• Income from house property/presumptive turnover

Hi- My only source of income is Income from House Property. As till date, when filing returns, I used to use the 30% deduction and compute tax on the balance 70% of Income. Since my income is less than 2 (crore), can I opt for presumptive turnover. (I will not claim the 30% deduction but rather compute my income as 8% of turnover). Would like to know if presumptive turnover applies to Income from house property and if it can be tested under Section 44D. Opinions will be really appreciated and welcome. If anyone has come across such a case, i would like to hear your opinion. Thank You.
Asked 1 year ago in Income Tax from Chennai, Tamil Nadu

There are many case laws where various court has decided that one can claim rent income as business income only if they have a business of similar nature i.e. developer and builder and they mention the same in their object clause rest all have to show rent income under the head house property income.

Also section 44AD is for business and since renting is not your business unfortunately you will have to show such income as income from house property.

Suppose we assume that you will take renting as your business then section 44AD says that one can claim either 8% profit or higher and since you are doing renting business there is no expense that you need to incurr in that and in such case assessing officer would ask you to show higher profit and you would also not get any benefit of 30% deduction also you can be asked to pay penalty.

So it's better to file and show such income under income from house property and take benefit of 30% deduction rather than showing it under incorrect head.

Hope you will find the above answer helpful if you do please give a 5 rating and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
2291 Answers
19 Consultations

5.0 on 5.0

A person engaged in business or profession can avail the opportunity of presumptive taxation.

Bharat Poplani
CA, Zirakpur
56 Answers

4.9 on 5.0

Hi,

Practically, it will be challenged by income tax authorities. Since, you have shown the income under house Property in past years, it is not advisable to show it under the head business profession.

Using 44AD for the same is again debatable.

Also, let us know the use if building in detail.

Abhishek Dugar
CA, Mumbai
3576 Answers
173 Consultations

5.0 on 5.0

Dear Sir,

Hope you are doing well !

At the macro level, property income is considered as income from house property if the property is not used by the owner for business or professional purpose. Secondly, the owner is not earning his living or main business is not to let out property.

As per my understanding, the definition of main business means “source of living”. In your case if you are earning your living from the house property income then it can be treated as business income. But it is subject to litigation.

It is advisable that you should show as an income from house property.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
3244 Answers
41 Consultations

5.0 on 5.0

Hi

44ad is applicable for business income only,and if renting is your only sources of income and main source of income then it can be declared as business income.

But it is not advisable to show rent income as your business income under presumptive tax scheme.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

Hi,

My suggestion is not to use presumptive turnover for declaring Income from house property. If your only source of income and livelihood is this, you may consider this as business income but since you have declared income from house property in the past years, suddenly changing into business income will be questionable.

Hope that clarifies your query.

Regards,

Nikhil

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Section 44AD applicable for business . There is separate head for calculating income from house property in my opinion it is not acceptable to opt 44AD & declare 8 or 6 % profit . you show it under house property income claim 30 % + any interest & statutory due on it.

Nitin Jain
CA, Jaipur
128 Answers

4.7 on 5.0

Hi,

It is house Property income and not business income. Accordingly, you can't use section 44AD for this income.

Practically also, ince tax authorities will most likely challenge the use of 44AD in case of this kind of income.

Lakshita Bhandari
CA, Mumbai
3848 Answers
190 Consultations

5.0 on 5.0

44AD is applicable only in case of trading. And business profession income

It can be calculated for rental income.

Vidya Jain
CA, Kolkata
731 Answers
18 Consultations

4.8 on 5.0

Hi,

- Only assessee engaged in business can only avail presumptive benefit. If you are engaged in the business of letting out of property and your primary income is from letting of house property then you can avail the benefit of presumptive taxation otherwise you need to show it as income from house property.

Thanks

Vivek Kumar Arora
CA, Delhi
3221 Answers
166 Consultations

5.0 on 5.0

Dear Sir,

It will be treated as business income but subject to litigation.

I would suggest show it under house property income only.

Karishma Chhajer
CA, Jodhpur
1375 Answers
8 Consultations

5.0 on 5.0

Hi,

Option for Presumptive Taxation is available only for Income from Business / Profession. It is not available for Income from Property.

To be able to consider House Rent Income as Business Income, you should be regularly buying houses and letting it out. Only then you can say you are in the Business of letting out houses

Pradeep Bhat
CA, Bengaluru
477 Answers
39 Consultations

5.0 on 5.0

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