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MS3 Income From Property - SirTariqTunio - SEP23

The document outlines the tax implications and treatment of income from property, including definitions of rent, non-adjustable amounts, and fair market value. It details allowable deductions related to property income and stipulates conditions under which deductions for unpaid rent can be claimed. Additionally, it addresses the tax treatment of income for joint property owners based on the definiteness of their shares.

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9 views1 page

MS3 Income From Property - SirTariqTunio - SEP23

The document outlines the tax implications and treatment of income from property, including definitions of rent, non-adjustable amounts, and fair market value. It details allowable deductions related to property income and stipulates conditions under which deductions for unpaid rent can be claimed. Additionally, it addresses the tax treatment of income for joint property owners based on the definiteness of their shares.

Uploaded by

vmuhammadaman
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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# 3 CONTROL SHEET OF INCOME FROM PROPERTY 3rd EDITION

ET
S HE PREPARED BY SIR TARIQ TUNIO THE TAXMAN (ARTT 0332-2130867) FOR SEP 2023 ATTEMPT ONLY

Rent means (1) any amount received or receivable by owner of land or building as consideration for use or occupation or right to use/occupy land or building,
RENT (2) any forfeited deposit paid under a contract for sale of land/building and (3) non-adjustable amount received in relation building.
Rent received or receivable for a tax
year by owner of the land or building
Non-adjustable Amount (In/Rel/To Building Only): (1) Taxed when received; NAA of Building ÷ 10 (Not taxed after 10 years) (2) Not taxed if refunded before
N.A.A 10 years on termination of tenancy (3) If earlier NAA is refund and subsequent received, subsequent is taxed after reducing that portion of earlier amount
which has been charged to tax. (Balance ÷ 10) [RECEIPT OF ADJUSTABLE AMOUNT: Not taxable. Being advance rent, it is taxed as rent whenever adjusted.]
AMOUNT
CHARGEABLE Fair market rent is taken where rent received/receivable is less than fair market rent (applies to both land or building). Exception: does not apply where fair
market rent is included in income of lessee under head Salary. ► WHETHER OR NOT FMV APPLIES TO EMPLOYER BEING OWNER IF RENT FREE
FAIR MARKET ACCOMMODATION IS PROVIDED TO AN EMPLOYEE? No fair market principle does not apply to this case. No amount is added to IFP of employer/owner.
VALUE ► SELF-HIRING: Employer rents accommodation from employer & returns it to him as perquisite. TAX TREATMENT: Employee chargeable to tax (1) under
Salary at AA or 45% w/e/h & (2) IFP for rent earned from employer. [FMV not applicable]

RENT NOT ► (1) Rent from sub-lease of a land or building, (2) Rent from lease of a building together with plant and machinery (3) Amount included
CHARGEABLE in rent for amenities, utilities or other service connected with renting of building [These 3 are chargeable to tax under IFOS]
UNDER IFP ► RENT FROM MOVABLE PROPERTY (such as machines, equipment, vehicles etc.) is chargeable to tax under Income from Business.
► Rent from agricultural land is exempt. (Agricultural Income is exempt u/s 41)

(1) REPAIR ALLOWANCE 1/5th of RCT in/con/with building


(2) INSURANCE PREMIUM paid/payable to insure building against damage or destruction
INCOME (3) LOCAL RATE, TAX, CHARGE OR CESS in/res/of property or income from property (excluding Income Tax)
FROM 10 DEDUCTIONS (4) GROUND RENT paid/payable in/res/of property
(5) PROFIT paid/ payable ON MONEY BORROWED to ACRER property, including by way of mortgage.
PROPERTY ALLOWED
[acquire, construct, renovate, extend or reconstruct]
(6) SHARE IN RENT AND SHARE IN APPERCEPTION IN VALUE PAID/ PAYABLE TO HBFC OR BANKS if property is ACRER with capital of HBFC/ bank under scheme of investment on basis of sharing
rent. [RETURN OF CAPITAL TO HBSC/BANK: Not allowed as deduction]
(7) PROFIT or INTEREST paid WHERE THE PROPERTY IS SUBJECT TO MORTGAGE OR OTHER CAPITAL CHARGE
(8) EXPENDITURE TO DERIVE RCT (including admin & collection charges) – not exceeding 4% of RCT in/res/ of property (Rent Collection Charges)
(9) EXPENDITURE paid/ payable FOR LEGAL SERVICES to defend title to property or any suit connected with property in court
(10)DEDUCTION FOR IRRECOVERABLE RENT: An allowance equal to unpaid rent is allowed as deduction, where reasonable grounds to believe that unpaid rent is irrecoverable.
CONDITIONS: (a) Defaulting tenant has vacated property or steps have been taken to compel him to vacate it; (b) Defaulting tenant is not in occupation of any other property of the person;
(c) All reasonable steps to institute legal proceedings for the recovery of unpaid rent have been taken or there are reasonable grounds to believe that legal proceedings would be useless;
(d) Unpaid rent was included in IFP in the TY in which rent was due and tax was paid on it.
► RECOVERY OF UNPAID RENT: Unpaid rent which was allowed as deduction, is charged to tax if recovered [in year of recovery]

► NO DOUBLE DEDUCTION: Expenditure deducted under IFP is not deductible under any other head
DEDUCTIONS ► DEDUCTIONS NOT ALLOWED (DNA): A deduction not allowed under § 21 under IFB is not allowed under IFP
GENERAL POINTS ► UNPAID LIABILITY: Deduction allowed on accrual basis is added back in income if not paid in 3 years following the year in which it was allowed as deduction. [PAYMENT OF UNPAID
LIABILITY: Allowed as deduction if paid after having been added in income.]

INCOME OF If respective shares → “definite & ascertainable” ► Net rental income is chargeable in each partners’ hands proportionately (not jointly). But if respective shares→ “not” definite & ascertainable
JOINT OWNERS ► Net rental income is chargeable jointly as AOP

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