A non-resident Indian is not liable to pay income tax on the full income from any property jointly owned by him with his wife. The only precaution that he should take is that there is no gift made by him to his wife, If this precaution is taken, the joint ownership of movable as well as immovable assets will entitle each of the owner to claim separate income tax assessment in his or her hands independently. Thus, a non-resident Indian could own shares of a limited company out of money belonging to him as well as out of separate funds belonging to his wife as also the funds of a major child. Thus, if the shares in a limited company are owned in three names with the funds contributed by the three persons as mentioned earlier, each of the persons would be liable to be taxed separately and not be clubbed together. In particular, this provision is recognised for the purpose of joint ownership of house property. Thus, it is provided in Section 26 that where property consisting of building or buildings and lands appertaining thereto is owned by two or more than two persons and their respective shares are definite and ascertainable, such persons in respect of such property are not to be assessed as an association of persons, but the share of each person in the income from the property would be included in his total income separately. In the case of other investment, like shares, debentures, etc., there is sometimes a risk of joint investment being considered as the investment of ‘an association of persons. In the interest of avoiding confusion and clubbing of income, a non-resident Indian should not make joint investments for movable assets. But as regards immovable house property, because of the clear cut provision contained in Section 26 there is no risk if it is purchased out of separate and independent funds belonging to the husband, wife and the major children, namely, all of them together, and it would not be liable to be clubbed. Rather, the income of each co-owner would be liable to separate assessment independently. This aspect of tax planning can be taken care of while purchasing house property, particularly where the house property is big and saving of income tax and wealth tax becomes important. |
