1. Next time whenever you make an agreement, you should make it in joint name.
2. You should collect the rent 50% each from source.
Tax implication for a US Citizen who is also a OCI (Overseas citizen of India)
My sister and I inherited a property from our parents. We have decided to put it on rent. Since my sister is local(in Kolkata) the rental agreement was put on her name. Now my brother-in-law says that the rent collected incurs a direct tax implication on my sister for the full rental amount. My question is.. 1. How do we split the rental amount so that each of us are only liable for 1/2 of the amount. ? 2.What is the best way to collect the rent. direct deposit to my sister's account and then she deposits the amount in my account or just split it from the source and deposit 50% in each one's account ? (I have a NRO account)
Asked 5 years ago in Income Tax
So for this one (since the agreement has already been made), if we split the rent at the source, will my sister be still responsible for the whole amount of the rent(tax implication) ? - Thanks Sandip
Asked 5 years ago
Hi
Yes, your brother-in-law is correct.
Rental income should be received in both of your accounts equally.
Include your name in the next rental agreement.
Hi,
Your brother in law is correct wrt the tax implications. My advise is to share the post tax rental income between the two of you till the time the new rental agreement is in place.
It is advisable to get your name included in the next rental agreement that is made and get the rentals split equally between the two of you.
hope that clarifies.
Regards,
Nikhil
I think the rent agreement needs to be amended or you can make a power of attorney in your sister's name that she can give the property on rent and collect rent on your behalf also and then she will deposit your share of rent in your account. I think this will save her tax as well as save the rent agreement from being amended because technically you both are the owner of the property then how can she alone undertake the rent agreement.
So I think make a power of attorney and ask your sister to deposit half amount in your account.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you
Hi Sandip,
Hope you are doing well !
Yes, your brother in law understanding is absolutely correct.
Rental income should be received equally in respective accounts.
Yes, she will be responsible.
It is advisable that your name include in next Rental agreement.
Hi,
1.Next time make the rental agreement in joint name.
2. You should collect the rent 50% each from source.
Yes, your brother in law is suggested right approach.
No Sandip, She will not be responsible.
Make sure you take 50% rent in your account either from source or from your sister.
Hi,
- To split the rent between you and your sister, you need to amend the rent agreement and include your name as well with the amount specifically mentioned in it.
- You should get the rent in to your NRO account only since you are NRI.
Thanks
Dear Sir,
1) You can split the rental amount equally in both of your account
2) You can go with the both the option but to be on safer side i would suggest you to have two deposits. 50% in your sister account & 50% directly in your NRO Account.
No if you split the source or even if you not split the source but your sister receive full amount and trasnfer balance to your account in either of the case she will not be subject to full tax
Hi
1. Include your name also in rent agreement.
2.Either take directly from sources or your sister can also transfer the half rent in your account.
No she will not be responsible for whole amount of taxes if she will transfer the half rent to your account.
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