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Urgent Plz query on House Property

Poornima Chakka (Management Traniee) (94 Points)

01 January 2010

Solution needed with sections plz it is the question from CS test paper 2010 series:

An assesse used to file his return of income showing income from rent on receipt basis and was assessed accordingly up to the assessment year 2009 -10. During the financial year 2009-10 he received a sum of Rs. 1,00,000 by way of enhancement for the last 6 years as the Govt department ( tenant) enhanced the rate of rent with retrospective effect, will the sum of Rs. 1,00,000 be taxable in the A.Y 2010 – 11? Can it be spread over the last 6 years? Is there any provisions of tax relief in such cases, like section 89(1) of the income tax Act, 1961? What are the provisions of the act governing such cases?

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17 Replies

shailendra (C.A. FINAL) (189 Points)
Replied 01 January 2010

According to me,

Section 145 has given the option to the assessee to offer the income from PGBP and IOS to tax on mercantile basis or cash basis. In house property income is taxed according to sec 28 i.e the charging section of house property. It is written there that income will be taxed on accrual basis only.

In the present case, Since the income has accrued in F.Y. 2009-2010 only therefore income will be taxable in A.Y. 2010-2011 only.

and relief u/s 89(1) will not be available because sec 89(1) is for salary only and not for IHP.

1 Like

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 01 January 2010

Dear Poornima mam

I guess sec 25B is applicable here as this seems to be arrears of rent...so 30% deduction is available for this and 70% will be included in calculation of house prop income

shailendra (C.A. FINAL) (189 Points)
Replied 01 January 2010

You are correct hareesh......

All the other provisions of I.T. Act will apply as they were applying before. 30% deduction is a part of computation of IHP and it will be allowed accordingly.

Poornima Chakka (Management Traniee) (94 Points)
Replied 01 January 2010

Hareesh

Section 25B is regarding to arrears of rent. but i think present situation is not an arrear and on the other hand it is unexpected additional rent realised. so Section 25B cant be applied.

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 01 January 2010

Oki mam..i thought such amounts either come under 25A or 25 B...here the govt enhanced the rent in this financial year right..with retro effect....

R!tu Ber! (Chartered Accountant) (405 Points)
Replied 02 January 2010

ya the case is not of arrears and i agree that no such provision for HP as in salary so the amount would be taxable in the same year in which payment ias received.

natasha (pcc student) (50 Points)
Replied 02 January 2010

i agree with ritu,there w'll be no deduction and the amt will become taxable

RADHIKA JALAN (agarwal) (1521 Points)
Replied 02 January 2010

hi...........

As per the provisions of the act,Rs.100000 is taxable after granting of statutory deduction u/s.24 i.e. @ 30%........sec.89 relief is not available here since it is applicable only for salary income...............

1 Like

BHAVESH RAJPAL (ARTICLE) (46 Points)
Replied 02 January 2010

QUERY REGARDING SALARY CERTIFICATE (16A)

WHETHER IN SALARY CERTIFICATE , IF EMPLOYEE IS HAVING ANY OTHER INCOME OTHER THAN SALARY, WHETHER IT IS MANDATORY TO BE SHOWN IN 16A

PLEASE REPLY

THANKS.............

Poornima Chakka (Management Traniee) (94 Points)
Replied 02 January 2010

HI Bhavesh,

It is not mandatory to disclose the the other income details to the employer, but if on the discreation the employee can disclose his other income and TDS calculation will be based on the total income. So there is no mandatory to disclose in Form 16A

Amir (Learner) (4016 Points)
Replied 02 January 2010

Dear Poornima,

I Just want to say that UNLIKE PGBP AND OTHER SOUCES, IT IS NOT OPTIONAL TO THE ASSESSE TO OFFER HIS INCOME UNDER HEAD HOUSE PROPERTY TO TAX ON RECEIPT BASIS...CLEAR LANGUAGE USED IN THE SECTION IS RENT RECEIVED OR RECEIVABLE... HENCE IF SOMEONE IS DOING THAT THEN HE IS VOILATING THE PROVISIONS...

FURTHER, THE FACT U HAVE MENTIONED THAT THE INCREASE IN RENT WITH RETRO EFFECT IS NOTHING BUT ARREARS OF RENT AND IT SHALL BE TAXABLE IN THE YEAR OF RECEIPT...

AS FAR AS DEDUCTION IS CONCERNED, 30% CAN BE CLAIMED U/S 24 AS STATUTORY DEDUCTION...RELIEF U/S 89(1) IS NOT AVAILABLE IN CASE OF HOUSE PROPERTY...

Amir (Learner) (4016 Points)
Replied 02 January 2010

Dear Bhavesh, I just want to add what Poornima rightly said that LAW HAS NOT CAST ANY DUTY ON THE EMPLOYER TO INQUIRE ABOUT THE OTHER INCOMES OF THE ASSESSE..

IT IS THE SOLE DISCRETION OF THE EMPLOYEE TO INFORM HIS EMPLOYER ABOUT HIS OTHER INCOMES..AND IN CASE EMPLOYEE DOES THAT THAT THEN THE TDS SHALL BE DEDUCTED BASED UPON THE TOTAL INCOME(I:E INCLUDING OTHER INCOMES)

Max Payne (employed) (2569 Points)
Replied 02 January 2010

Dear Poornima Madam,

Hareesh is correct in saying that the deduction u/s 25B can be claimed. 25B is section inserted to cut a loophple.. where assessee says that rent received pertains to an earlier year and hence cannot be taxed. The assessee is entitled to 30% deduction under this section using the same logic in section 24.

Arrears of rent is different from unrealised rent, for which you are correct in saying sectin 25A applies and no 30% deduction can be claimed - for that the logic is that an unoccuppied property needs no allowance for maintenance and upkeep- see rule 4 which says that the house must be vacated etc.

But pertaining the query you asked about any relief being available, the principle is that the assessee could have offerred an even higher amount as the GAV of the property, say fair rent. If he has subsequently received rent in arrears, then such amount cannot be taxed this year, which he has already offered for tax in an earlier year. For eg, if FV was 30,000 and actual cash realised was 20,000, arrears received Rs.15,000, then only balance Rs.5,000 could be taxable u/s 25B.

And relief u/s 89(1) will not be available.

SRINIVAS SRIRAJ (Chartered Accountant) (130 Points)
Replied 21 January 2010

Dear ALL,

I feel the amount relating to the earlier years even if not considered as arrears in this case, it becomes taxable. Sec.23(1)(b) talks about "received or receivable". That amount has become receivable during the year only and has actually been received also and hence shall be taxed in the normal course without considering the other sections. Pl note that "(a)" talks about "from year to year" and in "b" no reference to year is there meaning that whatever is received has to be considered under that Section. To conclude, if it is considered as arrears, Sec25B shall be attracted and if not Sec.23(b) will be attracted. In both the cases deduction can be availed.