Both husband, wife have to pay tax on income from property held jointly
* I own a house with my wife. She has entered into a rent agreement with a tenant and will declare this rental income in her IT returns. She does not have any taxable income expect FD interest. Is this transaction correct or should it be added to my IT returns?
If the property is jointly owned, then rental income would be taxed in your and your wife’s hands in the ownership ratio and accordingly will need to be disclosed. If the amount from this property was invested by you only, then clubbing provisions shall apply and the whole of the rental income shall be taxed in your hands only.
* I sold my property for Rs 85 lakh in 2017. This property was bought by me in 1997 for Rs 9 lakh. I returned Rs 65 lakh for loan against this property from the Rs 85 lakh. So what will be LTCG tax?
The long term capital gains (LTCG) tax will be computed by deducting Indexed cost of acquisition from sales consideration. Indexed cost of acquisition is calculated by multiplying purchase cost with cost inflation index of the year of sale and dividing by cost inflation index of year of purchase. If the property has been purchased before April 1, 2001,cost inflation index for the year of purchase is taken as CII of FY 2001-02,i.e.,100 and cost of the asset will be actual cost of the property or fair market value as on April 1, 2001, whichever is higher. For example, if the market value of the property as on April 1, 2001 was Rs 15 lakh, then LTCG will be calculated as follows (Rs 85 lakh – (Rs 15 lakh *272/100)) = Rs 44.20 lakh.
* What are tax implications of loan from spouse for purchase of flat.
Ordinarily, there cannot be a commer-cial relationship between husband and wife, hence the loan would be interest free. Hence, there would be no tax implication. However, if the loan bears any interest, then the borrower can avail deduction for interest even if taken from spouse as established in certain rulings. If the house is self-occupied, the borrower can avail a deduction for interest up to Rs 2,00,000. However, if it is rented, then the whole interest shall be allowed except, if there is any loss after adjustment that loss can be set-off up to Rs 2,00,000. The principal repayment of such loan shall not be allowed under Section 80C, as loan from spouse is not covered under it. Further, the spouse earning interest will need to report as his income and pay due taxes.
The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to firstname.lastname@example.org