Chartered Accountant
221 Points
Joined February 2015
Hi Rahul,
I presume the sale deeds for the 3 properties which is let out currently to single tenant are in the name of 2 different persons, who are husband and wife in the current case. I also presume that husband has not transferred two rooms to his wife for inadequate consideration, in which case he will be hit by section 27 of the Act and shall be assessable for entire rental amount from the property as a ‘deemed owner’. Furthermore, clubbing provisions u/s 64(iv) will get attracted in that case and entire income shall gets taxed in the hands of the husband.
Assuming that current case is not hit by S. 64(iv), since the property is registered in the name of different persons they become 'owners' for the respective shares and they shall be considered as 'co-owners' u/s 26. Their respective share in the property shall be taxable in their individual hands.
As regards receipt of the entire rental in the hands of the wife, it will surely arouse suspicion in the minds of the AO as to whether there has been any shift in income to avoid higher slab rates of tax. However, this argument of the AO may not hold good if both husband and wife were in the same slab rate before adding rental income, as there is no scope for the any tax benefit. It is essential to satisfy the AO that there has not been any motive to evade taxes in such case.
The best bet to handle this situation is to receive the respective share in the bank account of both and giving out a gift to wife- which is exempt under the current law.
Hope the above clarifies.
Regards,
CA Hariprasad Nayak
CAclubindia
