Conversion of HP Income to Business Income

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This discussion explores how an assessee receiving rent from a commercial property, currently shown as Income from House Property (HP), can reclassify it as Business Income (PGBP) to potentially reduce taxes. The advice given suggests declaring lease rentals and maintenance charges under PGBP, using the building's original cost for its value (depreciating the building, not the land), and charging all relevant expenses. No legal changes are needed, and the existing GST registration can continue. Tax audit requirements depend on total receipts exceeding 1 crore.

jamsheed

jamsheed (Querist)

13 December 2021 Assessee has a commercial property against which rent is being received and same is shown as Income from HP but to reduce Taxes he wants to treat it as Business Income. His only source of Income is receiving lease rentals.
He is also having GST Registration for Rental Income and also collecting Maintenance charges.
How to effect the change from HP to PGBP and what shall be the value of Building in such scenario?
Thanks in Advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

13 December 2021 Declare the lease rental and maintenance charges collection under PGBP.
Value of the building will be what actually it costed.
Depreciate building without land.
Charge all expenses.

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jamsheed

jamsheed (Querist)

13 December 2021 Thanks Sir,
Will any legal changes be required or it can start with maintainence of Books of Accounts and Audit if required?
Will same GST registration continue to hold good?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

13 December 2021 No legal change required. Tax audit applicable in case of total receipt exceed 1 crore.
Yes, same GST registration hold good.

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