• Advisory services for property gift deed from IT perspective

Hi,
I'm looking for an Income Tax legal expert to advise on  Property Gift Deed from an IT Perspective.

Background

My wife owns a residential property (constructed building let out for rent ) in Bangalore since 2003, we took a home loan in my wife's name to buy the plot and construct the building.
When the purchase of the plot and construction was done I and my wife were NRIs and both were working. And I contributed as well to repay the home loan, but I don't have the bank transactions proof now. The home loan was completely repaid in 2010

Question

I would like to enter as co-owner of the property through a gift deed from my wife, the objective is to get share the rental income between husband and wife. so that the outgoing income tax on rental income is minimal.
Since the purchase of the property was funded by a home loan taken in my wife's name, can we share the rental income (50:50) and pay our income taxes accordingly?

Please advise.

Regards,
Shivakumar
Asked 1 year ago in Taxation

2 answers received in 1 hour.

Lawyers are available now to answer your questions.

13 Answers

1. The property stands in the sole name of your wife in the office of the Registrar.

 

2. She can now register a gift deed conveying 50% undivided and un-demarcated share of the said property in your name.

 

3. Thereafter both you and your wife can jointly enter in to a tenancy agreement for letting out your said property and equally share the rent by collecting cheques opf 50% rent in each of your names.

Krishna Kishore Ganguly
Advocate, Kolkata
26290 Answers
726 Consultations

5.0 on 5.0

The property was purchased by your wife which is evident from the registered title deed on her name. 

To support the title to her name,  the home loan availed on her name is an additional evidence. 

Therefore by sharing the rental income between you,  in the capacity of her spouse may not make you eligible for any privileges in the income tax. 

Perhaps as per your proposal to become a joint owner of the property by she transferring a share of property to your name through a registered gift deed , you can share the rental income. 

After that you may claim IT exemption as per law. 

 

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

1) your wife can execute gift deed in your favour 

 

2) it should be duly stamped and registered 

 

3) income accrued on the gifts received will be clubbed with the person who gifted the same.

Ajay Sethi
Advocate, Mumbai
85546 Answers
5730 Consultations

5.0 on 5.0

You will not get any tax benefit. 

Income from the property gifted by wife to husband shall be treated as income of the wife. 

This is very old provisions of Income Tax. 

This is not treated as tax planning rather tax evasion. 

If not notice by the tax officer you may get the benefit by such transfer. But if it is noticed tax officer may issue notice to disclose the consideration for such transfer. In case of failure to prove adequate consideration paid by you,  penalty may be imposed .

So be careful. 

Kallol Majumdar
Advocate, Kolkata
2800 Answers
8 Consultations

5.0 on 5.0

yes the wife can transfer her 50% share in the property to the husband by a gift deed

the arrangement for rental sharing as contemplated by you does not violate any law

Yusuf Rampurawala
Advocate, Mumbai
6638 Answers
63 Consultations

5.0 on 5.0

Wife is at liberty to execute gift deed in favour of husband for 50 per cent share in proeprty

Ajay Sethi
Advocate, Mumbai
85546 Answers
5730 Consultations

5.0 on 5.0

Even without the details what you have given in your latest post, you can become a joint owner of the property.

Your wife has to execute a registered gift deed in your favor for a portion of the property (even undivided), which will enable you to become a joint owner of the property along with her. 

Once you become a joint owner you are entitled to a share in the rental income and also for other tax exemption privileges also.

 

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

1. Husband will be gifted 50% share of the said property standing in the name of the wife.

 

2. At this stage it will become immaterial as to who has paid how much amount to buy the said property.

 

3. After the gift deed is registered and  the husband becomes 50% owner of the said property he can enter in to a tenancy or any agreement along with his wife holding the balance 50% share of the said property.

Krishna Kishore Ganguly
Advocate, Kolkata
26290 Answers
726 Consultations

5.0 on 5.0

Whether you have given 50%of the sale consideration amount to the seller or not since the property is registered on your wife's name,  you cannot claim the privilege of income tax exemption on the purchase of house property. 

The registered sale deed is on her name hence she is the title holder as well as absolute owner of the property,  therefore you cannot deem yourself to be a joint owner 

Thus until and unless you are not recognized as a legal owner or even joint owner,  you cannot claim income tax exemptions out of the income from the property. 

 

T Kalaiselvan
Advocate, Vellore
75676 Answers
1313 Consultations

5.0 on 5.0

section 26 of the Income Tax Act, 1961 (“Act”),  states that when two or more persons own the property and their respective shares are definite and ascertainable, the share of each such person shall be assessed separately for computing the house property income.

 

if husband has paid 50 per cent of consideration to seller for purchase of property  husband should be deemed to be 50 per cent owner of property 

Ajay Sethi
Advocate, Mumbai
85546 Answers
5730 Consultations

5.0 on 5.0

I am to reply again to remove your doubts. You might not have gone through properly my earlier reply. 

Income tax law does no go by property law in transactions between husband and wife. 

So in whose name property is registered is immaterial for taxing purposes. 

Main contention is the contribution. If you contributed to the property in question then to that extent income from such property shall be your income. 

In the present case as you mentioned you have contributed 50 % of consideration of the property 50 % rental income from that property is your. 

Here registration of property does not have any implications. So there is no need to transfer 50% openership in your name by gift . 

What is required is you should have necessary proof to satisfy the tax authorities that you have contributed 50% of the consideration. It is your responsibility in case such information is sought by them. 

If you still have any queries please specify it. 

Kallol Majumdar
Advocate, Kolkata
2800 Answers
8 Consultations

5.0 on 5.0

1.After registering the gift deed conveying 50% share of the property in favour of the husband both the husband and the wife can thereafter receive  payments towards rent separately in equal proportion.

 

2. Both of their income from the house property will separately and individually be taxed. 

Krishna Kishore Ganguly
Advocate, Kolkata
26290 Answers
726 Consultations

5.0 on 5.0

 

What transpires from your query is that the property  (land) is registered in the name of your wife, though you have contributed the amount in acquisition / construction of structure and also for repayment of loan availed by her. Now you wish to share the rental income earned out of said property so as to bear minimum tax liability. 

 At the outset it may be clarified that in common parlance merely by contributing the amount for accusation of property does not makes you the legal owner or does not legaly transfers the title of property in your favor. The amount contributed by you can at the most be treated as a loan advanced by you to your wife or amount gifted by you to your wife. 

However if at all the amount is being treated as a gift from husband to wife and the very amount is utilized for accusation of an asset income tax planning can be made in such a way that the proportionate amount can be taxed in the hands of donor (in your case the husband).

As regards transfer of title by way of gift , yes the wife can gift a property to husband , but here in this case the income shall again be taxed fully in the hands of wife which would infact defeat the very purpose of your exercise. 

Sunil Makhija
Advocate, Mumbai
5 Answers

Not rated

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer