Clubbing of Rental Income

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This discussion explores the tax implications of renting a jointly owned commercial property to an LLP where one of the joint owners is a partner. It clarifies that if the rental income is declared in equal shares by both owners, the wife's portion of the rent won't be clubbed with the husband's income. However, if the rent is paid entirely to the wife despite a joint agreement, her portion is treated as a gift, and any income generated from that gifted amount could be clubbed with the husband's income.

Vedantham Raghavan

Vedantham Raghavan (Querist)
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25 December 2021 1. There is joint commerical property owned by Mr and Mrs X . Mrs X wants to rent the property to an LLP for Rs 30000/- per month., wherein Mr X is LLP partner. ( Mrs X is not LLP Partner and is housewife having income tax Pan No). Will clubbing provisions of income tax apply in the hands of Mr X partner.
2) Whether TDS is to be deducted also.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 December 2021 Being Joint owner of the property, the rental agreement should be between both the owners and tenant. Just one owner cannot declare total rental income in his/her ITR.

Vedantham Raghavan

Vedantham Raghavan (Querist)
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25 December 2021 Ok, - Assuming that the rent is also split 50:50, does the wife's portion of rent will be clubbed alongwith the husbands income?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 December 2021 No. There is no question of clubbing the rent income of husband, provided both have declared 50% rent in respective ITR.

Vedantham Raghavan

Vedantham Raghavan (Querist)
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26 December 2021 Sorry to bother, what happens to clubbling provisions if rent is entirely paid to wife, but rent agreement is made on both?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2021 As far as rental income is declared for assessment in equal shares, the part of rent received by wife (husband's share) will be treated as gift to wife. The gift amount is not clubbed directly, but any income earned over the gifted amount will be clubbed in Husband's hand.

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