Interest on refundable rental deposit is assessed under Income from House property,
and not income from other sources
True or false?
7 Replies
Chintan Shah
(-)
(534 Points)
Replied 27 February 2010
Dear .....,
Section 23 defining annual value (which is taxable under IHP under section 22 ) nowhere specifies any interest on refundable deposit as forming part of Annual value which is taxable under income from house property under section 22. Hence such interest will not be taxable under IHP but under IFOS u/s 56.
Regards
Chintan
Amir
(Learner)
(4016 Points)
Replied 27 February 2010
Bhai,
Deposit is given by tenant to Landlord & therefore Interest, if any, will be paid by the Landlord to the tenant.........
Therefore For tenant it will be assessed as PGBP/Other sources depending upon the facts...
Even If we assume that Deposit is made by Landlord to Tenant, then what Chintan bhai said is correct that what is taxable under House Property is Annual Value........Therefore it will be assessed as IFOS
C.Balaji
(Learner)
(1867 Points)
Replied 27 February 2010
Dear friend......
Deposit given by Tenant to Landlord........Refundable deposit - interest generated .......
It will be shown as Other source income .....
Land lord cannot claim the interest paid as deduction in HP income.....
Prasad R
(CA Final)
(2128 Points)
Replied 27 February 2010
I agree wid Balaji Interest on refundable deposit will be taxable under the head Income from other sources.
Regards
Prasad R
NANDINI MASAND
(learner )
(330 Points)
Replied 28 February 2010
if deposit given by tenent............then income from other sources...
if deposite given by landlord........then income from pgbp /income from other sources
Ashish Kukreja
(CA Final Student)
(587 Points)
Replied 28 February 2010
I agree wid amir and chintanshah..
but how can u assume that refundable rental deposit is given from tenant to landlord means deposit is first made by landlord to tenant and then tenant paid back rental deposit with interest to landlord..It is totally wrong.Clear ur concepts first..Nowehere in India happens like this..
Landlord asks for a deposit from tenant before giving him on rent and after completion of lease period mentioned in rent agreement,the lanlord pays back the deposit to tenant with interest agreed between them at the time of entering into a contract.
It will be assessed as IFOS for the tenant.
Ashish Kukreja
(CA Final Student)
(587 Points)
Replied 28 February 2010
In most cases security deposit paid by tenant is free of interest ,, so don't worry 
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