Income tax on rent recived by tenant by subletting

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A Jain

Private

9 Points Joined March 2016

This is a question regarding the Income on house property. Person A lease his house H to his mother B. A doesnt lives in house H, but B lives in that house. There is nominal lease amount X. Now B gives part of the house H to grandson C on rent. C pays a hefty amount Y of rent to B. Now if B shows the income by rent Y under other income head while filing the tax, is their anything wrong? A will file income from property head for amount X only. in no way A is liable to pay tax for rent Y. correct? Also is it necessary that lease be made for more than 12 years between A and B, cant it be just rental agreement between A and B for house H.

Replies (2)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210829 Points Joined July 2016

"A will file income from property head for amount X only. in no way A is liable to pay tax for rent Y. correct?"

No. Read:

As per Sec. 23(1)(a) the annual value of any property shall be the sum for which the property might reasonably be expected to be let out from year-to-year. In determining the annual value there are four factors which are normally taken into consideration. These are: i) Actual rent received or receivable, ii) Municipal value, iii) Fair rent of the property, iv) Standard rent.

shubham Pahuja

Chartered Accountant

236 Points Joined January 2014

Firstly,

Rental income in the hands of owner is charged to tax under the head “Income from house property”. Rental income of a person other than the owner cannot be charged to tax under the head “Income from house property”. Hence, rental income received by a tenant from sub-letting cannot be charged to tax under the head “Income from house property”. Such income is taxable under the head “Income from other sources” or profits and gains from business or profession, as the case may be.

Secondly,

There is no minimum time period required for the lease