What is Deemed Ownership in Income Tax?

In Income under the Head “Income from House Property”, Deemed Ownership is the point you should always remember while computing Taxable income. So let’s talk about deemed ownership.

Income Taxable under House Property

As per Section 27, the following persons through not the legal owners of a property are deemed to be the owners for the purposes of the section 22 to 26:

Transfer to a spouse [Section 27(i)]

If an individual transfers any house property to his or her spouse otherwise than for adequate consideration, the transferor in that case is deemed to be the owner of the property so transferred.

This would not cover cases where a property is transferred to a spouse in connection with an agreement to live apart.

Transfer to a minor child [Section 27(i)]

If an individual transfers any house property to his or her minor child otherwise than for adequate consideration, the transferor in that case is deemed to be the owner of the house property.

This would however not cover cases where a property is transferred to a minor married daughter.

Holder of an impartible estate [Section 27(ii)]

The impartible estate is a property which is not legally divisible.

The holder of an impartible estate shall be deemed to be the individual owner of all properties comprised in the estate.

Member of a Co-operative Society, etc. [Section 27(iii)]

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 of a society/company/association, shall be deemed to be owner of that building or part thereof allotted to him although the co-operative society/company/association is the legal owner of that building.

Person in possession of a property [Section 27(iiia)]

A person who is allowed to take or retain the 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 shall be deemed owner of that property.

This would cover cases where the,

  1. possession of property has been handed over to the buyer,
  2. sale consideration has been paid or promised to be paid to the seller by the buyer,
  3. sale deed has not been executed in favour of the buyer, although certain other documents like Power of Attorney/agreement to sell/will etc. has been executed.

Person having right in a property for a period not less than 12 years [Section 27(iiib)]

A person who acquires any right in or with respect to any building or part thereof, by virtue of any transaction referred to in Section 269UA(f) i.e., transfer by way of lease for not less than 12 years shall be deemed to be the owner of that building or part thereof.

This will not cover the case where any right by way of a lease is acquired from month to month basis or for a period not exceeding one year.

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