Rent collection after taking Wife property on Rent and subletting the same to third party

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This discussion explores a scenario where a wife owns a commercial property and rents it to her husband. The husband then sublets the property to a third party, intending to manage the rental income and tax liability. The core question is whether this arrangement is permissible for tax purposes, particularly if the husband has a lower tax bracket than his wife. The consensus suggests that tax authorities may scrutinise such arrangements to prevent tax manipulation and potential penalties.

Sanjay S

Sanjay S (Querist)

04 August 2023 Case;-

The Commercial propoerty is registered in the name of wife . CanWife give the property on rent to her husband. Can Husband then sublet the property to thrid party and take income to his accounts and pay tax accordingly ..Thanks

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 August 2023 If the difference in the rent received and paid be substantial without any justification, ITO may add the rent in the hands of the person with higher tax slab liability.

Sanjay S

Sanjay S (Querist)

04 August 2023 Not clear Sir, The question was the property is refistered in the name of Wife but the Tax laibiltiy of Husband is less . Need a solution ? Can the wife make husband a tenenat and then allow him to sublet to third party so that Tax liability remains under control
Thanks

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 August 2023 This is what I have stated earlier that AO will not allow such tax manipulation. There can be penalty for such tax diversion.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

11 September 2024 Good Luck.

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