Letting out of Property and Taxation.
Mohammed Vaid
(Querist) 13 October 2009
This query is : Resolved
I am having 1 residential property in mumbai which i want to let it out. This property is of Landlordship and not of ownership. I want to know can i let out this property, as my CA is saying no? I want to generate some income from it and will show the same in IT returns. Will it attract any kind of Capital gain tax, when i sell it or surrender it to the landlord? Kindly suggest.
JITIN KOHLI
(Expert) 13 October 2009
Mr. Vaid under section 22 of the income tax act, 1961 the retal income is computed of person who is the owner of the property. since you are holding it through landlord you are not its owner in records. since no sub tenancy is possible but sub lease is possible. if you want to grab some money by losing your possesion you may and you income will be included in income from other sources and you will not get benefits of municipal taxes and 30% deduction u/s 24. since it is only for owners. if you sell it or surrender your right that you get a sort of commpensation not any gain in any cappital asset since capital gain is applicable only in capital asset and possesion is not a capital asset so the whole consideration will to chargeable to tax under income from other sources not attract capital gain
Mohammed Vaid
(Querist) 13 October 2009
Many thanks to you Mr. Jatin for your valuable inputs. However, I want to clarify a little more that in our building other tenants are also letting their homes at Rs. 13000/- pm and all fall under landlordship. They pay mere there monthly rent plus 10% of the monthly rent they receive (i.e. 1300/-). Also they enter into Leave and License agreement. Is this proper? If yes, will they allowed to take exemption upto 1,60,000/- Rs. while filing there returns?
Also with regard to selling the homee one of our neighbour sold his home for Rs. 35 lacs. He had given a surrender letter to the landlord on stamp paper and in return the new incoming tenant entered into agreement with the Landlord. Also that outgoing neighbour paid Rs. 3.00 lacs to landlord as Transfer charges (they called it as Bill phiraee). Now on what aount he will be taxed and at what rate?
Manish Singh
(Expert) 20 October 2009
please clarify what do you mean by property owner by landlordship?
anyways according to the query, firstly, if you are just a tenant, the kind of title depends upon the nature of agreement between you and your landlord. it appears that its a lease hold land. in that case you must secure permission of the landlord (not in the case where the lease deed permits you to sub lease it to third party) before sub leasing it to other.
if you surrender your leasehold rights to the owner, the premium deposited by u shall attract capital gains tax.
