Deemed owner has been defined in section 27 of the income tax act, 1961. This section is an exception to the basic conditions of charging tax under the head house property. To get taxed under the head house property, following basic conditions are to be satisfied;
- The property must consist of building and land appurtenant thereto; and
- It must be owned by the assessee; and
- The property must not be used for the purpose of own business or profession.
This means only the legal owner of a house is liable to tax in India. However, in income tax law, we have few exceptions to the condition of legal owners to get the income taxed under the head house property. As per section 27 of the Income tax act, 1961, in the following cases the person will be considered as deemed to be the owner of the house property even though he/she is not the legal owner.
House property is transferred to spouse
If any house property has been transferred to spouse without adequate consideration, then the transferor is considered as deemed to be the owner of the property so transferred.
However, its not applicable to cases where the property is transferred in connection with an agreement to live apart.
House property transferred to a minor child
If any house property has been transferred by the assessee to his or her minor child otherwise than for adequate consideration, then the transferor is considered as deemed to be the owner of such house so transferred.
However, if the house is transferred to a minor married daughter, then above provisions are not applicable. In this case, assessee will not be considered as deemed to be the owner of the house property.
If you have gifted a house property to your spouse or minor child, then for income tax purposes, you will be treated as deemed owner of the house.
Deemed owner when assessee is holder of an impartible estate
Impartible estate means a property which is not legally divisible. If the assessee is the holder of an impartible estate, then he or she shall be considered as deemed to be the individual owner of all such properties comprised in the estate.
Deemed owner when assessee is a member of a cooperative society
If assessee is a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme, then the assessee shall be treated as deemed owner of such building or part thereof even though the co-operative society or company or association is the legal owner of that building.
When assessee is in possession of a house building
If assessee is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the transfer of property act, then assessee shall be deemed to be the owner of such house property.
Long term lease holder
A person who acquires any rights in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof. However, it excludes cases where any right by way of a lease is acquired from month to month basis or for a period not exceeding one year. This means, if transfer by way of lease is for a period not less than 12 years, then the person who acquires the right shall be deemed to be the owner of that building or part thereof.
In all these above cases, income will be taxed under the head house property even though assessee is not the legal owner of the building or part thereof.
