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
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.
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.
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.
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.
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
Thanks for the replies. let me just elaborate on the background of the property purchase transaction. 1.We were NRIs until Dec 2012 and both were employed 2. The Plot was purchased ( in 2003) without any loan when I and my wife were NRIs. We paid 50% of the cost through cheque from each of our NRE accounts, but the Plot was registered only in my Wife's name. 3. For the construction of the building the home loan was availed in my Wife's name (in the year 2005) 4. The Home loan EMIs was paid from my wife NRE account and was completely repaid by 2010 **Funds were transferred to my wife NRE account for home loan repayment from both of our individual Foreign Bank Accounts In light of the facts can Husband enter into joint ownership of the property through a gift deed? Please advise.
Wife is at liberty to execute gift deed in favour of husband for 50 per cent share in proeprty
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.
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.
Noted the recent replies, but I would like to get clarified on Mr.Kallol Majumdar Ji reply as below "income from the property gifted by the wife to husband shall be treated as income of the wife." This is very old provisions of Income Tax. Under the income tax law, the proportion of investment in the property will determine the ownership status in a property. In my case, the husband and wife both working professionals, have paid 50% each to the seller while purchasing the property but the property was registered only in the Wife's name, so under an income tax law, the Husband should be deemed 50% owner of the property, is this correct?? and income arising from the house property should be taxed in the hands of the husband and wife
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.
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
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.
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.
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.
