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House property tax deduction

MANJULA (Article assisstant) (103 Points)

09 March 2014

If the House Property tax is borne by the Tenant can it be given as a deduction in his hands of the tenant.

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SURESHAN K (Auditor) (189 Points)
Replied 09 March 2014

It is permissible deduction in the hands of "landlord" (not tenant) if he actually pays:

Please see the extraction of relevant Section:

23. (1) For the purposes of section 22, the annual value of any property shall be deemed to be—

(a) the sum for which the property might reasonably be expected to let from year to year; or

(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or

(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable :

Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.

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MANJULA (Article assisstant) (103 Points)
Replied 09 March 2014

Thank's but what is the case of Tenant making the payment can he claim the deduction in the hands of Tenant

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 09 March 2014

Dear manjula in this case tenant cannot take such deduction under income from house property but if he is doing business in that premises than it is an allowable expense in business. The tenant should show the property tax expenses in p&l which will be allowed. For landlord such amount (property tax paid by tenant) will be added in rental income and then deduction will de given from that income to him. I hope now the ans is clear to you. regards

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SURESHAN K (Auditor) (189 Points)
Replied 09 March 2014

Property tax can only be paid in landlord's name. Hence, tax paid on behalf of landlord cannot be allowable expenditure in the hands of tenant.

However, if agrement is drafted in such a manner that property tax also form part of consideration as rent but to be paid to local authority not to landlord, I think it can be claimed as rent paid..

where as in the hands of landlord, rent should be inclussive of property tax.

wait for more replies...

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