Can I transfer my property to HUF

S.C. Vasudeva

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Q.I have constructed raised plinths which are rented out to government. Now I want to construct a covered godown on this land in the name of my HUF.  I want to transfer my individual property to my HUF. Is it possible according to law? — Abhinav Goyal

A. It is possible to transfer your individual property to a HUF. However, in accordance with the provisions of Section 64(2) of the Income Tax Act, 1961 (The Act) where, in the case of an individual being a member of Hindu Undivided Family, any property having been the separate property of the individual is converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or been transferred by the individual, directly or indirectly, to the family otherwise than for adequate consideration, then, for the purpose of computation of the total income of the individual under this Act for any assessment year commencing on or after the first day of April 1971.

The individual shall be deemed to have transferred the converted property, through the family, to the members of the  family for being held by them jointly;

The income derived from the converted property or any part thereof  shall be deemed to arise to the individual and not to the family;

Provided that the income referred to in clause (b) shall, on being included in the total income of the individual, be excluded from the total income of the family. Therefore, in case the land on which you intend constructing the godown is transferred to the HUF, any income from such property shall be treated in the manner explained above. 

Can builder refuse to give possession letter after giving an NOC?

Q. I had purchased an apartment for Rs 56.50 lakh but the sale deed was registered on circle rate worth Rs 25 lakh on December 2012. I am currently living in this apartment and am giving electricity supply charges as builder arranged the power supply for the past one year. Now the builder has issued a letter demanding payment of the balance amount only after which he would issue the possession  letter. I have paid the amount but the builder is not giving the possession letter. My queries are:

Can the builder refuse to give possession letter after giving an NOC?

Can the builder demand service tax?

Can the builder disconnect power supply to my apartment?

Any liability of issues — Jaidev  Singh

A. The facts given in the query are not complete as it is not understandable as to  why a possession letter is to be obtained from the builder since you have mentioned in the query that you are living in the apartment since December, 2012 i.e. the date of purchase of the apartment. You have also not indicated whether the apartment was purchased from the builder directly or from a third party which had purchased the flat from the builder originally. The reply to your query is based on the presumption that you had purchased the flat from a third party on account of which you had obtained NOC from the builder for the transfer of the apartment in your name and thereafter the apartment was registered in your name.

You have indicated that you are living in the apartment and therefore, to my understanding the possession letter by the builder is not required as such a letter must have been obtained by you from the original buyer of the apartment especially when NOC in your favour had already been given.  It is presumed that you have a copy of such NOC with you.

According to the provisions of the Finance Act 1994, Service Tax is leviable on the construction of a residential complex having more than 12 residential units which have common area and one or more facilities or services such as park, lift, parking space, community hall, common water supply, effluent treatment system.  It is presumed that the apartment purchased by you is covered within the aforesaid category and that service tax leviable was not paid to the builder by the original buyer. In view thereof, you would be liable to pay service tax leviable on the service element covered within the amount paid by the original buyer to the builder.

It seems the electricity is not supplied by the electricity board/power transmission company and the same is being supplied through a backup system provided by the builder. In the circumstances he may disconnect the supply of electricity to pressurise you for payment of service tax. 

The issue whether the payment of service tax was the liability of the original buyer would depend upon the terms contained in the sale deed. You may, therefore, go through the sale deed to ascertain the same.

Pay EMI for joint loan separatel

Q.My wife and I purchased a plot jointly from HUDA. My wife is the first applicant, while I am the co-applicant. We took a joint bank loan for this. But the entire amount of EMI of loan is being paid by me from my bank salary account. Now we  have constructed a house on it and occupied it and wish to avail IT rebate .  

Can I take income tax rebate alone as I pay the EMI or it would be bifurcated between me and my wife. Both of us are in government  service and are income tax payees.  — D P Singh

A. The amount of deduction allowable under Section 80C of the Act for the repayment of the loan as well as for the amount of interest paid on the loan borrowed for the construction of the house under Section 24 of the Act shall be allowable to both of you in the ratio in which the house is owned by you and your wife.  It would be advisable that each one of you pays his/her share of EMI to avoid any problem with the tax department.

Should we take possession before selling right in plot?

Q.My father was allotted a plot by HUDA in 2000-2001. He paid all the instalments and extention fee, though a bit delayed (so payments are done with required interest). The possession for the same was offered in 2007. Due to some reasons he did’nt take the possession and paid the extention fee regularly. Now he is planning to sell it, but came to know about the capital gain? And according to law he has to take possession and get a Conveyence Deed made before making a sale deed with the buyer. My queries are:

Will it be a long-term gain or short-term? 

If short-term, then is there any way to convert this into long term capital gain?

If we make the agreement to sell before taking possession then will it be a long-term capital gain from the date of possession offer? — Dr. Neha

A. Your queries are replied hereunder:

It would be advisable not to take possession before selling a right in the plot allotted to your father by HUDA.

This will enable you to treat the capital gain arising on the sale of such a right as a long-term capital gain.

You should enter into an agreement to sell in respect of the right in plot and execute the necessary papers for transfer of such a right and thereafter take the possession on behalf of the person to whom right in the property has been transferred.

Can I save tax on rent from house in Chandigarh?

Q. I own a house in Punjab where I am residing.  I was also allotted a flat in Chandigarh in 2008. The possession of the flat was given on January 1, 2016. At that time the flat was incomplete as one toilet was to be constructed by the owner. The construction of flat was completed in March, 2016.

I rented out the flat on May 10, 2016 @ Rs 15000 per month. The rent is received by an account payee cheque. The Resident welfare Association (RWA) fee of Rs 500 per month is also included in the rent. I paid Rs 6000 to RWA for one year from 01/01/2016 to 31/12/2016. The fee is for maintenance by the  society, security service and electricity bills for lifts. I would like to mention here that the rental value of my house in Punjab is only Rs 7500 per month. My queries are:

Do I need to show any income from house property for January to March, 2016 and from  April 1 to May 9, 2016? Even though the construction of flat was completed in March, 2016 and flat had been let out on May 10, 2016.

How much income do I need to show from house property for the year 2015-16 & 2016-17 after deducting 30%? Can I show that I am living in Chandigarh (self-occupied property) and the house in Punjab has been let out even though I am living in Punjab?

If I am to show income of the flat in Chandigarh then can I deduct the amount paid to RWA as expenditure?

Do I need to show income from house property for the whole year or from the date of letting out the property?

I paid an amount of Rs 8050 for registering the rent deed, Advocate fees and other charges. Can this amount also be deducted from the rent received? — Vicky 

A. Your queries are replied hereunder:

You will have to reflect the income from Chandigarh  house property for the period May 10, 2016 to  March 31, 2017 in your income-tax return for the assessment year 2017-18 (financial year 2016-17).

No income is to be reflected for the financial year 2015-16 as the construction of the flat was completed in March 2016.  The income for the financial year 2016-17, as indicated in (a) above  shall be for the period  May 10, 2016 to March 31, 2017 which will be computed in the following manner:

Income from House Property

Annual letting value / rent from May 10, 2016 to  March  31, 2017 @ Rs.15000 p.m.

Rs 1,60,000

Less house tax                  Rs.    x Rs 1,60,000 - x (A)

Less 30% of the resultant figure 30% of Rs 1,60,000 - x (B)

Taxable income from house property A - B

You are required to show the true and correct income in the income-tax return , and therefore, you should reflect income from property which is in respect of flat let out by you in Chandigarh.

No other amount is deductible other than house tax, statutory deduction of 30% of the annual letting out value (i.e. rent received minus house tax) and the interest, if any, in respect of the amount borrowed for the purchase or construction of a house property.

This aspect has already been explained in (a) above.

The amount of Rs 8050 paid for registering the rent deed, Advocate fees and other charges is not deductible from the annual letting value.