• Rental income from sub-letting property

I have taken my Father's property on lease and paying nominal rent and have constructed building by availing bank loan and have let-out to third party.
Please answer the following:
1) Under what IT Head is sub-let Rental income is chargeable?
2) As per lease agreement between me and my father it is agreed that property tax/ municipal tax will be beard by me.  Can I claim deduction as my expense?
3) Land lord gets 30 % standard deduction, can I claim this also and can I claim interest and principal amount paid by me on loan taken?
4) what other deduction s are allowed? Please advise  lease agreement for 10 years have been made between me and father (owner).
Asked 4 months ago in Income Tax from Bangalore, Karnataka
Dear Sir,

1) Sub-letting income is taxable under the head Income from other sources.
2) Municipal taxes paid by you will not be deductible.
3) No standard deduction of 30% allowed to you.
4) You can claim repair and routine expenses incurred by you for the property otherwise no deduction allowed.

Thanks
Vivek Kumar Arora
CA, Delhi
866 Answers
16 Consultations

5.0 on 5.0

Hi

1. Other sources
2. Yes. You can claim all actual expenses incurred by you including the rent paid to your father.
3. No. All those benefits are only for owner of the property. Since you are not the owner, you can't claim these deductions.
4. Justified expenses in order to earn such income may be allowed.
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

According to Sec. 57  : Deductions from 'Income from Other Sources

The income chargeable to tax under this head is computed after making the following deductions :
 Any other expenses for earning income [ Sec. 57(iii)] :           
if the following 4 basic conditions are satisfied :

i. The expenditure should be incurred solely for earning such income
ii.    it should not be in the nature of capital expenditure
iii.   is should not be in the nature of personal expense.
iv.   is should be incurred in the relevant accounting year.
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

1) Sub let income should be cahrgeable under head "Income from other sources"
2) No, Muncipal tax should be borne by the owner and should be paid by him for claiming the deduction 
3) No 30% deduction is only available to owner 

Vidya Jain
CA, Kolkata
555 Answers
12 Consultations

4.8 on 5.0

This is a litigative point. There may be different opinions.

According to my opinion, these expenses should be allowed as deduction of expenses as it satisfied all 4 conditions of allowability.
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

To your first question:

1. Sub rental income will be charges under Income from Other sources.
2. Yes you can claim the property tax/municipal tax along with the rent you pay to your father as a deduction from the total income.
3. I am afraid, this is not applicable to you. It can only be claimed by the owner of the property.
4. The routine expenses and the justified repairs and maintenance expenses that you will incur which are mandatory to earn the income you derive currently, will be allowed.
Nikhil Khanna
CA, Mumbai
705 Answers
3 Consultations

5.0 on 5.0

There is no maximum limit to the repairs and other costs but it needs to be justifiable and you should be able to substantiate the same with adequate proofs if asked to do so.
Nikhil Khanna
CA, Mumbai
705 Answers
3 Consultations

5.0 on 5.0

Though the Municipal and property tax may still be allowed in spite of the fact that your father pays and you reimburse, but why not make the transaction more simple by you paying yourself from your bank account? 
The interest on loan can be claimed as an expenditure to earn the income.
Nikhil Khanna
CA, Mumbai
705 Answers
3 Consultations

5.0 on 5.0

Dear Sir,

Interest on loan can be claimed as deduction if there will be direct nexus between expense and rental income.
Vivek Kumar Arora
CA, Delhi
866 Answers
16 Consultations

5.0 on 5.0

If your father pays the tax and you reimburse it then it is not borne by the owner. In my opinion it is not allowed deduction to both. 
You can claim on interest on loan as deduction
Vidya Jain
CA, Kolkata
555 Answers
12 Consultations

4.8 on 5.0

Hi,

Answers are as below:

1) Sub-rental income is chargeable under the head Income from Other Sources.

2) Deduction for municipal taxes shall be allowed as it is directly attributable to source of income.

3) You can only claim interest paid on loan taken for construction of property. No standard deduction or principal amount deduction shall be allowed.

4) As a matter of general practice, whatever amount is taxable under the head "income from other sources", any expense which can be directly attributable to the source of income arising, can be claimed and allowed as deduction from that income. However, the same should be in the nature of expense only. Not like payment of principal component of loan or any major repairs or renovation expense carried on the building.

Feel free to revert for any further clarification.

Regards,
Sunny Thakral
CA, Delhi
224 Answers
4 Consultations

5.0 on 5.0

Hi,

1. It will be income under the head other sources.

2. Yes, you can take the deduction.

3. No, you can't get standard deduction. But interest can be claimed as expenditure. 

4. Lease rental paid by you to your father will also be eligible expense.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
2942 Answers
125 Consultations

5.0 on 5.0

Hi,

1. It will be taxable as Income from House Property.
2. Yes, you can claim a deduction of the property tax
3. Yes, you can claim deduction of 30%
4. You can only claim deduction of the interest and principal that you are paying

Repairs cannot be claimed by you separately as you are offering it to tax as Income from House Property.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
23 Consultations

5.0 on 5.0

Hello,

I will need to go through your lease agreement before, to answer your queries. The reply solely depends on the language used in your agreement.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

subletting income is taxed under Income from other sources.
Expenses incurred directly for earning that income can be claimed as deductions.
Standard deduction will not be allowed to you.
Interest on loan can be claimed  by you.
Swati Agrawal
CA, Indore
359 Answers

5.0 on 5.0

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