• Tax liability reduction

Hello Sir/madam,

Hope you are doing good!!

This is Rahul from Hyderabad. I leased out my land which is located in kukatpally, Hyderabad, for a rent of 4,00,000 INR per month. 

The total extent is 1 and half acres and the entire property is registered on my name. Can i request the tenant to issue two cheques of equal amount, 1 on my name and the other on my wife's name..For the amount that will be credited to my wife's account, can i file ITR on her PAN?

Is it possible? If not, can you please suggest an alternate method to save tax liability. Gift deed is an option as far as i know, but stamp duty is very high and i cant afford to execute a gift deed at the moment.

Please let me know what can be done?

Thanks in advance
Asked 15 days ago in Income Tax

Hi,

 

Considering that the property is under your name, the rent will be taxable in your hand only. Gift deed is not a good option because you will be caught under the deemed ownership provision u/s 27 and clubbing provisions and even if you undertake gift deed, the rent can be clubbed in your income.

 

If you have a HUF or any other entity, you may lease out the property to your HUF and other entity and that entity can manage the sub lease. We can discuss this in detail over a call.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Even if you receive the rent amount in your wife name it would be taxable in your hands only due to deemed ownership.

 

Also, gift option is not advisable due to clubbing provision.

 

However, we can go for huf scheme.

Saving taxes through HUF is a valid and lawful thing to do. HUF is treated as a 'person' under section 2(31) of the Income-tax Act and is a separate entity for the purpose of assessment. Personal income of the members is not treated as income of an huf.

 

Further, all income that arises on the investment of the HUF's funds and utilisation of its assets is regarded as income and is separately assessed and taxed.

 

 

We may assist you in entire procedure.

 

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

Hi Rahul

 

Trust you are good and safe.

 

1. You can not ask the tenant to issue two cheques as the land is in your name and the income accruing will be taxed at your hands only.

2.  Gift deed is also not an option in this case as you will be gifting to your wife and income from immovable property gifter to the wife will still be clubbed with your income.

 

To offer other options it will involve a bit more study and other details will also be required such as your current income status, your wife's income status and etc.

Trust this meets your understanding.

Thanks

Brijendra Tripathi
CA, Lucknow
143 Answers
3 Consultations

5.0 on 5.0

- Transfer of income without transfer of assets attracts clubbing provisions and income from such assets is taxable in the hands of donor. Co-ownership may work. It is a matter of detailed discussion and do not take decision in a hurry because most of the options will result in a diversion of income which is clearly evident. Option supported by strong reasoning and legal cases will work for you. In your case chances of scrutiny will increases.

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

Merely by transferring rent to your wife account, you cannot save tax. 

My understanding is your wife does not have taxable income and hence is below tax limit. There are clubbing provision whereby even if land is gifted to her, the income is taxable in your hand. 

Jasmina Jain Shah
CA, Greater Mumbai
442 Answers
4 Consultations

5.0 on 5.0

Hi,

 

Yes, you can create HUF. The modalities of the transaction mentioned by you seems ok but a proper care needs to be taken to create right documentation in place to avoid any future hassles.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

- I don't think HUF route will work. Creation of HUF just for division of income will attract scrutiny.

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

Yes, it seems ok.

 

However, we may discuss further in detail over call.

 

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

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