Transfer of Property

Dear CAs,

I am a salaried professional paying tax in the highest bracket. I also have other income i.e. I receive a rent of 20000 per month on a property that I leased out. As of today, I am paying 30% tax on this rental income of 20000 as well. On the other hand, my wife does not have any source of income. Therefore, I plan to transfer the property (via registered Gift Deed route) onto my wife's name. As i am transferting the flat ownership without receiving any consideration therefore i want to know whether my wife would still have to pay 30% tax even though she does not fall under that IT slab. Can you please share some insights? Thanks
Asked 7 months ago in Income Tax from Hyderabad, Telangana
Dear Sir,

As you are transferring the flat to your wife without any consideration even though the flat will be in your wife's name and she will be receiving the income in her name still the income will be clubbed in your hands and you will be held liable to pay taxes on the same and not your wife. 

Trust this clarifies your query. 

Feel free to get back/ call back in case of further details. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
719 Answers
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Dear Sir

Because of the clubbing provisions under income tax act, if you transfer the property to your wife without consideration, the income will be clubbed in your hands and you will be held liable to pay taxes on the same.

Thanks and Regards 
CA Abhishek Dugar
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
773 Answers
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You can take a loan for buying a property. Since this property already belongs to you it will not help.
Abhishek Dugar
CA, Mumbai
773 Answers
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Hello Sir,

Deduction of Interest is only allowable against Housing Loan that can be taken only at the time of buying a house.

The Loan which you may take now will be a Mortgage Loan and No Deduction is allowable for Mortgage Loans under the Income Tax Act.

In order to save up on taxes we need to understand your family tree and also your comfort factor with each member to decide if we can transfer the property in their name in order to save up on taxes.

 Trust this clarifies your query. 

Feel free to get back/ call back in case of further details. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
719 Answers
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Clubbing provisions will attract in this case and the income will again be clubbed in your Income.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Dear Sir,

As you are transferring your house to your spouse without any consideration, if any income is derived by your spouse from same property than it should be clubbed to your income.

However, if the property is transferred to your son or daughter who is above 18 will not attract any clubbing provisions as nothing is being mentioned about the same in the Act.

However we can still workout on your Taxability, you can contact us at ca.skagarwal@gmail.com.

Looking forward for your response.

Thanks and Regards
Shiv Kumar Agarwal
CA, Delhi
197 Answers
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The income earned on properties gifted to the spouse will be clubbed with the income of the transferor.  However, the income earned on the reinvestment of income will not be clubbed and such income will be the income of the spouse, in whose favour the property was gifted. Thus if you transfer property, the rental income will be clubbed in your hands but the interest earned on the investment of rental income earned by your wife will not be clubbed in your hands and it will be her income only.

You may gift money to your wife who will invest such money in FDRs with the Bank. The interest earned on the deposits will be clubbed in your hands but the interest earned on reinvestment of such interest will not be clubbed in your hands and she will be paying tax on such interest. 

As you are in high tax bracket, you may invest in financial instruments such Mutual Funds and Shares in reputed companies, yielding dividends.  The dividends are exempt  from tax and your effective return may be more or less equal to the pre-tax returns, if not more.  Further, considering the scope for  market appreciation in the long run, you  may have long term capital gains, which are exempt, if traded through stock exchanges. 
B Vijaya Kumar
CA, Hyderabad
290 Answers
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