DIRECT TAXES
| How property income is taxed Mon, 06 Dec 2010 |
| The Hindu Business QUESTION: What are the proposals regarding assessment for income from property? ANSWER: The ad hoc deduction, which is being allowed at 30 per cent for repairs, maintenance and collection charges will get reduced to 20 per cent under the Code. Where the property is used for business, no income is inferred under the present law, but Sec. 24(5) exempts only the income of a property used by the owner as hospital, hotel, convention centre, cold storage or special economic zones. The limitation of exemption for such prescribed use is not understandable, since only the actual income from property could be computed as property income with reference to gross rent as reduced by the ad hoc deduction and interest on borrowed capital. Gross rent has been defined under Sec. 26 of the Code as an amount of rent received or receivable directly or indirectly for the financial year or part of the year for which such part is let out. It has been understood that only actual rent for which it is let out would be taken as rent, whether it is received or not, so that the adoption of the notional rent, which the property would fetch, if it is higher than the actual rent as under the present law, has been dropped, which is a welcome reform. Interest against self-occupied property is limited to Rs.1.50 lakh as under the present law, but treated as a tax incentive under Sec. 74 of the Code, so that a loss from property now possible, where interest exceeds the notional income, will no longer be available, if the Code becomes law. S. RAJARATNAM |
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