Income from building

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naveen kumar (Querist)
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08 February 2014 sir,
one of our client have bought a building(registered in his name) of 4 floors and he is getting an annual rent of Rs 15,00,000/-. To reduce the tax liability he decide to give one - one floor to his 4 sons by sinning the MOU . Does the MOU needs to be registered ??? is any provision is there like this??? or any other better ways to reduce tax liablity

CA Galib Mirza

CA Galib Mirza (Expert)
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08 February 2014 Dear Naveen
In order to Tax Planning, You client has to make a valid registered gift deed and transfer the floors in the name of sons, in this case as per sec. 56 such transfer is exempt from taxation and not out of perview of capital gains.
If he signs mere mou without any consideration from the the son it will fall under ambit of section 45 and Capital Gain will be attracted, and if AO proves that this is a revocable transfer then he may also provisions of clubbing, due to which income from rent will be added back in the income of your client.
Hope this will serve your purpose.

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