Income from Property

Question 1

Withholding vs charging (S155, S15, S39), where not applicable? What will be amount subject to? What is rate

Answer 1

1. Charging (S15) - Land & Building only
2. Withholding from Rent of
   
   1. Income property (chargeable u/S15) &
   2. Furniture & Fixture and
   3. services related to property and
   4. sub-lease (IFOS, S39);

• Income from lease of machinery+building (IFOS) not covered.
• Withholding not applicable where Karayadar (Tenant) Ind/AoP and rent<1.5M or any Malik (Owner) rent less than 200k.
• Amount – Gross rent including any advance rent & N/A security deposit (for NASD Amount/10). Rate from Company-15% of GR, Ind/AoP-slabs.

Question 2

What is rent income for Sec 15 (Real rent or deemed or liability)?

How will value be calculated? &

How will chargeable? paid/accurual

Answer 2

1. Rent for actual occupation/use or right to use occupation;
2. Zabat kiya howa biyana; (only related to) Building,
3. security deposit (not adjustable with rent)/10.

• Amount=higher of FMV or actual (except lease to employee);
• Chargeable on “for the year” basis i.e. advance rent not chargeable.

Question 3

Whose income will be income from property?

Answer 3

Is there any exemption available – Person should be owner of property; Ind/Aop<200k and no other source of income.

Question 4

Is income from property taxed on gross or net (with deductions allowed)

Answer 4

Co-Net basis; Ind/Aop who opt – Net basis; All Others – Gross

Question 5

Rent IFP (Sec 15) vs Rent (Sec 39)

Answer 5

Sec 39-P&M with Building rental, sub-lease, ground rent, rent of amenities connected with building (Furniture & Fixture), Utilities & other service charges related to building. Sec 15 – Other

Question 6

Building constructed on rented/leased land/Plot - What are two rental income and how will be subject to which sections of ITO

Answer 6

Ground rent income of ground-floor (land) owner IFOS (u/s 39), Building rental – IFP (S15)

Question 7

Why Machinery+Building rented together are taxable as IFOS (Sec 39)

Answer 7

To claim IA for machinery & depreciation for machinery and building

Question 8

What deductions available for adjustment against rental of building only and not land

Answer 8

Repair allowance (1/5, 20%) & insurance.

Question 9

How many deductions are available – 10

Answer 9

1. Repair,
2. insurance,
3. property taxes,
4. ground rent,
5. interest on loan for construction/renovation/extension/re-construction,
6. share of rent u/Islamic finance,
7. martgage charge,
8. legal charges,
9. unpaid rent,
10. admin charges actual with ceiling of 6% of rent

Question 10

Repair allowance 2 conditions

Answer 10

1. For building only;
2. whether paid or not

Question 11

Insurance exp. 2 conditions

Answer 11

only for two purposes,

1. damage &
2. destruction

Question 12

Which property taxes allowed 2 conditions

Answer 12

other than IT, whether on property or income

Question 13

Interest exp. on what type of borrowings is allowed & whats condition

Answer 13

All borrowings, condition-mortgage

Question 14

Under Islamic Finance, What is expense allowed for deduction?

Answer 14

Principal not allowed, Share in rent or share in appreciation

Question 15

Mortgage charges 2 conditions

Answer 15

1. for same property;
2. paid basis only

Question 16

Admin expenses 2 conditions

Answer 16

1. All properties (i.e. not restricted to building only),
2. actual with capping of 4% of rent (Gross rent including all 3 types of rent)

Question 17

Legal exp. 2 conditions

Answer 17

1. Only property department or
2. court related to defend title

Question 18

Bad Debts 3 Conditions

Answer 18

1. Bona fide (bhai rehta ho, doubt on bona fide),
2. Legal action taken or not cost effective,
3. Previously included in income and taxed

Question 19

What happens when expenditure Liability > 3 years and to which 2 expenses this does not apply?

Answer 19

add to income.

Does not apply to

1. repair allowance (as allowance) and
2. mortgage (as allowed on paid basis).

Question 20

When income of joint owners will be IFP & when IFB

Answer 20

Rent=IFP not AoP.

When Property is jointly owned, IFP & chargeable in the hands of owners as IFP & not IFB.