Income from House Property
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
23 June 2011
What will be the tax implication in below case?
Suppose a family have five members Mr. A and Mrs. A and three children all are major. Mr. A gets property from his ancestral under will property is not register under his name. After some time Mr. A dies without will and property is let out by Mrs. A and his children. Rent income is deposited in the joint account of Mrs. A and his children. What will be the tax implication?
1. Who will be liable for tax?
2. Is that income from house property divided in the 4 part and taxable in the respective individual i.e. Mrs. A and her 3 children?
3. Is it will be treated as AOP?
4. If Mrs. A had made some legal expense to clear title on property then Is it allowed as deduction?
Suppose a family have five members Mr. A and Mrs. A and three children all are major. Mr. A gets property from his ancestral under will property is not register under his name. After some time Mr. A dies without will and property is let out by Mrs. A and his children. Rent income is deposited in the joint account of Mrs. A and his children. What will be the tax implication?
1. Who will be liable for tax?
2. Is that income from house property divided in the 4 part and taxable in the respective individual i.e. Mrs. A and her 3 children?
3. Is it will be treated as AOP?
4. If Mrs. A had made some legal expense to clear title on property then Is it allowed as deduction?
23 June 2011
Q 2.
Reply-
In my view, according to the will Mr. A becomes the owner of the property and on his death property can be divided in his successors or legal heirs. On the above line query no 2. can be answered affirmatively as Yes
*
Q1. Who will be liable for tax?
Reply - All the four members are equally entitled and as such will be liable to tax in respect to rental income under the head IFHP as co-owners.
Reply-
In my view, according to the will Mr. A becomes the owner of the property and on his death property can be divided in his successors or legal heirs. On the above line query no 2. can be answered affirmatively as Yes
*
Q1. Who will be liable for tax?
Reply - All the four members are equally entitled and as such will be liable to tax in respect to rental income under the head IFHP as co-owners.
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23 June 2011
3. Is it will be treated as AOP?
AOP is formed generally for a profit motive and the motive must be an pre-existing idea
before formation of the AOP.
*
Here it doesn't look so. Had the case be of land or any other asset except HP, then also it can't be told as an AOP. In spite of AOP, it would be better to term it as a BOI (Body of Individuals).
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In case of House Property assessable under the head IFHP, Section 26 is the guiding section where property is owned by co-owners. S 26 clearly spells that such property shall not be assessed in the hands of an AOP or BOI.
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Section 26 further prescribes that each co-owner is treated as separate owner and his respective share will be assessed as if the single property constitute 4 separate properties according to the respective shares of the co-owners.
AOP is formed generally for a profit motive and the motive must be an pre-existing idea
before formation of the AOP.
*
Here it doesn't look so. Had the case be of land or any other asset except HP, then also it can't be told as an AOP. In spite of AOP, it would be better to term it as a BOI (Body of Individuals).
*
In case of House Property assessable under the head IFHP, Section 26 is the guiding section where property is owned by co-owners. S 26 clearly spells that such property shall not be assessed in the hands of an AOP or BOI.
*
Section 26 further prescribes that each co-owner is treated as separate owner and his respective share will be assessed as if the single property constitute 4 separate properties according to the respective shares of the co-owners.
23 June 2011
4. If Mrs. A had made some legal expense to clear title on property then Is it allowed as deduction?
Reply - No, it will not be deductible from the Rental Income. From Rental Income the specified deductions of Section 24 can only be deducted.
Reply - No, it will not be deductible from the Rental Income. From Rental Income the specified deductions of Section 24 can only be deducted.
Querist : Anonymous
Querist :
Anonymous
(Querist)
24 June 2011
1. Suppose Mrs.A had made expenses on repair before giving the property on rent and legal expenses to clear title on property. The expense on repair and legal is 80% to 90% of income. Can she claim this by showing house property income under the head income from business and profession.
2. If it is treated as income from business then profit can be divided in four part or it is taxable in the hand of Mrs. A.
2. If it is treated as income from business then profit can be divided in four part or it is taxable in the hand of Mrs. A.
24 June 2011
Q 1. Suppose Mrs.A had made expenses on repair before giving the property on rent and legal expenses to clear title on property. The expense on repair and legal is 80% to 90% of income. Can she claim this by showing house property income under the head income from business and profession.
*
Reply-
The Expenses of clearing the title are not considered as revenue expenditure. However, it the time of sale of the property, you may add it as an improvement
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For repairs Section 24 has provided indirectly a deduction of 30% of your Net
Annual Value(NAV= Gross Annual value(Rent)- Municipal Taxes). Which is allowable irrespective of any repairs.
So in the coming years it is likely to be compensated automatically.
*
Reply-
The Expenses of clearing the title are not considered as revenue expenditure. However, it the time of sale of the property, you may add it as an improvement
*
For repairs Section 24 has provided indirectly a deduction of 30% of your Net
Annual Value(NAV= Gross Annual value(Rent)- Municipal Taxes). Which is allowable irrespective of any repairs.
So in the coming years it is likely to be compensated automatically.
24 June 2011
Q 2. If it is treated as income from business then profit can be divided in four part or it is taxable in the hand of Mrs. A.
Reply-
IFHP is a specific head in the statute and in no way your income is different from such Income. It is nothing but IFHP and will be assessed so only. You can't treat it as business by the virtue of Section 26 also, which specifically tells that the income will be not assessed in the hand of AOP. So, in no case it can be treated as business Income.
Reply-
IFHP is a specific head in the statute and in no way your income is different from such Income. It is nothing but IFHP and will be assessed so only. You can't treat it as business by the virtue of Section 26 also, which specifically tells that the income will be not assessed in the hand of AOP. So, in no case it can be treated as business Income.
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24 June 2011
Your question is very much clear that there is no will left by Mr. A. The best way is to get the succession certificate from the Court. If it has been done then there is no hassle as Mrs. A and her 3 children are joint owners. There is No question of AOP or BOI. If no succession certificate has been taken then make a family settlement and let all the 4 be the owners and get it registered.
All the 4 are co-owners and the provisions of Section 199 will come into play. As regards repair expenses it cannot be claimed against the house property income as there is limit of 30% to allow all expenses. It is better to capitalize and enhance the value of the property as 30% is allowed whether you incur the expense or not.
All the 4 are co-owners and the provisions of Section 199 will come into play. As regards repair expenses it cannot be claimed against the house property income as there is limit of 30% to allow all expenses. It is better to capitalize and enhance the value of the property as 30% is allowed whether you incur the expense or not.
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