How to show asset and rent income

This query is : Resolved

PRAVIN PANDHARINATH DAREKAR (Querist)
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06 April 2017 Assessee's Father Purchase Property in Joint Name i.e. in the name of assessee and his name and full amount is paid by father. he(assessee's Father) not filing the income tax return due to income below under taxable limit. Assessee is filing income tax return,how property will be shown in assessee's balance sheet and how rent income will be shown.

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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07 April 2017 If in the registry papers, property is shown as purchased by father and son then the property is to be shown in the balance sheet of both the owners in the proportion of ownership mentioned in the property and rental income shall also be shown in that proportion. since father has paid full amount. an amount of purchase consideration equal to son's share which is in fact paid by father, may be shown as loan from father in son's balance sheet.

PRAVIN PANDHARINATH DAREKAR

PRAVIN PANDHARINATH DAREKAR (Querist)
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07 April 2017 does it can be shown as gift???

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PRAVIN PANDHARINATH DAREKAR

PRAVIN PANDHARINATH DAREKAR (Querist)
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07 April 2017 son is not paying any amount to father so it will remain as liability in balance sheet for future year then what to do?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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28 July 2024 When dealing with property purchased in joint names where the full amount is paid by one individual (the father) and the other individual (the son) is filing the income tax return, there are specific considerations and steps to follow. Here’s a detailed guide on how to handle this scenario:

### 1. **Handling the Property and Rent Income**

#### **A. Ownership and Balance Sheet:**

1. **Property in Joint Names:**
- Since the property is in joint names, both the father and the son are considered co-owners. However, if the entire amount was paid by the father, this can be addressed in the financial records and tax filings.

2. **Balance Sheet Treatment:**
- **Asset Recording:** In the son’s balance sheet, the property should be recorded as an asset. The property can be shown as a “Jointly Owned Property” with the value representing the proportionate share. Since the property is co-owned, you can record the entire value of the property or the proportionate share if that is clearly agreed upon.

- **Liability:** Since the father has financed the property, and if there is no formal loan agreement or repayment plan, you might need to record this as a “Loan from Father” or a similar liability. If the father is not charging any interest and is not expecting repayment, this can be classified as a “Loan” or “Capital Contribution” in the balance sheet.

#### **B. Rental Income:**

1. **Income Tax Return:**
- **Rent Income Reporting:** The rental income from the property should be reported in the income tax return of the co-owner who is receiving or managing the rental income. If the rent is received in the joint names, it should be split based on the ownership share, or the one receiving the rent should report it.

- **Joint Ownership:** If the rent is split equally, then each co-owner should report their share of the rent income in their respective tax returns.

- **Form 16A/26AS:** Ensure that any TDS deducted on rental income is correctly reported and reflected in Form 26AS.

#### **C. Gift Consideration:**

1. **Gift Declarations:**
- **Gift Documentation:** If the father wishes to treat the property as a gift to the son, this needs to be documented. In such cases, a gift deed should be executed, and the son must account for this in their income tax returns.

- **Gift Tax:** Gifts from relatives (such as father to son) are exempt from tax under the Income Tax Act. However, proper documentation and execution of the gift deed are important for legal clarity.

2. **Impact on Balance Sheet:**
- If treated as a gift, the son should record the property as an asset without showing any corresponding liability. The father would not show the property in his balance sheet if it is transferred as a gift.

### 2. **Practical Steps:**

1. **Record the Property:**
- In the son’s balance sheet, record the property under assets. If not paying any amount, mention it as a joint property or similar term.

2. **Create Liability Entry:**
- In the son’s books, create a liability entry reflecting the amount paid by the father, or classify it as a capital contribution if that’s the agreement.

3. **Income Declaration:**
- Ensure that any rental income is correctly attributed and declared in the appropriate tax return.

4. **Consultation:**
- **Tax Consultant:** It’s advisable to consult with a tax professional or financial advisor to ensure compliance with tax laws and accurate financial reporting.
- **Legal Documentation:** For gifts or loans, ensure that appropriate legal documentation is in place to avoid any future disputes or complications.

### **Summary:**

1. **Balance Sheet:**
- Record the property as an asset and note any liability if the father’s contribution is not reimbursed.
- If the property is considered a gift, it should be shown as an asset in the son’s balance sheet without a corresponding liability.

2. **Rental Income:**
- Report rental income based on ownership and receipt, split accordingly if needed, and ensure all income and TDS are accurately reported in tax returns.

3. **Documentation:**
- Execute and maintain proper documentation for gifts or loans to ensure legal clarity and tax compliance.

These steps will help you manage the property, rental income, and financial records appropriately while adhering to tax regulations.