Rental income - joint ownership & nav calculation

Tax queries 4126 views 2 replies

tanvinay

MBA

24 Points Joined January 2013

I brought a ready to move in flat in Bangalore in the joint name of me and my wife. We had taken a loan for the purchase as co-applicant and am making regular EMI payments. The EMI of INR 50,011/- is a direct debit from my salaried account. Both of us are employed. For the current FY 2012-13, the situation is as under:

We stayed in the property from 1-Apr-2012 to 31-Jan-2013. The house was put on rent from 1-Feb-2013 for a monthly rental of INR 23,000/-. We have now moved to Mumbai and are paying a monthly rental of INR 35,000/- . My question are as under:

1. Can I show 100% of rental income in my wife's name? For the last FY, we showed joint ownership of 50-50 for the property. The EMI payment happens from my account barring 2-3 months when my account balance is low, my wife does a NEFT transfer to my account for the ECS to happen.

2. Since the property was let-out for part of the year and self-occupied for part of the year, how would Net Annual Value (Rental Income) be calculated?

3. How would HRA be computed in my case?

Any help on the calculation would be highly appreciated.

Regards,

Vinay

Replies (2)

CA. Ankit Khemka

CA in Practice

45 Points Joined October 2007

Dear Vinay

Your Query complies of lot many questions involving various sections of the Income Tax Act. I am answering your query to solve as much doubt as possible for you.

First of All, under Income Tax Act, it is not solely important to see in whose name the property is purchased, We have to see, whose money was invested. Ifit was only your money, than the property completely belongs to you and hence, income in respect of your wife's share will be clubbed in yours income. But if you and your wife independently paid for your respective shares, then you become co-owners and thus, property income will be distributed in your holding ratio.

Further, Since your property was partly self-occupied and partly let-out, the computtation will be as follows:

Step 1. Compute Fair Rental Value for all 12 months i.e Reasonable Expected Rent for the whole year.

Step 2. Calculate Actual Rent recd./receivable by you.

Step 3. Higher of the above will be GAV.

In case where property is let out for part of the year, the assessee has to calculate GAV in respect of whole year, if thats higher than Actual Rent.

In respect of interest on housing loan, total interest will be allowable as the property is letout for part of the year, limit of Rs.150,000 will not be applicable.

Rental income cant be completely shown to be that of your wife.

Thanks and regards

Ankit Khemka

Guest

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