It is very common in India to own a house property jointly with a spouse or children. This increases the chances to receive a higher loan amount. As per Section 27 of the IT Act in some cases, the legal owner is not considered as the real owner of the property. In fact, someone else is considered as the deemed owner of the property. Therefore, the income tax implications are different in both cases.
Deemed Owner
Income from house property is taxable in the hands of its owner. In some cases, the legal owner is not considered as the real owner of the property. In such cases deemed owner is treated as an owner. He/She is liable to pay tax on income earned from such house property. Following are the cases where the person is deemed to be the owner of the property even if they are not the legal owners of the property:-
- Transfer to Spouse
- An individual transferring their property to their spouse otherwise than for adequate consideration. In this case, the transferor is also a deemed owner of the house property. But this excludes cases where a property is transferred to a spouse in connection with an agreement to live apart
- Transfer to Minor Child
- An individual transfers any house property to their minor child for inadequate consideration. In this case, the transferor shall be deemed to be the owner of that house property transferred. However, this shall not cover cases where a property is transferred to a minor married daughter
- Holder of an Impartible Estate
- Impartible Estate is a property that cannot be legally divided. Therefore, the holder of an impartible estate shall be deemed to be an individual owner of all the properties in the estate.
- Member of a co-operative society, company, or other association of persons
- A member of a co-operative society, company, or other association of persons to whom a building or part thereof is allotted under a House Building Scheme of a society/company/association, shall be deemed to be the owner of that building or part thereof allotted to him although the co-operative society/company/association is the legal owner of that building.
- Possession of a Property
- As per the Income Tax Act “A person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of nature referred to in Section 53A of the Transfer of Property Act, 1882 shall be deemed to be the owner of that building or part thereof.”
- Rights in a Property
- A person who acquires any right in or with respect to any building or part thereof, as is referred to in section 269UA(f). This person shall be deemed to be the owner of that building or part thereof.
- However, it excludes any rights by way of a lease from month to month or for a period not exceeding one year
Co-Owner
When a house property is jointly owned by one or more persons then each joint owner is known as co-owner. As per the Income Tax Act “If house property is owned by co-owners and their share in house property is definite and ascertainable than the income of such house property will be assessed in the hands of each co-owner separately”. While computing Income from House Property, the annual value of the property will be taken in proportion to their share in the property.
FAQ
Co-owners have equal rights to possession of the property, the right to use and the right to dispose of his share of the property.
Annual Value is the estimated rent that you could get if the property was rented out. However, it is based on the following factors that are key to consider while calculating the annual value:
– Actual Rent received or receivable
– Municipal Value
– Fair rent
– Standard rent
– Expected rent.
Gross annual value = Higher of actual rent received or Expected Rent*
Expected Rent* = Higher of Municipal Value or Market rental value (in line with the Standard Rent as per Rent Control Act)
Since the flat has been given to your wife as a gift for nil consideration, you will be considered as the “deemed owner” of the house. Therefore the rent income from the flat will be clubbed in your hands and the same shall be taxed as house property income.
Hey Shubham,
Each joint owner/ co-owner and a borrower can claim Rs 2 Lakhs interest deduction – In case of a joint home loan for self-occupied house property, each of the owners can claim Rs 2 Lakhs in their tax return. The total interest is allocated between them based on their share of ownership.
Sir/Ma’am,
I have been transferred in the month of october. At my previous place of posting I was getting lease cheque directly from my employer and at my current place of posting I am getting HRA.
So how can I get HRA reg tax savings in ITR as there has been lease to HRA change from october 2020 onwards.
Regards,
Monu Gulshan
Hi @MONU_KR
You can calculate the exempt amount of HRA and declare the same in the ITR so as to save the taxes.
You can use Quicko’s calculator for calculating exempt amount of HRA.
Also if you have submitted the receipts to the employer must have calculated exempt House Rent Allowance and deduct the same from the employee’s taxable salary. You can know exempt house rent allowance from your Form 16.
HRA will be calculated on a pro-rata basis i.e from October 2020 till March 2021.
Hope this helps!
For FY 2020-2021, Six months I ,ve been on company provided lease(i.e. from APRIL 20 to Oct 20) and thereafter I have been on HRA for rest Six months(i.e from OCT 20 to March 21).
Above calculators are not helpful to me.
Kindly assist will I be eligible for tax exemption.
Regards,
Monu Gulshan
DOES NEFT transaction TO OWNER WORKS AS A PROOF OF RENT RECIEPT AS MY OWNER IS NOT PROVIDING RECIPT
Can we also claim property taxes while calculating income from House Property?
Hi @Dixita
Property tax is levied by the Municipal authorities on the real estate which consists of a house, office building and premises rented to third parties. While calculating Income from House Property, the net annual value is calculated by subtracting municipal taxes from the gross annual value of the house.
Therefore you can claim property taxes while calculating Income from House Property
I receive HRA as part of my salary, how much of it is exempt from income income tax?
Hi,
The lowest of the following is exempt House Rent Allowance from Income Tax:
You can use HRA Calculator to do the calculation for you
Hey, For this financial year, you can calculate and claim the exempt HRA, you can not claim housing loan interest.
As you mentioned that construction is still going on for the house on which you have taken the loan it will be considered as pre-construction interest. Pre-construction interest can be claimed equally for 5 consecutive years from the year in which construction is completed.
Hope this helps