Frequently asked questions

An assessee receives composite rental income for the property, furniture and fixtures, and other services such as lift, security, etc. How will this income be taxed?

If let out property and other assets are inseparable:

Where composite rent is received from letting out of building and other assets (like furniture) and the two lettings are not separable i.e. the other party does not accept letting out of buildings without other assets, then the rent is taxable either as business income or income from other sources, the case may be.

This is applicable even if sum receivable for the two lettings is fixed separately.

If let out property and other assets are separable:

Where composite rent is received from letting out of buildings and other assets and the two lettings are separable i.e. letting out of one is acceptable to the other party without letting out of the other, then

  1. income from letting out of building is taxable under “Income from house property”
  2. Income from letting out of other assets is taxable under the head “Profits and gains from business or profession” or “Income from other sources”, as the case may be.

This is applicable even if a composite rent is received by the assessee from his tenant for the two lettings.

An assessee earns rental income from a property located outside India. Is such income taxable in India?

In case of a resident in India (resident and ordinarily resident in case of individuals and HUF), income from property situated outside India is taxable, whether such income is brought into India or not.

In case of a non-resident or resident but not ordinarily resident in India, income from a property situated outside India is taxable only if it is received in India.

For more information on Residential Status, click here.

For more information on what income is taxable in India, click here.

What is a deemed let out property?

Where the assessee owns more than two properties for self-occupation, then the income from any two such properties, at the option of the assessee, shall be computed under the self-occupied property category and their annual value will be nil.

The other self-occupied/ unoccupied properties shall be treated as “deemed let out properties”.

All provisions relating to a leased property apply mutatis mutandis to the deemed let out property.

Note: The option can be changed year after year in a manner beneficial to the assessee.

The tenant defaulted on payment of rent. Do I still have to pay tax on income I have not received?

Actual rent received should not include any amount of rent which is not capable of being realised.

However, certain conditions are to be fulfilled for claiming such deduction. These are:

  1. the tenancy is bona fide
  2. the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property
  3. the defaulting tenant is not in occupation of any other property of the assessee
  4. the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.