09 February 2024
Property purchased by the Private limited company through Bank loan. The company business is trading. So property rent comes under house property income. So Interest on loan can be deducted under rental income without any limits. My doubt is if house property income result in loss that can be deducted in income from business income of the company or not. For example If house property loss occurs for Rs.200000/- and company business income head results Rs.100000/-.Company net income results in loss Rs.100000/- is it right.
10 July 2024
In the scenario you've described, where a Private Limited Company has purchased a property using a bank loan and earns rental income from that property, here’s how the taxation and treatment of losses work:
### 1. Treatment of House Property Losses:
- **House Property Loss**: If the rental income from the property is less than the interest paid on the loan (resulting in a loss from house property), this loss can be set off against other heads of income under the Income Tax Act, 1961.
- **Set-off Against Business Income**: Yes, the loss from house property (in your example, Rs. 200,000) can be set off against income from other heads, including business income. This means that if the business income is Rs. 100,000, the company can set off the house property loss against the business income.
### 2. Calculation of Net Income:
- **Net Income Calculation**: - Business Income: Rs. 100,000 - House Property Loss: Rs. 200,000 (assuming this is the loss after considering interest deduction) - Net Income (Loss): Business Income - House Property Loss - Net Income (Loss) = Rs. 100,000 - Rs. 200,000 = Rs. -100,000
- **Resulting Loss**: If the net income calculation results in a loss (negative figure), it means the company has incurred an overall loss for that financial period. In your example, the company's net income would be a loss of Rs. 100,000.
### 3. Tax Implications:
- **Set-off and Carry Forward**: - The loss of Rs. 100,000 can be set off against other taxable incomes of the company, such as income from trading activities. - If there is still a loss after setting off against other incomes, the remaining loss can be carried forward to future years (up to 8 assessment years) to set off against future profits under the same head of income (business income).
### Conclusion:
Yes, based on the tax laws in India, a Private Limited Company can set off losses from house property (rental income) against income from other heads, including business income. Therefore, if the house property income results in a loss of Rs. 200,000 and the business income is Rs. 100,000, the company’s net income for the year would result in a loss of Rs. 100,000. This loss can be utilized to reduce taxable income from other sources, ensuring that the company optimizes its tax position within the framework provided by the Income Tax Act.
For precise tax planning and compliance, especially when dealing with losses and set-offs, it’s recommended to consult with a qualified tax advisor or chartered accountant who can provide guidance tailored to the specific circumstances of the company and ensure compliance with tax regulations.
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