Best Practices for Joint Owners of a Rented Commercial Property

✅ Best Practices for Joint Owners of a Rented Commercial Property

To avoid confusion and unwanted GST liability, joint owners should take the following steps:

1️⃣ Separate Lease Agreements

  • Each co-owner should ideally execute a separate lease or rent agreement with the tenant for their respective share of the property.

  • The agreement should clearly state:

    • The portion (e.g., 50%, 25%) owned and rented by each owner.

    • The rent amount payable to each co-owner separately.

    • The separate bank account to which rent is credited.

🟢 Effect:
Each owner’s rental income is considered separately for GST threshold (₹20 lakh), even if the tenant is the same.

2️⃣ Separate Rent Invoices / Receipts

  • Each owner should issue their own invoice or rent receipt for their share of the rent.

  • If an owner is registered under GST, they must:

    • Use their own GSTIN, and

    • Charge 18% GST on rent,

    • File GST returns for their share.

3️⃣ Separate Bank Accounts

  • Ideally, each owner should receive rent directly into their own bank account, not a joint one.

  • This strengthens the case that each is a separate supplier, not an association of persons (AOP).

4️⃣ If Joint Agreement is Unavoidable

If, for practical reasons, a single rent agreement is made:

  • Mention each owner’s share of ownership and rent in the agreement.

  • Mention that the tenant will split the rent payment to each owner directly.

  • Keep clear documentation (receipts, payment records) showing rent is received separately.

5️⃣ GST Registration Implication

Owner’s Annual Rent Share GST Registration Required?
Less than ₹20 lakh (₹10 lakh in special category states) ❌ No
More than ₹20 lakh ✅ Yes
Joint rent > ₹20 lakh (AOP structure) ✅ AOP must register

⚖️ Example

Three co-owners (A, B, C) rent a shop for ₹60 lakh/year.
Each gets ₹20 lakh credited separately.
👉 None are required to register under GST (since ₹20 lakh is not exceeded).

If the tenant pays total ₹60 lakh to a joint account, and the co-owners operate collectively → the AOP must register and pay GST on ₹60 lakh.


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