Your Taxes

I have purchased a house jointly with my wife. It is registered in our names. Out of the total cost of ₹45 lakh , my wife contributed ₹5 lakh by cash that she received from her father. We now receive rent of ₹15,000 from the house every month in my wife’s name. I earn ₹12 lakh per year as income. My wife is not earning. What are the tax implications?

L Srikantan

Generally, in case of a jointly-held property, rental income has to be reported based on the respective owners’ share in the property. As purchase consideration is paid out of separate funds, the rent is taxable in proportion to the share of contribution towards property purchase. Though rent is received in the name of your wife, the rent to the extent sourced from your funds is taxable in your hands, that is, in the ratio of 8:1. As regards purchase of property, you do not have any tax implications, since the value of property is less than ₹50 lakh.

Since your wife does not have any other income, her share of rent would not exceed the basic exemption limit and hence she would not have any tax liability.

I have been hired as a consultant by a firm at a fixed fee of ₹9 lakh for the period April 2017-March 2018. This works out to ₹75,000 per month, of which 10 per cent is deducted at source. I also have a rental income of ₹3.6 lakh per annum. I stay in our own house, the loan for which is in my husband's name. What is my tax liability?

Deepali Jose

The fees is in the nature of professional receipts. You can claim deduction for eligible expenditure that you incur while rendering consultancy services and the net income is to be offered to tax as profits and gains from business or profession. However, if you qualify as a tax resident for 2017-18 and are in the legal, medical, engineering, architectural, accountancy professions or providing technical consultancy or interior decoration, you could opt for presumptive method of taxation. This means that 50 per cent of your receipts would be presumed to be the profits derived from the profession and you would not be required to maintain books of accounts to substantiate the expenses.

The rental income that you earn will be taxable as income from house property after claiming the specified deductions (municipal tax payments, interest on loan (if any), statutory deduction of 30 per cent). In the case of a home loan for a jointly owned self-occupied property, each co-borrower could claim their share of interest as deduction (subject to limits specified). From the facts, we understand that you do not have any outflow towards the loan; hence, there would not be any impact on your taxable income on account of this property. Your aggregate income from profession and house property is taxable at the rates applicable to your income slabs. From the total tax liability, you could reduce the taxes deducted at source.

The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in

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