper deed of retirement / indemnity. While it will not bind the tax authorities, a written indemnity from continuing partners protects your right to recover money later.
• Keep records of assessments and demands. If the Department recovers from you, you will need documentation to claim contribution from co-partners.

This is the 2025 Act's re-drafting of what was Section 188A of the Income-tax Act, 1961. The substance is essentially the same; the main change is the modern "tax year" terminology replacing "previous year" and "assessment year".