Brothers joint property income expenses

Brothers joint property income expenses ITR Vas Freelancer  21 Points  Joined January 2021 5 brothers (not direct brothers, cousin brothers) have small adjacent properties (~ 70 cents each) having rubber plantation. One brother (who files ITR each year) manages affairs of all plantation as brothers stay in different cities. (Expenses for nearly 7 years, until tapping started, have all been shared by brothers through cash adjustments in previous years.) Expenses are incurred (mainly fertilizer and labour charges) as and when required and these are usually out of pocket expenses without paper vouchers. Latex (from all plots) is sold (thru producers cooperatve society), but sale proceeds are credited in bank account of the one brother managing affairs. Income has to be distributed to brothers and expenses have to be collected. Query: (1) Would a plain paper statement of account of expenses and income and transferring eligible share thru bank transfers to brothers will be sufficient explanation for IT in case of a query from IT department? Can cash be paid/received in settlement? (2) This being agricultural income (and exempt), should the income be added in IT return? (3) Are brothers liable to include such income in their IT returns (only two others file ITR)? Thanks in advance for expert advice.

Here’s a detailed take on your queries about joint agricultural income from brother’s rubber plantations:

1) About Accounting & Settlements

• Plain paper statement of income and expenses, along with bank transfers, can be considered valid proof if properly maintained and consistent.

• However, absence of supporting vouchers/receipts (especially for expenses like fertilizers and labor) weakens the evidentiary value. It’s advisable to maintain at least some documentary evidence like cash memos or ledger entries.

• Cash payments/settlements are allowed but not recommended for tax or audit clarity. Bank transfers are better as they leave a clear paper trail.

• In case of IT Department query, if income is agricultural (exempt) and properly explained, it should be acceptable but always maintain good records.

2) Should Agricultural Income be Declared in ITR?

• Agricultural income is exempt under Section 10(1) of the Income Tax Act.

• However, Section 5A requires that agricultural income be shown in the ITR (under exempt income) for computing the tax on non-agricultural income (to determine slab rates or surcharge).

• So, yes, it is best practice for the brother who is filing the ITR to disclose agricultural income separately as exempt income.

3) Are All Brothers Liable to Include Income?

• If the income is agricultural and exempt, then no tax is payable by any of the brothers.

• The income should be distributed in their respective shares as per ownership.

• Each brother should disclose their share of agricultural income in their own ITRs if they file returns.

• Those brothers who do not file ITR technically do not have to disclose exempt income but ideally all owners should report their share for compliance and clarity.

Additional Suggestions:

• Consider opening a joint bank account for plantation receipts and expenses to bring transparency.

• Maintain a ledger or register showing contributions, expenses, and income share for each brother.

• Consult a CA for formalizing the partnership or joint ownership arrangement for better tax planning and legal clarity.

• For future years, insist on getting proper receipts/invoices for expenses incurred.