Section 27 of the Income Tax Act provides cases, wherein, certain individuals, who are not the legal owners of a property, are deemed owner of house property, and income from such property is taxed in their hands. The following cases are covered under this Section : –
Transfers of a house property to the spouse – Section 27 (i) of the Income Tax Act
Where, an individual transfers a house property to his/her spouse, and there is no adequate consideration, the individual transferor is deemed to be the owner of the property. However, the transferor will not be treated as the owner of the property, where the couple agrees to live apart, and the property is transferred to a spouse in connection with such living apart. Where the individual transfers cash to his/her spouse and the spouse acquires a house property out of such cash, the transferor individual shall not be treated as deemed owner of the house property. However, income from such house property may be subject to clubbing provisions
Transfers of a house property to minor child – Section 27 (i) of the Income Tax Act
Just like the above, Where, an individual transfers a house property to his/her minor child , and there is no adequate consideration, the individual transferor is deemed to be the owner of the property. However, the transferor will not be treated as the owner of the property, where the property is transferred to a minor married daughter. Where the individual transfers cash to his/her minor child, and the child acquires a house property out of such cash, the transferor individual shall not be treated as deemed owner of the house property. However, income from such house property may be subject to clubbing provisions
Holder of an impartible estate – Section 27 (ii) of the Income Tax Act
An impartible estate refers to a property that cannot be legally divided . According to Section 27(ii) of the Income Tax Act, the holder of an impartible estate is considered the sole owner of all the properties, and accordingly, income from such property is taxed in the hands of the holder of the impartible estate .
Holder of an impartible estate – Section 27 (iii)
Section 27(iii) of the Income Tax Act provides that if a building or a part of a building is allotted or leased to a member of a cooperative society, company, or other association of persons under a House Building Scheme of the society/company/association, that member shall be considered the owner of the allotted building or part thereof, even if the legal ownership remains with the cooperative society/company/association . In such a case, income from such property is taxed in the hands of the allottee for the purpose of the income tax act.
Possession of a house property – Section 27 (iiib)
Where a person acquires any right in a building or a part of a building , by virtue of a transaction in the nature of transfer of a lease for a period not less than 12 years, such acquirer of rights will be deemed as the owner of the building or part thereof and therefore, income from such property is taxed in the hands of such acquirer.
Exceptions : –
- Right is acquired on a month-to-month basis ; or
- Right is acquired for a period not exceeding one year.
