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Deemed owner and tax liability
March, 23rd 2009

Some conditions when a person is considered to be the owner of a property that is not in his name. Generally, only the actual owner of a house is believed to be liable to pay tax. However, this is not the case under the Income Tax Act. Under the Income Tax Act, it is not only a property owner who is liable to pay tax on 'Income from House Property'. A deemed owner is also liable to tax on such an income.

A deemed owner is an owner by implication, although he may not be the owner in the real sense of the word. However, such a person is treated as an owner and is liable to tax in the same manner any owner. Specific provisions have been made under the Income Tax Act that deal with tax on income from a residential property.

These basic conditions must be met for any income to be taxed under this head: The property should be a building or land adjacent to one The assessee must own the property The property must not be used for the purpose of business or profession of the assessee. It must be only rented out so as to derive rental income.

Therefore, any income from a property which is not owned by the assessee will not be treated as 'income from house property' but as other income and other provisions of the Income Tax Act will apply. In certain cases, the assessee, though not the owner of the property, is deemed to be the owner of the property. That is, he is treated as owner of the property and income from that property will be treated as his 'income from house property'

Deemed owner

These are some conditions that make a person a deemed owner and liable to tax on property income:

Gifting property: An individual who gifts property to his spouse or minor child will be treated as the deemed owner of that property. Here, though legally the owner of the property is his spouse or minor child, any income from that property will be treated as his income.

Holder of impartable estate: The holder of an impartable estate will be treated as the owner of that entire property. For example, where a Hindu Undivided Family (HUF) jointly holds property on behalf of all its members, it will be treated as the owner, though legally, the property will be in the names of individual members of the family.

Member of society

A member of cooperative society, company or other association of persons to whom a building has been allotted under a house building scheme of the society will be treated as deemed owner of that property.

Section 53A: A person who meets the provisions of Section 53A of the Transfer of Property Act will be treated as a deemed owner of the property concerned. Section 53A of the Transfer of Property Act deals with situations where though the agreement to buy a property has not been registered with the appropriate authority, the person who has purchased the property will be treated as the owner of the property.

Long term lease holder: A person who has acquired rights through a long term lease of property will be treated as the owner of that property, and income from that property will be taxable in his hands under 'income from house property'. For this purpose, a long-term lease means lease for a period of more than 12 years.

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