09 March 2015
Hi, Me & my mother purchased a site in Bangalore from BDA recently. Now we are going ahead with the construction of the property. This property might fetch a rental income of Rs. 1 Lakh per month. I am a salaried person with income of around 20 lakhs per year. My mother is a pensioner with a monthly pension of around 2.4 lakhs per year. Now my queries are :
1) Since I am already under 30% tax bracket, can I show all the income from rental property to my mother IT returns?
2) Since the rental income is more than 10 lakhs per year, we will need to pay service tax also ?
3) If yes, then by splitting this rental income equally between each of us, will we be able to save on service tax ?
4) We will also get around 10 lakhs as advance by the tenants. Are there any taxes involved for this advance amount also ?
26 July 2025
Hey! Let me break down your queries on tax related to your joint property rental income in Bangalore:
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### 1) **Can you show all rental income in your mother’s IT returns?**
* Since the property is jointly owned by **you and your mother**, rental income must be **declared in the ratio of ownership** (or mutually agreed ratio). * If you both own 50-50, then rental income should be split equally. * You **cannot show 100% rental income only in your mother’s return** if she is not the sole owner. * So, you should split the rental income accordingly — e.g., Rs 50,000 each per month.
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### 2) **Is service tax applicable on rental income above Rs 10 lakhs?**
* **No**, residential rental income is **exempt from service tax** (now subsumed in GST). * Even commercial rent is subject to GST, but **residential rental income is exempt** from service tax/GST. * So, **no service tax or GST is payable on residential rent** regardless of amount.
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### 3) **Can splitting rental income save service tax?**
* Since **no service tax applies on residential rent**, splitting income will not impact any service tax liability.
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### 4) **Is advance from tenants taxable?**
* Advance rent received is considered **income in the year of receipt**. * Usually, it’s adjusted against future rent, so taxed as rental income when earned. * For security deposits (refundable), these are **not taxable** as they are refundable. * But if the advance is non-refundable or treated as rent for advance period, then taxable.
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### 5) **Is there any limit on advance amount?**
* There is **no specific tax limit on advance rent**. * However, if advance is unusually high or related-party transaction, it could invite scrutiny. * Proper documentation is important.
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### Summary
| Query | Answer | | ----------------------------------------------- | ------------------------------------------------------------ | | 1. Show rental income fully in mother’s return? | No, split as per ownership ratio. | | 2. Service tax on residential rent? | No, exempt. | | 3. Splitting saves service tax? | Not applicable, as no service tax. | | 4. Tax on tenant advance? | Taxable if advance rent; not if security deposit refundable. | | 5. Limit on advance amount? | No specific limit, but document properly. |
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If you want, I can help you draft how to declare this in your ITR! Want that?
CAclubindia
