Status of assessee and tax rate
This query is : Resolved
12 August 2015
SIX INDIVIDUAL [ 3 BROTHERS AND THEIR WIVES ] HAS PURCHASED A PLOT OF LAND. THE PURCHASE DEED ALL THE SIX NAMES HAVE BEEN MENTIONED AS PURCHASED. NOW, THEY WANT TO CONSTRU RESIDENTIAL HOUSES ON IT AND TO SELL THEM LATER ON.
THEY DO NOT WANT TO FORM PARTNERSHIP FIRM.
THEY DO NOT WANT TO FORM PARTNERSHIP FIRM.
12 August 2015
They can enter in to partnership on which 30% tax payable. Salary and interest on capital can be a allowable deduction and taxed on individual partners based on slab rates.
12 August 2015
THEY DO NOT WANT TO FORM PARTNERSHIP FIRM.
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Read more at: https://www.caclubindia.com/experts/modify_message.asp?entry_id=1009681
25 July 2025
Got it — so six individuals (3 brothers and their wives) jointly own a plot but don’t want to form a partnership firm. You want to know their **tax status and applicable tax rate** when they construct and sell residential houses on that plot.
Here’s the scoop:
1. **Individual Ownership**: Since all six are co-owners and no partnership firm is formed, each person will be treated as an individual owner holding their respective share in the property.
2. **Taxation on Income from Sale of Houses**:
* The income from selling constructed houses will be treated as **capital gains** or **business income** depending on the facts:
* If the houses are sold as a one-time activity, it may be treated as capital gains.
* But if the activity is frequent or commercial in nature (like construction and sale of houses), it may be treated as **business income**.
3. **Tax Liability**:
* If treated as business income, each individual will be taxed separately according to their individual tax slab rates.
* No separate tax rate like partnership firm (flat 30%) applies because no firm is formed.
* Expenses directly related to construction and sale can be claimed by each individual in proportion to their ownership share.
4. **Filing**:
* Each individual should declare their share of income (profits or gains) on their personal Income Tax Returns.
* They must maintain clear records of expenses, construction cost, sale proceeds.
5. **Other Notes**:
* If the property is jointly held, stamp duty and registration are usually paid on the entire transaction.
* Capital gains tax (if applicable) would be computed on the individual’s share.
---
### Summary:
* Since no partnership firm is formed, **each co-owner is taxed individually on their share of income**.
* Taxed as per **individual slab rates**.
* No flat 30% tax like a firm.
* Must maintain separate accounts for each owner’s share.
If you want, I can help you draft a simple ownership agreement or explain tax filing for this case. Would you like that?
Here’s the scoop:
1. **Individual Ownership**: Since all six are co-owners and no partnership firm is formed, each person will be treated as an individual owner holding their respective share in the property.
2. **Taxation on Income from Sale of Houses**:
* The income from selling constructed houses will be treated as **capital gains** or **business income** depending on the facts:
* If the houses are sold as a one-time activity, it may be treated as capital gains.
* But if the activity is frequent or commercial in nature (like construction and sale of houses), it may be treated as **business income**.
3. **Tax Liability**:
* If treated as business income, each individual will be taxed separately according to their individual tax slab rates.
* No separate tax rate like partnership firm (flat 30%) applies because no firm is formed.
* Expenses directly related to construction and sale can be claimed by each individual in proportion to their ownership share.
4. **Filing**:
* Each individual should declare their share of income (profits or gains) on their personal Income Tax Returns.
* They must maintain clear records of expenses, construction cost, sale proceeds.
5. **Other Notes**:
* If the property is jointly held, stamp duty and registration are usually paid on the entire transaction.
* Capital gains tax (if applicable) would be computed on the individual’s share.
---
### Summary:
* Since no partnership firm is formed, **each co-owner is taxed individually on their share of income**.
* Taxed as per **individual slab rates**.
* No flat 30% tax like a firm.
* Must maintain separate accounts for each owner’s share.
If you want, I can help you draft a simple ownership agreement or explain tax filing for this case. Would you like that?
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