Concept of “deemed owner” under the income tax act, 1961

Concept of deemed owner

Under section 27 of the Income Tax Act,1961 In Case an individual transfers any house property to his/her spouse and is not connected to an agreement to live apart or minor child (does not include married daughter) without any adequate consideration then such individual known as Deemed Owner of such house property.

In this case the transferee he holds no title in the property, he has only the possession of such property.

Conditions for taxing income from house property

 Income from house property is taxable in the hands of legal owner of that house property (it may be deemed /registered /beneficial owner).

Deemed owner of house property (section 27)

 According to Income Tax Act and other applicable provisions assessee in the following cases is deemed to be the owner of the house property, even though not owner of the house property:

1. Transfer of house property to a Spouse: If an individual transfers any house property to a spouse for inadequate consideration, except when asset transfer to live apart, the transferor will be the deemed owner of the transferred property.
2. Transfer house property to Minor Child: If an individual transfers any house property to a minor child for inadequate consideration, (does not include married daughter), the transferor will be the deemed owner of the transferred property.
3. Holder of impartible estate: An individual who is holder of an impartible estate shall be deemed to be the individual owner of all properties comprised in the estate.
4. Member of co–operative society: A member of a co-operative society, company or other AOP to whom a building or property is allotted or leased under a house property scheme shall be deemed to be the owner of that allotted part of building or property.
5. Person in possession of house property under part-performance of contact: If an individual is allowed to take or retain possession of any building or its part, in part performance of a contract shall be the deemed owner of the building or its part. This includes following scenarios:

• • Possession of the property has been surrendered to the buyer
  • Sale consideration has been met or promised to be met by the buyer
  • Sale deed has not been executed in favor of the buyer

6. Person having right in a property by the way of lease for 12 years or more:  If an individual has any right with respect to house property transfer by way of lease for 12 years or more shall be deemed to be the owner of that building or its part, except when any right by way of a lease is acquired on a monthly basis or for a period not exceeding one year.