Rental income of property inherited

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 August 2016 Properties inherited after death of father is now transferred in the names of his widow and children's.
All the Properties are now in the name of Widow and children without mentioning their share.
How will rental income from Joint Property inherited be taxed?(Will it be taxed as AOP or will it be taxed individually as it is inherited.)

#Please quote section or case laws wherever possible.

Querist : Anonymous

Querist : Anonymous (Querist)

03 August 2016 Please refer section 26 of IT Act, 2016. And please quote reference.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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21 July 2025 This is an important question on the taxation of rental income from inherited property that is jointly held by legal heirs without specified shares.

Let’s go step-by-step, then cite the applicable law.

✅ Scenario Summary
Properties inherited from deceased father.

Now held jointly by widow and children.

Property ownership is undivided — no specified share ratios recorded.

Rental income is being earned.

Question: Should rental income be taxed in hands of individual co-owners, or as AOP (Association of Persons)?

✅ Tax Treatment of Rental Income from Inherited Property
The governing provision is:

🧾 Section 26 of the Income Tax Act, 1961
📌 What It Says:
“Where property consisting of buildings or lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not be assessed as an association of persons but each person shall be assessed individually in respect of his share...”

✅ Key Point: Definite & Ascertainable Shares
So:

If the shares of co-owners are definite and ascertainable → tax each person individually on their share of income.

If shares are not definite/ascertainable → income taxed as AOP (Association of Persons).

🧠 Now, in case of inheritance from father:
Under Hindu Succession Act, widow and all children inherit equally, unless there’s a will stating otherwise.

Even if shares are not mentioned on property documents, they are legally determined by succession law.

So, shares are "ascertainable" by operation of law (equal or as per will), even if not documented.

Thus, Section 26 applies, and each legal heir will be taxed individually on their share of rental income — not as AOP.

✅ Relevant Case Law
CIT v. Indira Balkrishna [1960] 39 ITR 546 (SC)
Held: Mere joint receipt of income does not make it income of an AOP. There must be voluntary association and common purpose to earn income.

ITO v. Shri Ram L. Bhasin [1983] 4 ITD 733 (Del)
Held: When property is inherited and co-owners' shares are determinable under succession law, income should be assessed individually, not as AOP.

✅ Conclusion
Particular Treatment
Property inherited jointly Treated as co-ownership (not AOP)
Shares not mentioned in papers But are ascertainable under succession law
Rental income taxable in whose hands? Each legal heir individually, under Section 26
AOP treatment applicable? ❌ No, unless they voluntarily pool resources to earn jointly

✅ Final Note
To ensure smooth tax treatment:

Each co-owner should:

Disclose their share of rental income in their own ITR

Claim 30% standard deduction under Section 24

If possible, execute a family partition deed or memorandum confirming each one's share (for clarity and future record)

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