Rent income in the name of parents

1. On showing the whole Rental Income in the hands of your parents even after holding the 1/3rd share in property, Section  60 is came into existance which results in clubbing of 1/3rd portion of Rental Income in your hand. Sec.60 provides that if a person transfers his income without transferring its Assets, then such an income is clubbed or taxable in the hands of transferreror of Income. Only 2/3rd portion of income can be shown in the income of Parents.

It is much better to have a gift deed for a whole property.

2. In both cases such an Income is taxable under the head House Property.

3. You can also opt to make a trust in which such property is transferred for the benefits of your parents. In such case, the Income is taxable in the hands of your parents.

I agree with Vineet 

Dear Nitish .........

If any person gift his/her rental income to some other person, then only clubbing section will applicable. But if any person transfer his property through proper gift deed, then no clubing section will apply (as said by Vineet).

Hence I m fully agree with vineet

Dear Vineet "property is transferred " Means I need to tranfer ownership of Flat ?

any Alternate / other way to do the same ??

YES SUHAS,

You should transfer your property to your parents in Proper ratio,which is very most inportant for distribution of rental income.

For this,I agree for  Comment made by mr.vineet...

Regards,

Ronak Darji

Why are are going to tranfer deed 

for only tax saving purpose you can create your HUF after this tranfer all rental income in HUF A/c

Mr. Suhas, I am not in agreement with the view of Mr. Mukesh.

You may save your tax by opening HUF but not by directly transferring the rental income in HUF A/c. If you transfer your Rental Income in your HUF's A/c, then clubbing provisions again came into existance. Section 64(2) provides that if any person transfers its property into the Pool of Assets of his HUF otherwise than adequate consideration, then the income is treated as the Income of transferror.

For doing the Tax planning by creating HUF, you will require to transfer the property at an adequate consideration. (Transfer means same as provided in Sec. 2(47) i.e. sale, relinquishment, exchange etc.). In this case, you will be able to transfer the Income to your HUF and that is taxable as a separate person. Please note that the property is transferred at atleast on the value on which you will pay the stamp duty).

Dear Vineet & Friends

Thanks for reply

I think HUF is out of question because HUF will consider as one entity and the tax benefit will appply as per individual only, But if I transfer to parents Dad & Mom in that case I am creating two entity and can avail two tax filling benefit i.e. 240000 tax free income each for dad & Mom. i.e. 480000 total income tax free if I make gift deed in the name of my dad & Mom.

AM I RIGHT ??? PLEASE GUIDE 

I am agree that to take full rental income on my parents name I need to transfer my ownership to my parents, 

BUT is it possible BY ANY OTHER WAY that I can keep ownership with me only but earn / show  income in the name of my parents. so that I can save TAX by legitimate way

Thanks

Suhas

Dear Vineet & Friends

Thanks for reply

I think HUF is out of question because HUF will consider as one entity and the tax benefit will appply as per individual only, But if I transfer to parents Dad & Mom in that case I am creating two entity and can avail two tax filling benefit i.e. 240000 tax free income each for dad & Mom. i.e. 480000 total income tax free if I make gift deed in the name of my dad & Mom.

AM I RIGHT ??? PLEASE GUIDE 

I am agree that to take full rental income on my parents name I need to transfer my ownership to my parents, 

BUT is it possible BY ANY OTHER WAY that I can keep ownership with me only but earn / show  income in the name of my parents. so that I can save TAX by legitimate way

Thanks

Suhas

Dear Suhas......

There is no other way to transfer the rental income and retaining the ownership.......

Agreed with the view of Mr. Mudit.

Originally posted by : P.SUHAS
	Dear Vineet & Friends Thanks for reply I think HUF is out of question because HUF will consider as one entity and the tax benefit will appply as per individual only, But if I transfer to parents Dad & Mom in that case I am creating two entity and can avail two tax filling benefit i.e. 240000 tax free income each for dad & Mom. i.e. 480000 total income tax free if I make gift deed in the name of my dad & Mom. AM I RIGHT ??? PLEASE GUIDE

Dear Vineet & Mudit

Thanks for your guidence What about above my understanding about HUF is it Correct ?

Suhas
 

Yes. But, by transferring it in 3 parts (i.e. Father, Mother and HUF), you may also avail the benefit of Rs.6,40,000/-.