Pvt ltd co having only rental income .

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2013 Hi ,
There is a private limted company which has only Income from house property (Rental ).
Does one show ones expenses in the return . Also can the director have remuneration that year to be reflected in accounts etc ?
THANKS.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

11 August 2013 If the Directors are paid remuneration show it in the P&L A/c along with other expenses and rental income.
.
Head of Income does not changes the accounting aspects.
.

Querist : Anonymous

Querist : Anonymous (Querist)

12 August 2013 Thank you for your reply . The main thing is as the pvt ltd company has no business that year hence there can be P/L A/C but any loss reflected there cannot be adjusted in the income tax return as there is no business that year . No expenditure with repect to business can be adjusted that year.
Hence P/L A/C as per income tax PAYMENT is meaningless because income from house property is 30% deduction etc etc .
Thus anything in the P/L A/can we show in the B/S ?.Please enlighten ?

Upgrade to CAclubindia Pro. Subscribe Now!

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

10 August 2024 For a private limited company that has only rental income and no business activities, here's how to handle the accounting, tax return, and reporting:

### **1. Accounting and Financial Statements**

**1.1. **Profit and Loss Account (P&L Account)**
- **Rental Income:** All rental income should be shown under the "Income from House Property" section of the P&L Account.
- **Expenses:**
- **Direct Expenses:** You can include direct expenses related to earning rental income, such as property maintenance, repairs, property taxes, and insurance, in the P&L Account.
- **Administrative Expenses:** Administrative expenses like directors' remuneration, legal fees, and audit fees are also allowable. These should be shown in the P&L Account as part of the company's expenses.

**1.2. **Balance Sheet (B/S)**
- **Assets:**
- **Fixed Assets:** The property from which rental income is earned should be shown under fixed assets in the balance sheet.
- **Receivables:** Any rent receivables should be shown under current assets.
- **Liabilities:**
- **Current Liabilities:** Any outstanding expenses or liabilities related to property maintenance or other expenses should be shown under current liabilities.
- **Equity:** Retained earnings or reserves should be shown under the equity section, reflecting the accumulation of profits or losses.

### **2. Income Tax Implications**

**2.1. **Tax Return Filing**
- **Income from House Property:** Rental income is taxable under the head "Income from House Property" as per the Income Tax Act. This income should be reported in the tax return.
- **Deductions:** Under Section 24 of the Income Tax Act, you can claim a standard deduction of 30% on rental income. Additionally, you can claim deductions for property taxes and interest on loans taken for property acquisition.

**2.2. **Expenses Reporting**
- **Allowable Expenses:** Expenses related to the property (e.g., repairs, maintenance) can be claimed against the rental income. Administrative expenses (including directors' remuneration) can also be claimed as per the provisions applicable to income from house property.

**2.3. **Director's Remuneration**
- **Allowability:** Remuneration paid to directors is an allowable expense and should be included in the P&L Account. It will be considered while computing taxable income. Ensure that the remuneration is within the limits prescribed by the Companies Act, 2013, and is properly documented.

### **3. Losses and Business Income**

**3.1. **Non-Business Income**
- **Business Losses:** Since there is no business activity, business losses cannot be carried forward or set off against rental income. Only rental income-related expenses are allowable.
- **Income from House Property:** Any loss under the head "Income from House Property" (after claiming deductions) cannot be set off against other heads of income.

**3.2. **Presentation in P&L and B/S**
- **P&L Account:** Reflect all rental income, allowable expenses, and directors' remuneration in the P&L Account.
- **Balance Sheet:** Show fixed assets, receivables, payables, and retained earnings in the balance sheet. Ensure all entries are correctly made to reflect the true financial position of the company.

### **Summary**

- **Expenses Related to Rental Income:** Can be included in the P&L Account.
- **Director's Remuneration:** Allowed and should be reflected in the P&L Account.
- **Losses:** Business losses cannot be set off against rental income.
- **Presentation:** Ensure accurate presentation of rental income and related expenses in the financial statements.

For specific accounting treatments and tax implications, consulting with a professional accountant or tax advisor is recommended to ensure compliance with relevant laws and regulations.