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Tax under rent from commercial property

Nikhil Jain (ITA) (36 Points)

06 February 2013

Hello All,

My friend have bought a shop in a mall this year and let it out at rent. His query is :

1.) Whether the amount he paid as 'Stamp Duty' will be considered for Tax Rebate from his total income?
2.) While calculating Total Income from shop, Maintanence and Electricity Installation Amount paid will be reduced from same to get the net income he earned?
3.) Also, the interest he is paying on loan for this property will be considered for Net Income / Profit? For eg. if he is getting 10000 as rent and paying 8000 as Interest to bank, will his net income will be 2000 for calculating Tax?

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3 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 07 February 2013

The tax benefit paid on a property towards stamp duty is available u/s 80C only in respect of residential property. As your freinds property is being used for commercial purpose so he cant avail the benefit of 80C on stamp duty paid for shop.

From the REnt received, the property tax paid would get deducted. On the balance he will be eligible for a standard deduction @ 30% towards expenses incurred for maintaining the property irrespective of whether any expenditure on maintenance is incurred or no.

also the entire interest paid on the loan taken would also be eligible for deduction. Balance amount would get added to total taxable income.

so your income from house property will be as follows:

Rent Received		xxxxx
Less: Municipal Taxes Paid		xx
Net Adjusted Annual Value		xxxxx
Less: Deduction u/s 24
STd Ded @ 30% of NAAV	xxx
Interest paid on Home Loan	xxx	xxxx
Income From House Property		xxxxxxx

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Nikhil Jain (ITA) (36 Points)
Replied 08 February 2013

Dear Sir,

Thanks for your valuable reply.

I have read if we consider this as a House Property, the stamp charges can be used for Tax deduction.I am bit confused in definition of 'House Property'.

Also would like to know if Rent from Shop is 10000 and he is paying a EMI of 15000 on his loan then is this can be considered as a loss (10k-15k=5k) instead of Income?

Also guide me what is the process of not paying TDS at time of collecting rent, instead pay at time of ITR filing.
Thanks !

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 08 February 2013

Wheter the incmoe is from commercial property or residential property it is computed under the head Income from House Property. so there's no need to get confused just becuase the word house is being used.

No you can't straightaway deduct the emi from the rent received. The income is to be calculated as shown by me in my previous post & you will get the deduction of only interest portion of the EMI as shown above. as this is a commercial property yoru freind won't be eligible for deduction u/s 80C for payment of principle on loan taken.

Only in case of self-occupied property for the puropse of residence the interst upto 1.50lacs for the F.Y. can be shown as a deduction from the total taxable income.

You need not worry about the TDS on rent. Only the payer of rent has to deduct tax on the rent paid by him to your freind. If he has not made teh TDS, then the differential tax liability will have to be settled at the time of filing the I-T reutrn. So I think you shud advise teh payer of rent to deduct tax at source in order to avoid any differential tax liabilioty.