treatment of rent from paying guest

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  1. kmonex

    kmonex New Member

    I stay in a flat which is in my name. There is also a paying guest I have kept in the flat. The rent that I take from the pg will it fall under income from house property in IT. Also in my returns do I show the flat as self occupied or rented. pl clarify .Also if you could share any other information that I need to know
  2. ZED

    ZED Well-Known Member

    Yes, as per Sec.22
    The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head "Income from house property".

    Part of the portion will be covered under self occupied and the rented portion would be covered under let out property.
    Though it might be difficult to give this information in ITR-1 , but with other ITR forms you can clearly give these details.

    It would be difficult to tell the other provisions, you will have to provide us with details of specific query. Deduction u/s 24 is the most used section under the head of income from house property, therefore I am citing that for you.

    24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:—

    (a) a sum equal to thirty per cent of the annual value;

    (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

    Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

    Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within five years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed two lakh rupees.

    Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

    Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

    Explanation.—For the purposes of this proviso, the expression "new loan" means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.
  3. kmonex

    kmonex New Member

    Thank you .
    you say it is possible in other itr forms .Can you specify where to mention.
    Also the 2nd name in the flat is of my daughter. Does that mean she is the co owner.
    ? In that case do I need to share the rent for income tax purpose or can she surrender her right to the rent
  4. ZED

    ZED Well-Known Member

    We have to see who actually is in receipt of the rent, if its only you then income would be chargeable only in your hands. Owner is someone who can receive the payment in his own rights. If she does not has right on such rent and only you have it, then FOR THE PURPOSE OF COMPUTING RENTAL INCOME, it would be considered solely as your income.

    Check schedule HP, you will find details of 2 properties, you can give details in that portion

  5. kmonex

    kmonex New Member

    thank you so much zed.
    As I understand from what you have written ,since the rent is being received only by me ,I will have to consider it as my taxable income ,even though she is the 2nd owner. Am I correct?
    Also pl clarify whether the 2nd name in the agreement copy of flat will be considered as a coowner.
  6. ZED

    ZED Well-Known Member

    Let's take a more deeper look.

    Was there a proper rent agreement with the tenant? What was written in it? To whom the rent was payable, only to you or to both of you? Who were the parties to the agreement?
    Clubbing provisions are as such not applicable (on the basis of information available to me)
    A person entitled to receive income from a property in his own right is to be treated as its owner, even if no registered document is executed in his name.

    Yes, since you are the only person in receipt of such income. You can also make a contract wherein its specifically mentioned that all the rent would be received by you.(This is generally done if the rent is to be received only by one person only.)

    Prima facie, yes.
  7. kmonex

    kmonex New Member

    thank you very much zed.very well explained
    ZED likes this.
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