Question

As a general rule: I. Income from property is taxed to the person who owns the property. II. Income from services is taxed to the person who performs the services as an agent for another taxpayer. III. The person to whom income from property is assigned must pay tax on that income. IV. The person who receives the benefit of the income must pay the tax on the income.

a. Only I and II are true. b. Only I is true. c. I, II, and III are true, but IV is false. d. I, II, III, and IV are true. e. None of these is true.

Answer 1

a. Only I and II are true

Below two options are False as a general rule

III. The person to whom income from property is assigned must pay tax on that income.

IV. The person who receives the benefit of the income must pay the tax on the income.

If a person receiving the rent is not the owner of the property, then rental income is not charged to tax under the head "Income from house property" (E.g. Rent received by tenant from sub-letting). In the following cases a person may not be the registered owner of the property, but he will be treated as the owner (i.e., deemed owner) of the property and rental income from property will be charged to tax in his hands:

(1) If an individual transfers his or her house property to his/her spouse (not being a transfer in connection with an agreement to live apart) or to his/her minor child (not being married daughter) without adequate consideration, then the transferor will be deemed as owner of the property.

(2) Holder of impartible estate is deemed as the owner of the property comprised in the estate

(3) A member of co-operative society, company or other association of persons to whom a building (or part of it) is allotted or leased under house building scheme of the society, company or association, as the case may be, is treated as deemed owner of the property.