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Income Tax Treatement

praveen (Chartered Accountant) (6971 Points)

23 June 2011

I have a case where the individual is abroad and has sent some money to his wife in India, She arranges some more money from bank through loan and also uses the money received from her mother to buy a property. Now if the property is let out for rent and earns say 7.00 Lacs per annum. Will clubbing provisions apply & if yes what will be the taxable income in the hands of the individual

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21 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 23 June 2011

I wuld like to Know this answer from experts in the Forum or any one who knows the answer to the query posted

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 23 June 2011

in proportionate ratio of the investment the amount would get clubbed, but beforehand the interest portion should be decucted from the rental income, if interest income is exceeding the loan from bank and mother in law, then the balance only should get clubbed.

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CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 23 June 2011

Originally posted by : U S Sharma
	in proportionate ratio of the investment the amount would get clubbed, but beforehand the interest portion should be decucted from the rental income, if interest income is exceeding the loan from bank and mother in law, then the balance only should get clubbed.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 23 June 2011

My view is clubbing provision not applicable for Non Residents .so wife is taxed on the total income

waiting for experts view on this

praveen (Chartered Accountant) (6971 Points)
Replied 23 June 2011

Thanks for all the replies..

Meanwhile, i was also researching on this area.

So what i could find out is that income from the gift would be taxable, hence income from property located in india will be taxable as indian income in the hands of the NRI also.

Mr. Sivaram i dont think the clubbing provisions have exemption for non residents.

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praveen (Chartered Accountant) (6971 Points)
Replied 23 June 2011

however there are cases where the court has decided that if the property is bought out pin money then it shall not be taxable.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 23 June 2011

Wonderful praveen but i am of the view clubbing provisions are not applicable to Non residents can u attach any clarifications to this reply please from the act

@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)
Replied 23 June 2011

i also think that clubbing provision will not attract...

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 23 June 2011

NO CLUBBING PROVISION WILL ATTRACT

praveen (Chartered Accountant) (6971 Points)
Replied 23 June 2011

As per Section 64 1 (iv) "Subject to the provisions of clause (i) of section 27, to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart;"

See nowhere in the section it refers to residential status.

moreover as per me whatever you receive from your spouse is gift. Income from gift is clubbed in hands of the person who gifts na. Hence, Clubbing provisions are bound to apply.