How to split rental income between husband and wife to save tax

One of our readers, Bhupinder Aggarwal, shared an interesting tax query a few weeks back. He co-owns a house along with his wife. But the house has been rented out to a tenant, who pays rent to only one of the co-owners. The tenant is also deducting TDS in a single name, as the rent agreement has been created in a single co-owner's name.

Now, Aggarwal wants to know how to show this rental income in his as well as his wife's income tax return, as both are co-owners of the house. Can the rental income be split between them to lower their respective tax liabilities?

"Tenant is paying rent in the single name, but the house has a co-owner (wife). Tenant is also depositing TDS in a single name, as the rent agreement is in a single name. Please advise how to show this income in my and my wife's income Tax return?" Aggarwal wrote in an email dated April 25, 2025.

According to tax laws, the rental income can be split between the husband and wife if both are co-owners of the property. The split shall be proportional to their ownership share in the property.

In cases where a property is co-owned but the rental income and TDS are received and deposited in the name of only one co-owner, such as the husband, the income still needs to be apportioned between both co-owners in accordance with their respective ownership shares, as per Section 26 of the IT Act.

Even though the rent agreement and TDS are in one name, both co-owners are considered beneficial recipients of rental income. Hence, in their respective Income Tax Returns (ITRs), the rental income should be reported proportionately as per their respective ownership mentioned in the documents (e.g., purchase deed or sale agreement).

The spouse receiving the rent and TDS certificate (Form 26AS) should declare their share and mention the balance as "income apportioned to co-owner" in the ITR.

The other co-owner can then report their share and claim credit for their portion of the TDS.

It is recommended to maintain proper documentation, including co-ownership proof and a declaration of income sharing, to support the reporting during scrutiny or assessments.