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Tax Implications: When Dad Leases Property to Son at Zero Rent?

Mihir Tanna |1018 Answers |Ask -Follow

Tax Expert - Answered on Jan 20, 2025

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more

Question by RAJINDER on Jan 08, 2025Hindi

Money

father gives his commercial property to son on zero rent lease agreement, further son sublet the same property on rent and keeps money in his account. can the son disclose this income in his itr and will the income tax department ask the father to pay tax on said income as he owns the property.

Ans: As property is transferred by father to son with proper agreement, rental income is likely to be taxable in the hands of son.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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My father gifted a home to me and my brother in the name of registration and remaining (other brothers are also included). A few years ago, I was involved in share markets and mutual funds investment and banking asked me to submit an ITR file. So I am very worried about my situation. Shall I show it in my tax property (gift tax)? Kindly clarify my doubt.

Ans: The relationship of father and son is covered under the definition of 'specified relatives'.

So, as per the current income tax rules, a father gifting his son is fully exempt, hence attracts NO tax in your hands.

You can show it in your assets.

However if, after computation, you do have tax payable for previous years on your shares and mutual fund transactions, you have an exposure and can consider paying it with interest.

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Asked by Anonymous - Jul 21, 2023Hindi

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Hi, We have rented our Apartment, which is in joint ownership, myself and wife's.. The house is rented and the tenant transfers the whole rent amount in my Account... Now my AIS is showing the entire rental income, around Rs. 2L (tenant seems to be showing the full rent in my PAN) whereas in my wife's AIS, no rental income is shown and it is showing nothing. Now while filing ITR of mine, & my wife's..what rental amount should I show in my ITR? Secondly, in my AIS, I see some Interest amount from xyz bank in which I don't have any account.. What should i do about this wrt filing ITR. Thanks in advance for your response.

Ans: You can bifurcate the rental income into the ratio of ownership ( yourself and your spouse). The very purpose of providing AIS to tax payers is that , they may report errors if any to the department and it can be rectified. you can report the error, if any through Compliance portal.

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Question by Padmanaban - Jan 26, 2025Hindi

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I have purchased a flat worth Rs 70 lacs and registered it in my son's name The full amount has been paid from my savings . My son was an NRI at the time of registration and doesn't have income source in India , except maybe Rs 2 lacs in his savings account. I recently came to know that we have to inform , if we purchase any property above Rs 30 Lacs . Will the above transaction cause any Income Tax issues for my son ? I don't not own any other property I have furnished the flat and stay in it whenever I come to Coimbatore I stay in a different apartment in Madurai I don't not plan to rent it out. My reason for buying a property in his name is I am 70 years old and I want to create an asset for him in the future. Is there any submission He or I have to make to I T Dept stating that I have gifted the amount. I am an assessee and file I T Return regularly. My son used to file when he was employed in India . Last 2 years , he is a NRi and doesn't file since he doesn't have any Income . Should I just prepare a Letter for records ,stating I have purchased a Flat in my son's name as A Gift and give details of amount paid by me from my Bank account to the Flat promoter.

Ans: Reporting will be done by the property registrar and not by buyer/seller.

If father give gift to son of substantial amount, it is advisable to execute the gift deed.

As son don't have any income source in India, department may ask source of money and which can be explained by you with proper documentation.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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