Rental income taxed in hands of legal heir on death of owner

By: | Published: October 23, 2018 2:45 AM

For transfer of lease in case of death, the rental income will be taxed in the hands of the legal heir to whom the property has been transferred.

Rental income, I-T return, IT department, mutation entry, Section 45, trasfer of propertyStandard deduction of Rs 40,000 can be claimed as per provisions of Section 45.

* If tenant/ owner dies or slips into Alzheimer or coma during tenancy agreement period and the premise is actively used by relatives what will be the impact on rental agreement?
– Ankit Khandelwal

For transfer of lease in case of death, the rental income will be taxed in the hands of the legal heir to whom the property has been transferred. However, for the period the owner was alive, the heir will need to file return for the owner in representative capacity and pay tax accordingly. For diseases like coma/Alzheimer, you need to consult a lawyer and taxability will be in the same manner as explained above.

My company has sold investments (long term) in previous year (FY 2016-17) for Rs 100 lakh. We have filed return for that year paying tax. But, in FY 2017-18 we received additional amount of Rs 10 lakh (due to some adjustments). So, while filing return now should we include the income in capital gains with no indexation or in miscellaneous income in business income?
—G Satish

Standard deduction of Rs 40,000 can be claimed as per provisions of Section 45. The capital gain arising from transfer of capital asset shall be income of the previous year in which the transfer took place irrespective of the year in which the consideration is received. In your case, additional amount determined is received in FY 2017-18 and it has to be included in year of transfer, i.e., FY 2016-17 by taking appropriate steps for reopening and rectifying the earlier return. Capital gain will now be computed by taking whole consideration received, i.e. RS 110 lakh. Please note that you can revise returns for FY16-17 till March 31, 2019.

*I got payment of Rs 10 lakh by cheque on sale of property. IT department has asked me about source of the money. I do not have any proof of the sale. How should I respond to the IT department?
—Venkatesh Akana

You have not clarified if you disclosed this amount while filing your return in the year in which you sold property. Assuming you have disclosed this amount and paid due taxes, you can refer to your I-T return. If you haven’t disclosed this amount and it was taxable, you need to pay due taxes and reply accordingly. If the amount was not taxable as you may have claimed certain exemptions, to answer the IT department you can show copy of bank statement containing name of buyer which can be further matched with other documents like title deed, mutation entry, property card or any such legal document proving transfer of title of property to the buyer.

The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to fepersonalfinance@expressindia.com

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