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Co-Owner and Deemed Owner of Property

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Divya Singhvi

Co-owner
Deemed Owner
Income from House Property
Income Tax

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.

ITR for Multiple House Properties
CA Assisted Income Tax Return filing for Individuals and HUFs having multiple house property income, multiple salaries and income from other sources.
[Rated 4.8 stars by customers like you]
ITR for Multiple House Properties
CA Assisted Income Tax Return filing for Individuals and HUFs having multiple house property income, multiple salaries and income from other sources.
[Rated 4.8 stars by customers like you]

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:-

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.

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FAQ

What rights do co-owners of property have?

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.

What is meant by the annual value 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)

I have transferred my flat to my wife as a gift. She receives monthly rental from this flat. How will this income be taxable?

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.

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