Return filing u/s 44ad

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An individual with commercial property rental income of around £150,000 per annum and GST registration is asking if they can file their Income Tax Return under Section 44AD. The consensus is that while rental income is typically taxed under 'House Property', it can be declared as business income under Section 44AD if renting out properties is considered the individual's primary business activity, especially if it's explicitly stated in their business objectives.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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29 July 2020 Dear Sir,

I am an individual resident and earning rent income from a commercial property of around Rs. 15 lacs p.a. and I am also registered under GST. My turnover is less than 25 lacs p.a. Can I file my Income tax return u/s 44ad.

Please help me in the above matter.

Regards,
Divyesh Jain

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 July 2020 Yes you can file ITR under 44AD.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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29 July 2020 Thanks a lot sir for replying to my query.

CA KARAN SINGH

CA KARAN SINGH (Expert)
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29 July 2020 Yes, you can file return of income u/s 44AD. But if you are not in the business of renting out properties or renting out of properties is not mentioned in your object clause, then it is better not to declare income u/s 44AD.

DIVYESH JAIN

DIVYESH JAIN (Querist)
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29 July 2020 I am filing return on behalf of my client as an individual capacity. Apart from rent income from commercial property he has only pension income.

In this case I feel he is solely in the business of renting out property.

CA KARAN SINGH

CA KARAN SINGH (Expert)
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30 July 2020 Does he have multiple properties or single one?

DIVYESH JAIN

DIVYESH JAIN (Querist)
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30 July 2020 Single property in the name of himself and his wife

CA KARAN SINGH

CA KARAN SINGH (Expert)
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30 July 2020 Sec 44AD is for declaring business income on a presumptive basis. So first of all, the assessee should have income from the business, then only he can declare income on a presumptive basis. And on the other hand rental income is taxable u/h House property. But there are some judgments which says assessee can declare rental income as business income rental income constitutes a major part of his income and object clause in the memorandum clearly specifies the renting out of the property as a business activity. So if your client has a business of renting out properties, then he can declare income u/s 44AD.

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