Skip to content

3.c Deemed ownership

Deemed Ownership is a concept in tax law that applies to situations where a person is considered to be the owner of a property for tax purposes, even though they may not hold the legal title to the property. This concept is significant because it determines who is liable to pay taxes on the income generated from the property, under the head "Income from House Property."

Key Scenarios of Deemed Ownership

  1. Transfer of Property to Spouse or Minor Child:

  2. If a person transfers property to their spouse or a minor child without adequate consideration (i.e., without receiving anything in return of equal value), the transferor is still considered the owner of the property for tax purposes. This means that the transferor is responsible for paying taxes on the income generated from the property, even though the legal ownership may lie with the spouse or minor child.

  3. Possession under Section 53A of the Transfer of Property Act:

  4. According to Section 53A of the Transfer of Property Act, if a person is allowed to take or retain possession of any building or part thereof as part of a contract for the sale of property, they are treated as the owner for tax purposes. This applies even if the legal title has not yet been transferred to them. Essentially, if you have control over the property and are benefiting from it, you are considered the owner for tax purposes.

  5. Owner Treated as Someone Else:

  6. In some cases, a person is treated as the owner of a house property even though the legal owner is another individual. This might happen in situations where the real owner is not able to exercise their rights over the property, and another person is in de facto control of the property, enjoying the benefits and income from it.

Importance of Deemed Ownership

The concept of deemed ownership ensures that tax liability is assigned to the person who actually controls and benefits from the property, rather than simply the legal owner. This prevents tax evasion through strategic transfers of property and ensures that the income from the property is taxed appropriately, in line with the economic reality of ownership.

In summary, deemed ownership focuses on who effectively controls and benefits from a property, rather than who holds the legal title, ensuring fair taxation based on the actual use and enjoyment of the property.

Ask Hive Chat Chat Icon
Hive Chat
Hi, I'm Hive Chat, an AI assistant created by CollegeHive.
How can I help you today?
🎶
Hide