1)A person has leased out commercial property @ Rs 30000/- per month. Rent is received after TDS deduction @ 10% = Rs 27000/- per month. What would be the taxable income and net tax payable with regard to this rent received? Please help and elaborate with calculations if possible. Also provide any ways of tax planning/saving regarding the same. 2)Is there any difference between computing tax on rental income from residential property and rental income from commercial property? Do they both fall under the same head "Income from House Property"? 3)How does one differentiate Residential Property from Commercial Property? What are the documents which show the difference between the two? 4)Is there any possibility that rental income from such a simple lease agreement can tantamount to profits/gains/income from profession or business? The assesee, who has given the property on rent, is a retired semi-literate person and is not involved in the activity going on in the leased premises.
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Deductions available from income from commercial property
Rental income arising from commercial property is also requried to be charged under the head Income from House Property. You would deductions on account of Municipal taxes paid during the year from the gross rent received. On the balance a Std Ded of 30% would be deducted on account of expenses incurred on maintenance of the property irrespective of the expenditure incurred. If you have taken any loan for the property then the interest paid would also get deducted. However if the owner is a senior citizen and his only income is of lease rent then there would be no requriement of making TDS as it would fall below the exemption limit. So he will be requried to submit the certificate to the deductor not to deduct tax.
Residential property means the one used for residential purpose only & commercial property means th eproperty used for carrying on business of the person paying the lease rent to the owner of the property.
Even if the assessee is carrying on the business of leasing out properties then also the income would be chargeable under the head Income from House Property as per Court Rulings.
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