Sir/Madam, My mother transferred her property to my name last year and included a clause in the registered document of settlement that she would be getting the income for her lifetime and since then she pays whatever tax liability arises from the income from the said property under her name. I would like to know that in this situation, is it ok to continue as is or do I have to pay the tax from this property's income as the property is settled in my name? Please advise. Thank you,
In Income tax there is a concept called diversion of income by overriding title and application of income. As you have mentioned that a clause in the document that she would be getting the income. It was diversion of income by overriding title. So here it will form part of her income only.
It can continue as it is and you do not need to pay tax for the income.
Supreme Court in CIT v. Sitaldas Tirathdas [(1961) 41 ITR 367] / [TS-9-SC-1960] Case law if you need further reference.
Dear Sir,
This is a case where asset is transferred but income is not transferred and there is a specific clause in the agreement as well for receipt of rent. Returns filed by you in previous years are correct as the income is taxable in the hands of your mother only. You should continue as you did in previous years. It is valid.
Hi,
I understand that the ownership has been completely transferred to your name. If that has happened, the income shall be deemed to have your ownership and hence shall be taxable in your hands.
Hence, you should be paying the taxes on the same.
Thanks
Damini
Hi,
You need not pay any taxes as the income will not be deemed to be in your hands. Since the clause specifically mentions that your mother will be the one eligible for the incomes, she will be liable to pay taxes thereon.
Hope that clarifies.
Regards,
Nikhil.
Hi,
In my opinion the income lawfully belong to your mother and does not belong to you. The income will never reach in your hands to be taxable as your income.
Hence, it is reasonable to say that income belongs to your mother and she is liable to pay tax on it.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com