Tax Query: Is rental income taxable for the recipient or the owner?

I am the owner of house property and also receive rent from letting out the property. From FY 2020-21, I have the rental remittances into my mother’s bank account. The house property continues to be in my name. I want to know whether the rental income is taxable as my income and whether I can claim deductions against the rental income?

The general rule is that the income of the property is part of the taxable income of the owner. Hence, the income from house property owned by you is taxable as your income. In the case of remittance of income to your mother’s bank account, you are still the owner of the rental income. Hence, the income continues to be taxable as your income. Also, you can claim deductions from the rental income for municipal tax payments or interest on housing loan or other prescribed deductions.

Also Read: Tax Query: Can I claim deduction on PPF or medical insurance payments?

I have investments in bank fixed deposits in the name of my two minor children. The interest credited on the two accounts is Rs 5,000 and Rs 7,000 per annum. Is the interest income taxable, and am I eligible for any deduction?

Interest income earned by a minor gets taxed as income of the parent. As between parents, the income gets clubbed with the income of the parent whose total income (excluding minor’s income) is higher. However, the parent getting taxed can claim a deduction of Rs 1,500 per child in respect of the minor’s income. Do note that the deduction is on the aggregate annual salary of each child. 

In the case on hand, the aggregate interest income of Rs 12,000 gets taxed as income of the qualifying parent. Further, the parent can claim a deduction of Rs 3,000 (Rs 1,500*2), and the net taxable income is Rs 9,000.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in