Deemed owner

Income from house property is normally taxed in the hands of its legal owner — the person whose name is on the title. The deemed owner rule is the exception: in certain situations, someone is treated as the owner, and taxed accordingly, even though the legal title is not in their name.

Two situations the workbook names:

1. Co-operative housing society membership. The building (and the land under it) is legally owned by the co-operative housing society, not by the individual flat-owner. But a member with the right to reside in, and enjoy the benefits of, a specific unit — including the right to transfer that right of enjoyment — is treated as the deemed owner of that unit, and taxed on its income accordingly. The workbook calls this the most common example of deemed ownership.
2. Transfer to spouse or minor child. An individual who transfers a property to their spouse, otherwise than for adequate consideration and not connected with an agreement to live apart, is treated as the deemed owner of that property for computing income from house property. The same rule applies where the property is transferred to a minor child.

In both cases, the practical effect is the same: the income from the property is taxed in the deemed owner's hands, not the legal title-holder's — closing off an obvious route to shift taxable rental income to a lower-taxed family member simply by putting the title in their name.

Illustrative scenario.

Mr Malhotra transfers a flat he owns to his wife, without adequate consideration and with no agreement to live apart. The flat is let out for Rs 30,000 a month. Even though his wife now holds legal title, Mr Malhotra remains the deemed owner of the property, and the rental income — Rs 3,60,000 a year — is taxed in his hands, not hers.

Separately, Mrs Kulkarni lives in a flat owned by her housing society, where she is a member with the right to occupy Unit 4B. Although the society, not Mrs Kulkarni, holds legal title to the building, she is the deemed owner of Unit 4B, and any income from letting it out (or its annual value, if self-occupied) is computed in her hands.

Chapter 7 (Concepts of Taxation), section on ownership of property, covers both the co-operative society example and the spouse/minor-child transfer rule under "Deemed owner." Expect a question identifying a deemed owner in a fact pattern involving a society flat or an intra-family property transfer.

• The co-operative housing society case is about who holds legal title versus who has the right to occupy — the society, not the individual member, is the legal owner, yet the member is taxed on the unit's income.
• The spouse/minor-child rule requires "otherwise than for adequate consideration" — a genuine sale at fair value does not trigger deemed ownership.
• The spouse rule does not apply if the transfer is connected with an agreement to live apart — that is the one stated exception.
• Deemed owner is about who is taxed, not about who legally owns the asset — the two can differ, and that gap is the entire point of the rule.