Rental income

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amit (Querist)
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07 February 2012 HI.. I AM GETTING 1.5 LAKH RENTAL INCOME PER MONTH . . I WANNA KNOW IF I FORM NEW PARTNERSHIP FIRM WITH PRIMARY BUSINESS OF RENTAL INCOME.. WILL I GET EXTRA TAX BENEFIT OR NOT .. WILL THIS RENTAL INCOME BE SHOWN AS "BUSINESS INCOME" OF THAT PARTNERSHIP FIRM OR BE SHOWN AS "INCOME FROM HOUSE PROPERTY" . .

EVENTUALLY , I WANA KNOW SHOULD I FORM NEW PARTNERSHIP FIRM FOR RENTAL INCOME OR REMAIN SHOW IN INDIVIDUAL.

CA Prashant Gupta

CA Prashant Gupta (Expert)
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07 February 2012 If you form a partnership firm you will loss the benefit of basic exemption limit if you do not have other income.

In case of indiviual, you will get benefit of slab rate, in partnership the flat rate of 30% is applicable, but in partnership you can claim interest and salary to partnership as in limit prescribed in Income tax act.

The rental income will be shown in house property income even if in partnership firm.

CA. Hari Kishan

CA. Hari Kishan (Expert)
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07 February 2012 There has always been a lot of litigation with respect to rental income being offered under Income from Business.. so would advise to offer the same under the head income from house property..

Also should you wish to take a aggresive view you can offer as business income.. however you could do a cost analysis of the total business expenses you would incur vis a vis 30% allowed as standard deduction.

CA. Hari Kishan

CA. Hari Kishan (Expert)
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Prakash Kochar

Prakash Kochar (Expert)
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08 February 2012 A partnership firm can be constituted for earning business income, but not for earning House property income.
Firm having income under any other head will not qualify for deduction u/s. 40(b)if it is assessed as income from house property.
If house property is transferred to partnership firm by regd. document in such case the income will be assessed in hand of firm otherwise income may be assessed in the hand of owner on record.

sivasankar

sivasankar (Expert)
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08 February 2012 Keeping the property under business income is most beneficial because you can claim all expenses as expenditure.But to claim it as business income you have to incorporate the firm before construction which shows your true intention rather than a after thought exercise.We had a similar issue wherein ITO want to treat it as house property but the firm was incorporated before construction begin hence we won the case.

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