Vivek Jalan
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It is now reasonably settled that rental income received from unsold portion of the property constructed by the Assessee Real Estate Developer is assessable as income from house property. However, the question is that whether the Annual Letting Value should be considered immediately after receipt of
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FAQ :
Yes, rental income received from the unsold portion of a property constructed by a real estate developer is generally assessable as income from house property.
Yes, the law provides a period of up to two years from the end of the financial year in which the completion certificate is obtained. During this period, the annual value of unsold flats held as stock-in-trade is considered NIL.
The amendment to Section 23(5) of the Income Tax Act, which introduced the 'cooling period', was made by the Finance Act 2017 and was generally considered applicable prospectively from Assessment Year 18-19 onwards.
The estimated income is calculated at 8.5% of the Annual Letting Value (ALV), and this ALV is considered based on the Municipal Value of the property, not the investment or construction cost.
The law recognises that it may not be possible for a developer to let out a property immediately after it is complete or to sell it as soon as the occupation certificate is obtained, hence the provision for a cooling period.
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