Wholl pay the tax on income earned from transferred assets?
As discussed above, the transferor is liable to tax on income arising from transfer of assets without adequate consideration. However, if such income, in turn, gives rise to further income, then tax liability on the latter income will rest with the transferee and not the transferor. Ranga, transfers a house property without adequate consideration to Ganga. Rental income from such property received by Ganga will be taxed in the hands of Ranga, the transferor. If this rental income is placed by Ganga in a bank as a fixed deposit, then the interest earned on this deposit will be taxed in the hands of Ganga, the transferee and not Ranga.
