Tuesday, February 21, 2023

Is your wife a co-owner? Pay tax on 50% of your property income

Wife co-owner? Pay tax on 50% property income


MUMBAI: According to a decision made by the Delhi bench of the Income Tax Appellate Tribunal (ITAT), if a registered sale deed did not specify the extent to which a husband and wife owned a house property, both parties would be considered to own an equal share. The ITAT decided that Shivani Madan, the taxpayer, was entitled to a tax bill of Rs 9.8 lakh for the financial year 2014–15, which was the year of the litigation.

Because this property was unoccupied, the wife was liable for paying taxes on half of the notional rent calculated in accordance with the Income Tax (I-T) Act.

A previous investigation into a business group and, by extension, the taxpayer revealed that she and her husband jointly owned a house in 2011 for Rs 3.5 crore. Because of this, people were curious as to why her I-T returns did not include the income from this house property.

Only Rs 20 lakh, or roughly 5.4% of the property's purchase price, had been invested by Madan.

She disclosed her share of house property income in response to the I-T notice. This strategy was rejected throughout the appeal's various stages.

She argued that because it is customary to include the wife's name in the sale deed, taxing her 50% of the income from the house property was not justified when the litigation reached the ITAT. This argument was also bolstered with references to a number of judicial decisions.

However, the ITAT rejected these submissions based on the circumstances of the case. The tax tribunal bench cited, for instance, the Calcutta High Court's ruling that property income should only be taxed in the husband's name because the wife was a housewife with no independent income and the husband made the entire investment. In contrast, Madan was a salary earner (being employed by the business group that was the subject of the search). Experts in taxation point out that the wife's name is frequently added to a house property.

However, in the event of a tax dispute, it would be helpful to have documentation of the exact share that each co-owner contributed to the builder or seller of the property, details of bank accounts from which payments have been made, and previous tax returns, among other things.

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