Income tax implication on rental value

Income tax implication on rental value

I and my wife are domicile and resident of Noida, Uttar pradesh. Now we are planning to buy a second home in Goa for rental purpose. I am borrower and my wife is co-borrower for Home loan purpose. she is also housewife and i will be paying full EMIs. Pl. clarify:

1. Since the home loan would be repaid completely by me, is it possible that I can declare my wife 90% share holder and myself 10% share holder of property in sale deed.

2. If answer for 1 above is "Yes", than home loan interest benefits would pass to whom.

3. The rent from this property will be coming in my wife account. What will be tax implication on this income.Would the income from this property will be added to my income or it would be totally to account of my wife.

4. Pl. suggests method for minimum income tax implication on me for :
i) Property share declaration in sale deed
ii)Method to collect income from this property (method by which i can give full rent from this property to my wife).

Asked 8 years ago in Income Tax

1. No sir . As she is a housewife and all the Repayments are being done by you it would not be possible for declaring 90% in her name and 10% in your name. The basic crux is that who is the beneficial owner and from where the money will be passing along with the margin money you paid for purchase.

2. Home loan benefit if you want to take then you need to divide rent in two account or take in joint account. Declare income from rent and take benefit of housing loan interest (If nothing is mentioned in deed then it is assumed as 50:50).

3. Full rent will not be suggested in her account as in Income Tax clubbing provisions will attract in your case. Better to show 50: 50.

Shyam Sunder Modani

CA, Hyderabad

1409 Answers

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Talk to Shyam Sunder Modani

Thanks for above reply.

This property is purchased by home loan contribution. The rent from this property would be coming on daily basis or weekly basis because my property would be booked by different tourists visiting Goa. So the amount would be credited to our bank account on daily basis or at cycle of 3/4 days. Also to maintain this property for renting to tourists, various expenses would be made such as electricity, security and house cleaning.

Pl. clarify:

1. Whether the income earned by this property on daily/weekly basis would be considered uner 'income from house property' or under 'Profit and gains from Business or profession'.

2. While filing ITR, this rental income to be shown under which head i.e, under 'Income from House property' or under 'Profit and gains from Business or profession'.

3. Can we decrease our tax liability by declaring income from this property under 'Profit and gains from Business or profession', as the expenses to run this property are higher or equal to income received in rent.

Pl. suggest method for little tax implication on rental income.

Asked 8 years ago

Dear sir,

I have asked same question to lawyers also and they are having view that I can register property with 90% share of wife and 10% of wife. They are also saying that rent earned from this property will distributed in this % of 90 & 10 only. In this way, the tax implication on me for the rental income from this property would be only 10%.
Pl comment on this.

Asked 8 years ago

Hello,

There is no straight jacket answer to your question. The answer totally depends on what step you take ahead and how you show the transaction.

I will advise you to opt for a phone consultation and discuss it with any professional for a more detailed and clarificatory answer.

Trust this clarifies your query.

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

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP