Taxation of Commercial property

Taxation of commercial property can arise under two heads:

1. Rental income from commercial property
   • Generally taxable under ‘Income from House Property’ if simply let out.
   • Standard deduction @ 30% u/s 24 is available.
   • Interest on loan is also allowable subject to conditions.
   • However, if the property letting is part of business activity with substantial services, income may be taxable as Business Income.
2. Sale of commercial property
   • If held for more than 24 months → Long-Term Capital Gain (LTCG).
   • Indexation benefit is available where applicable.
   • LTCG can be saved by claiming exemptions:

   (a) Section 54F

   • Exemption available if net sale consideration is invested in ONE residential house property.
   • Applicable only if taxpayer does not own more than prescribed residential houses on date of transfer.

   (b) Section 54EC

   • Investment in specified capital gain bonds (REC/NHAI etc.) within 6 months, up to prescribed limit.
3. Purchase of land/plot only
   • Mere purchase of plot/land generally does NOT qualify for exemption u/s 54F unless residential house construction is completed within prescribed time limits.
4. Commercial property meaning
   • Shops, offices, godowns, showrooms, commercial complexes, business establishments etc. are generally treated as commercial properties based on approved usage/local authority classification.