income from house property

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karan (Querist)
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01 May 2009 Q1)a refundable deposit cannot be included in rent received or recievable.The notional interest on refundable deposit can form a part of rent received or recievable when it is received to compensate short payment or non payment of rent can u tell me what is notional interest and pls clarify this with suitable example.

Q2)deduction on interest on borrowed capital is available even if neither the principal nor the interest charge on property i didnt understand what does it mean can u clarify this point

thanks in advance :)

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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01 May 2009 you must be reading V.K singhaniya for PCC.

Q1)a refundable deposit cannot be included in rent received or receivable The notional interest on refundable deposit can form a part of rent received or receivable when it is received to compensate short payment or non payment of rent can u tell me what is notional interest and pls clarify this with suitable example.

Answer: some time the house owner wants some securities from the hirer of the house , which may be for various purpose. If such securities is refundable ( i.e. will be refunded after leaving the house or after some time) and the hirer of the house ( who pays the refundable security) without any interest , then notional interest ( i.e. interest on the refundable security at a perventage at prevailing reasonable and normal market rate) can be added to the rent paid, for the purpose of calculating Gross annual value of house property.

The logic is that since the landlord has a deposit with him on which he is not paying any interest. It is assumed that the landlord is charging less rent in compensation of interest free money. So better to make the rent amount at normal level by adding the interest.

[if you need an example, then write me Manmohan.kolkata@gmail.com ]

Q2)deduction on interest on borrowed capital is available even if neither the principal nor the interest charge on property i didnt understand what does it mean can u clarify this point

Some time for taking an assets is given as securities ( called mortgage). It means that the assets are charged against the loan amount. In case the loan is not paid the lender ( who has given loan) acquires the right on the assets.
In the line the author (VKS) want to say that for the purpose of claiming the deduction u/s24(b) interest on loan, it is not necessary that the loan amount (principal or interest) must have charged on assets.
it can be claimed even if the even if neither the principal nor the interest is charge on property

taxindiaconnect

taxindiaconnect (Expert)
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01 May 2009 The short reply to your query is that the refundable security is treated as advance hence is not rent. No TDS is required to be deducted on refundable security u/s 194I.
The notional interest is an interest which on reasonable basis be calculated on the amount of refundable security amount and may be added to the rent being paid. In such a case TDS needs to be deducted.
The interest deduction is available if the loan is taken for the purpose of property from which the rental income is being earned whether the property is charged against it or not.

karan

karan (Querist)
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01 May 2009 thanks u very much friends. I am very much thankfull to solved my query and I am really enjoying this forum. :)

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