Many taxpayers transfer or gift a house property to their spouse for family, financial, or estate planning purposes. Once the property stands in the spouse's name and the spouse starts receiving rent from tenants, it is commonly believed that the rental income will automatically be taxable in the spouse's hands.
However, the Income-Tax Act, 1961 contains specific provisions that can result in the rental income being taxed in the hands of the person who gifted the property. Taxpayers should, therefore, understand the interaction between the clubbing provisions and the concept of deemed ownership before filing their income tax returns (ITRs).
