This Blog is written by Mr. Bilal Hussain Malik, Associate Taxation Services. Please read this blog and provide your valued comments.
Income from Property
The chargeability of income under the head “Income from Property” is elaborated in
Section 15 of the Ordinance. The said section states that “The rent received or receivable by a person for a tax year, other than rent exempt from tax shall be chargeable to tax in that year under the head “Income from Property”.
Before going on, first we define the rent
“Rent” means any amount received or receivable by the owner of land or a building as
Consideration for the use or the right to use, the land or building,
And includes any forfeited deposit paid under a contract for the sale of land or a building’’
Example: Where rent received or receivable is less than fair market rent for the property, the owner shall be treated as having received the fair market rent for the period the property is let on rent in the tax year. However, this shall not apply in the case of self-hiring where fair
Market rent is already included in the income of the lessee, chargeable to tax under the
TREATMENT OF NON-ADJUSTABLE AMOUNTS
The treatment of non- adjustable advances received in relation to buildings is explained in
Section 16 of the Ordinance in the following manner:
- Where the owner of building receives an advance which is not adjustable against rent, the whole of advance shall be treated as rent chargeable to tax under the head income from property in the year of receipt and following nine tax years in equal proportion i.e.1/10th of such un-adjustable advance shall be included in the income of the taxpayer under the head “income from property” in 10 tax years commencing from the tax year in which the advance is received.
- If advance is refunded in any year before the expiry of 10 years such advance shall not be included in the income from the tax year in which it is refunded or thereafter
- After vacancy, if the property is let out again against another non-adjustable advance, new advance less the portion of previous advance already charged to tax shall be chargeable equally in 10 tax years, commencing from the tax year in which the advance is received from the succeeding tenant.
The above treatment is shown in separate block of taxation.
Treatment for Company: while treatment for Company is to include in normal tax regime and also following expenses are allowed to be claimed under this head:
|29% for income up to Rs 5 crore||7% for income between Rs 1 crore & Rs 10 crore|
|30% for income exceeding Rs 5 crore||7% for income between Rs 1 crore & Rs 10 crore and 12% if income exceeds Rs 10 crore|
Note: No treatment is required in case of adjustable advance against rent because the same will be automatically included in the computation of rent.
Bilal Hussain Malik