Rent income - small rent, big security deposit - dilemma

amit shah (senior consultant) (42 Points)

23 January 2014  

Dear fellow CAs - I have interesting situation, and wanted your views

From a let out property, we received 1.2L rent, and 20L security deposit.

Question 1: How do we include income from 20L security deposit. Money used in business.

Property empty for 2 months and let for 10 months. Estimate fair rent for property is 6L annually i.e. above 1.2L received. Section 23a claims annual value is what property would reasonably be expected to let

Question 2: Since property let for 10 out of 12 months, will Section 23c, allow using lower actual rent as annual value, and not depending on fair market value.

Thanks - IT Act sections below!

23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be—
(a) the sum for which the property might reasonably be expected to let from year to year; or

(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause ( a), the amount so received or receivable; or

(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable