• Rental income under income from business head

Hello Sir/Madam,

I leased out my property to a dealership of KIA motors and earned rental income of 45,00,000 INR during financial year 2021-22. The tenant has already deducted 10% of 45L, which is 4.5L towards TDS and the same has been deposited to government's account. The transaction is getting reflected on my form 26as.

The leased out property when handover to them had couple of temporary sheds, they built a couple of RCC based rooms underneath the pre-exisiting temporary sheds and we are paying property tax as per GHMC's calculations.

Now my question is, can i declare rental income of 45L as income from business and declare 35-40% of the total rent as net profit under 44AD? For instance, if i consider around 40%, my income from business would be 18L and if i add my income from other sources (primarily salary), there wont be any extra liability compared to what i already paid.

if i declare rental income under house property and claim standard deduction of 30%, my tax liability is close to 2.5L. So, my accountant insisted me to take a chance and declare rent income as business income but i am not sure whether it is legal or kind of a gamble? 

your inputs on this is appreciated

Asked 10 months ago in Income Tax

It would be treated as Income from house property only.

Vivek Kumar Arora
CA, Delhi
4599 Answers
896 Consultations

5.0 on 5.0

Dear Sir,


Hope you are doing well !!


It would be considered as income from house property only.



Payal Chhajed
CA, Mumbai
5182 Answers
264 Consultations

5.0 on 5.0

Yes you can declare the amount as business income but then there would be two issues.


1. Later when you sell the property it will be always short term capital gain under section 50 and you will not get benefit of indexation also depreciation will be charged on property.

2. Further, you will have to pay capital gain tax on conversion of fixed asset into stock in trade.


Also, if you don't have any actual expense it might lead to scrutiny and addition as undisclosed income.


Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4149 Answers
82 Consultations

5.0 on 5.0

It should ideally be House Property as it is not your business to rent the properties.

Prerna Peshori
CA, Pune
137 Answers
2 Consultations

5.0 on 5.0

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