I had a land at chennai, bought from housing board and built a house during 1971. Last year 2010,I demolished the old house, for building a new residential cum commercial building. Building is likely to be completed by feb,2012. About 6 months back I made a settlement on my wife's name giving 50% share in the property. My wife had a piece of land bought during 1988, near chennai, which was sold in 2011. The proceeds of the sale was also invested in our building under construction. Now after the completion of the construction, can I make the rental agreement on my name and my wife's name for the commercial space in the newly constrcted building, so that we both have tax advantage
settlement
krishee
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1 Answers
First, as your wife has sold land, there would be long term gains and income tax would be applicable for sale. If her share in cost of construction of new property (only residential part would be considered) is more than sale consideration of land sold, then there won't be any income tax payable u/s 54F. However this section won't apply in case she already own two or more residential properties in her name (single or jointly owned).
I am not really sure that I have completely understood the rent agreement part of question. But Rent cannot be paid to spouse and its considered a sham transaction.
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