I and my wife jointly own a flat in Mumbai; she is the second owner. Rental income is ₹ 50,000 a month, of which ₹ 8,500 is maintenance charge. Can the entire amount be shown as my wife’s?—P. Dhrub Kumar
Rental income earned is taxable in the hands of each co-owner, in proportion to the share owned. While you and your wife are the legal owners from a tax perspective, the proportion of ownership would be determined based on amount funded by each person for the cost of property. We highlight here that there has been a recent judicial precedent suggesting that the co-ownership will be determined based on the agreement. So the proportion of ownership would be case specific and subject to various factors like names and share mentioned in agreement, funding of costs, etc. While computing taxable rental income, a standard deduction for repairs and maintenance can be claimed at 30% of the net rental value (gross rent minus actual municipal taxes paid), irrespective of the actual expenditure incurred. Interest paid on a housing loan can be offset from the net rental value to determine the taxable rent.
My dividend income is about ₹ 25 lakh for assessment year 2018-19. I paid interest of ₹ 9 lakh on loans I took to buy shares. Is the interest paid tax deductible?—Umesh S.
Where the dividend earned from domestic companies for specified taxpayers (a resident individual is one of the specified taxpayers) exceeds ₹10 lakh, taxes are payable at the rate of 10% (plus applicable surcharge and cess) on the dividend exceeding ₹10 lakh, under Section 115BBDA of the Act. No deductions can be claimed in respect of any expenditure when computing the taxes due under this section. Therefore, you will not be able to claim tax deduction for expenses incurred to earn the dividend income.
To read more queries, go to www.livemint.com/askmintmoney
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
Send queries and views to mintmoney@livemint.com