Best way to Show Rent & Interest income

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  1. Vivek Rusia

    Vivek Rusia New Member

    Dear Executive,

    First of all I would like to thank you for providing such a wonderful and useful platform.

    I have following questions:

    If a NRI couple has rent income in India from a flat, 100% registered on husbands name, but in home loan wife is co-applicant, but whole EMI is being paid from husband's income since wife is homemaker and had no income.

    Q-1. Is it possible to show that rent income in wife's ITR, and claim the home loan tax benefits (considering EMI is being deducted from husband's account, which has wife's name as joint holder)?

    Q-2. If the rent income from above flat is being deposited through cheque on the name of wife, to a joint account (wife is primary holder whereas husband is joint holder), then can it only be showed under wife's ITR or can it also be showed under husband's ITR, if needed?
     
  2. ZED

    ZED Well-Known Member

    No because she did not repaid the loan.


    In this case, the real owner is only the husband and wife is not the true owner. As such it should be the husband in whose income the rental income should be coming.
    The husband should make a declaration to the AO , under the Benami Transactions (Prohibition) Act that this property belongs to him and he is the real owner and the money was also paid by him.

    In case of CIT V Hasina Begum (1986) 158 ITR 215 (Cal) it was held that if the funds were provided by repayable loan, then it (Income under the head "Income from house property") shall be taxable in the hands of borrower.




    Since the assessee is NRI, was tax deducted at source at flat 30%?
    Tax is deductible in this case.
     
  3. Vivek Rusia

    Vivek Rusia New Member

    Dear ZED,

    Thanks a lot for your reply. Now I have 4 Qs to ask.

    1. Even for NRIs TDS on rental income is not applicable if the total rent in the particular FYr is <INR 1,80,000. Right?

    2.
    Is Benami Transaction Act 2015, applicable on rent (income from property) as well? I am asking because after reading this act on internet, the impression to me is, that it is only applicable on property purchase or sale. Please correct me if I am wrong? Please note that the property is still on the name of husband, only thing is wife is getting the rent in her account (and want to show that in her ITR).

    3.
    Please could you explain, in the last line of your 2nd para that is "....he is the real owner and the money was also paid by him.", what is the meaning of money (rent received OR amount paid to buy the property OR anything else)? Please note that here the ownership of the property is still with husband who actually paid the money to seller, so for sure property is not BENAMI at all.

    4.
    Also please could you explain last paragraph (pasted below) of your answer, from the perspective of my Q-2.?
    "In case of CIT V Hasina Begum (1986) 158 ITR 215 (Cal) it was held that if the funds were provided by repayable loan, then it (Income under the head "Income from house property") shall be taxable in the hands of borrower."
     
  4. ZED

    ZED Well-Known Member

    That limit is for resident.

    [You may focus primarily on coloured text]

    S.194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of—
    ..........

    Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees :



    S(6)A person is said to be "not ordinarily resident" in India in any previous year if such person is—

    (a)an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or

    (b)a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.


    6. For the purposes of this Act,—

    (1) An individual is said to be resident in India in any previous year, if he—

    (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
    (c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.







    There is no *Benami Transaction Act 2015*, we have ,
    Benami Transactions (Prohibition) Act, 1988
    The bill was proposed in 2015 but it was never passed.

    One Act has nexus with other Acts. Under Income tax Act, while making any assessment, Benami transactions are considered by the AO. You will find this in many judgements.

    Further, I asked to give declaration under Benami Transactions (Prohibition) Act , because earlier (prior to the enactment of this Benami Transactions (Prohibition) Act) a declaration was to be made to AO for declaring the property held benami.
    After the enactment of the above Act, the provisions under the Income Tax Act and the rules made thereunder were removed in respect of benami properties.
    But, the information was still suppose to be given to tax auhority (so as to avoid penalties in case of properties held benami) therefore, simply, people used to filed the same application which was applicable before.

    There is another reason why I used the words *declaration under Benami Transactions (Prohibition) Act*
    While making the application to AO, it must be explained by the applicant that the information is given in respect of property held benami as per the provisions of Benami Transactions (Prohibition) Act
    [This should be specifically mentioned]

    The Benami aspect has not been properly explained in Income Tax Act, but if you read the judgements then you will be able to understand this. You might be feeling confused, but put everything aside and think who is the real owner, the one who buys the property or not?


    The money which was used for buying the property.



    Yup, even if you do not see the Benami Transactions (Prohibition) Act, still this judgement has held what I explained in my previous post.

    The person who borrowed the money would be deemed to be the owner of the property and the income from house property shall be chargeable to tax in his hands.



    Let me know if you have any other doubt.
    Although only one judgement has been cited, but there are many.
     
  5. Vivek Rusia

    Vivek Rusia New Member

    Thanks ZED, for so quick response, it is really very informative, but to understand it properly I have to read it many time carefully, in the mean time please could you confirm on below.
    1. The limit of tax free income (including Rent, interest, etc.) for NRIs.

    2. If TDS is deducted, then can NRI claim the return of excess tax deducted with ITR?

    3. For NRIs, Is there any way (like form 15H/G) to avoid TDS on rent and interest, and to pay the tax with ITR?
     
  6. ZED

    ZED Well-Known Member

    It is the same as is for the resident, but certain benefits are not available, like you just came to know about 30% TDS.

    Yeah sure.


    Form 15 G or 15H can not be used but you may obtain a certificate u/s 197 from your AO. Now, it can be done online also.
     
  7. Vivek Rusia

    Vivek Rusia New Member

    Thanks Again ZED, Please could you provide your expert comment on below Qs. as well.

    If a Husband transfers his money to wife's account and then wife lend that amount on interest to an individual and/or pvt. ltd. firm,

    1. What is the best legal way to justify that transfer; 'as gift' or 'as interest free loan' or anything else?
    1.1 So that the amount is tax free in wife's hand (considering husband has already paid tax for the same).
    1.2

    2.
    Then the interest earned will be considered under whose income, wife's or husband?
    2. what are the legal

    Objective behind this are as follows;
    1. Reduce husband's tax liability by transferring interest income to wife.
    2. Increase wife's income, so that in future that could be used for loan purpose, if needed.
     
  8. Vivek Rusia

    Vivek Rusia New Member

    Thanks Again ZED, Please could you provide your expert comment on below Qs. as well.

    If a Husband transfers his money to wife's account and then wife lend that amount on interest to an individual and/or pvt. ltd. firm,

    1. What is the best legal way to justify that transfer; 'as gift' or 'as interest free loan' or anything else?
    1.1 So that the amount is tax free in wife's hand (considering husband has already paid tax for the same).
    1.2 In case if needed wife can return the original amount to husband (and amount going back to husband remains tax free in husband's hand).

    2. The interest earned (in wife's account) will be considered under whose income, wife's or husband?

    Objective behind this are as follows;
    1. Reduce husband's tax liability by transferring interest income to wife.
    2. Increase wife's income, so that in future her ITR could be used for bank loan purpose, if needed.
     
  9. Nikhil1029

    Nikhil1029 New Member

    Please go through below videos to understand simple steps to file income tax returns and pay tax online.

     
  10. Vivek Rusia

    Vivek Rusia New Member

    Hi Nikhil, Thanks for your post but this is not at all related to my queries/thread, I believe we should only post relevant things in any thread, so that the topic is not deferred and also to keep the forum's value high.

    Many thanks in advance for your kind understanding and future cooperation. bye the way FYI I already know how to file ITR online.
     
    ZED likes this.
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