A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
Thanxking You'll in AdvanceDear Sir/ Madam,
A property under redevelopment fetches Rs 100 per member.Of which Rs 30 is corpus and the balance is Rs 70 that is the rent component spread over 3 years for the rehabilitation that the flat owners will have to manage with.
a)Since the Rs 30 is given in lieu with a vision that the tax rates/ maintenance will be higher once the owners move into the new construction, should it be in the first place considered as a source of income and taxed as it bound to perish and hence is an estimated expense?
b) Wrt Rs 70, why would this attract tax if its a provision paid in advance and will be distributed over the 3 years?
In any and both the cases mentioned,there is no gain at all and hence the capital tax gain or short term tax again should not be applicable as there is no sale of plot/propert at all.Its purely a trade-off and I will seek your expert advice in this case as we are undergoing a circustance quoted above.
20 July 2024
Based on your query regarding the corpus fund and rent component received from the property under redevelopment, here are the considerations:
**Corpus Fund (Rs. 30 per member):** 1. **Nature of Income:** The corpus fund of Rs. 30 per member is generally treated as a capital receipt rather than income for tax purposes. This is because it is not earned through regular business activities but rather represents a contribution towards the trust's capital base.
2. **Tax Treatment:** Since it is a corpus fund, it should not be considered as income and hence should not be taxed. Corpus funds are typically used for specific purposes like investment or long-term financial stability of the trust, and they do not result in profit or gain.
3. **Audit Perspective:** As an auditor, you should ensure that the corpus fund is appropriately accounted for in the financial statements under the capital section, not under income. Ensure that the trustees' handling of the corpus fund complies with the trust deed and legal requirements.
**Rent Component (Rs. 70 per member over 3 years):** 1. **Advance Provision:** The Rs. 70 per member over 3 years is a rent component spread out in advance. This amount represents an advance received for future services (rehabilitation) and is not taxable as income immediately upon receipt.
2. **Tax Implications:** Typically, such advance payments are recognized as income over the period to which they relate (in this case, over the 3-year rehabilitation period). Therefore, the tax liability on this amount arises gradually as the services are provided, not at the time of receipt.
3. **Audit Considerations:** Ensure that the advance received is appropriately disclosed in the financial statements under liabilities or advance income. Verify the accounting treatment to ensure it complies with accounting standards and reflects the income recognition principle correctly.
In summary, the corpus fund of Rs. 30 per member should not be treated as income for tax purposes but rather as a capital receipt. The rent component of Rs. 70 per member, being an advance for future services, should be recognized as income over the period to which it relates. Proper accounting and disclosure of both these items are crucial for compliance and transparency in the financial statements of the trust.
If you have specific details or additional aspects to consider, feel free to provide more information for further clarification.
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