Rent deed

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This query is : Resolved

CA Kamlesh Kukreja (Querist)

28 August 2014 Two Brothers "A" & "B" Purchases shop jointly having equal share of Rs:-78 Lakhs. B is conducting its own business in that shop

can "A" receive rent from "B" as A have invested funds in shop but only used by B?

Further will it be necessary to have rent deed between them for claiming rent exp in income tax. B is covered by Audit?

CA Devanand Jethanandani

CA Devanand Jethanandani (Expert)

28 August 2014 Dear Kamlesh,

Of course A can receive rent from B.

Yes rent deed is must.

CA Kamlesh Kukreja

CA Kamlesh Kukreja (Querist)

28 August 2014 is it necessary to notarise that as rent is req for april 2014 but notary will be done now

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

21 July 2025 Here’s a clear breakdown of your query regarding the joint ownership and rent deed between the two brothers:

Situation:
Two brothers, A & B, jointly purchased a shop (equal share in Rs 78 lakhs).

B is running his own business in that shop.

Question 1: Can A receive rent from B since A invested funds but B is using the shop?

Question 2: Is a rent deed necessary for claiming rent expense in Income Tax?

Question 3: Is notarization necessary if rent deed is executed now but backdated rent is for April 2014?

Answers:
Can A receive rent from B?

Yes, absolutely. Since the property is jointly owned, B (who uses the shop for business) can pay rent to A for A’s share.

This is treated as normal rental income for A and a rent expense for B’s business.

Is rent deed necessary?

Yes, a formal rent deed is necessary to document the rent agreement.

For Income Tax purposes, especially since B’s business is under audit, having a proper rent deed supports the legitimacy of rent expenses claimed by B and rental income reported by A.

Is notarization necessary?

Notarization is not mandatory but recommended.

It strengthens the authenticity of the rent deed and helps during scrutiny or audit.

Even if the rent deed is executed now but made effective from April 2014, the document can be backdated (but it must be genuine and reflect actual agreement).

Courts or tax authorities may ask for proof that rent was actually paid during that period (bank statements, receipts, etc.).

Additional Suggestions:
Ensure rent is actually paid from B to A, preferably by cheque or bank transfer, to create a paper trail.

Maintain all rent receipts and records for audit.

Clearly specify rent amount, payment schedule, and terms in the rent deed.

If A is receiving rent income, he should declare it in his income tax return under “Income from House Property.”

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