# Deemed Ownership [Section 27]

Section 27 lists persons who, though not the legal owner, are treated as the owner of house property and taxed on its income. This prevents tax avoidance through transfers and structuring.

## The Six Categories

1. Transfer to a Spouse [Sec 27(i)]

Property transferred to spouse without adequate consideration → transferor is deemed owner.
Exception: Transfer in connection with an agreement to live apart → the transferee spouse is the owner and is taxed.

2. Transfer to a Minor Child [Sec 27(i)]

Property transferred to a minor child without adequate consideration → transferor is deemed owner.
Exception: Transfer to a minor married daughter → transferor is NOT deemed owner (clubbing under Sec 64(1A) still applies).
Note: If cash is given to the spouse/minor child to buy property, the transferor is NOT deemed owner — but clubbing provisions apply instead.

3. Holder of an Impartible Estate [Sec 27(ii)]

The holder is deemed owner of all properties in the estate.
Even after the Hindu Succession Act, 1956 (where such properties are assessed as HUF), the deeming under 27(ii) continues for impartible estates.

4. Member of a Co-operative Society / Company / AOP [Sec 27(iii)]

A member allotted or leased a building (or part) is deemed owner, even though the society/company is the legal owner.

5. Person in Possession under Part Performance [Sec 27(iiia)]

A buyer in possession under Section 53A of the Transfer of Property Act is deemed owner where: (1) possession handed over, (2) consideration paid/promised, and (3) sale deed not executed but POA / agreement to sell exists.

6. Lessee for 12 Years or More [Sec 27(iiib)]

A person acquiring rights via a lease of 12 years or more is deemed owner.
Exception: Leases of less than a year or month-to-month leases do NOT create deemed ownership.

## Memory Hook

Transfers to spouse / minor child without consideration → transferor still owns (the law sees through the gift).
Cash gifts escape deemed ownership but get caught by clubbing instead.

Worked example

### Example 1

Example (Spouse transfer): Mr. P gifts a let-out flat to his wife for no consideration. Rent of ₹3,00,000 is received by the wife.

Under Sec 27(i), Mr. P is the deemed owner and the ₹3,00,000 (after Sec 24 deductions) is taxed in his hands — not his wife's.

### Example 2

Example (Cash gift — clubbing, not deemed ownership): Mr. P instead gives ₹40 lakh cash to his wife, who buys a flat and lets it out.

Mr. P is NOT the deemed owner of the flat (no property was transferred).
However, the rental income is clubbed with Mr. P's income under the clubbing provisions.

### Example 3

Example (12-year lease): Mr. Q takes a 15-year lease of a commercial building. Under Sec 27(iiib) he is the deemed owner for the lease and taxed on the property income. Had it been a month-to-month tenancy, he would NOT be a deemed owner.

⚠️ Common exam mistakes

Taxing rental income in the spouse's/minor's hands after a no-consideration transfer — the transferor remains the deemed owner under Sec 27(i).
Treating a CASH gift like a property transfer — cash gifts do not create deemed ownership (Sec 27), but they trigger clubbing under Sec 64.
Deeming the transferor as owner on transfer to a minor married daughter — this is an exception (though Sec 64(1A) clubbing may still apply).
Treating a short / month-to-month lease as creating deemed ownership — only leases of 12 years or more qualify under Sec 27(iiib).

Reference: Section 27 — Income-tax Act, 1961

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