Fin623 GDB No. 2
Friday, January 21, 2011 Posted In Fin Edit ThisGDB#2
Is rent received in advance for more than one tax year, taxable in entirety(wholly) in the tax year when it is received???
Solution:
According to him only the gross rental income of one year in the tax year is taxable, or the income of second or so on years are the liability of taxpayer
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its an advance rent (can be called security) if advance is for ten years 120000 then it will spread over ten years 120000/10=12000 that is taxable every years up to ten years.
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The rent is an income which is derived from property; it is taxable if received or receivable by a person in a tax year other than rent will be exempt from tax.
Sec 15 (1)
ILLUSTRATION
Say non-adjustable advance rent received Rs. 120,000.
Amount adjustable shall be 120,000/10 = Rs. 12,000 Rs12,000 shall be adjustable for ten years.
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N-1:
Non adjustable amount received by the owner of the building from the tenant shall be treated as rent
chargeable to tax under the head “Income from Property” in the tax year in which it was received and following 9 tax years in equal proportion. Sec16.
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Advance rent received during a tax year is chargeable to tax only to the extent it relates to that tax year. Unadjusted balance of advance rent is chargeable to tax in the following tax year (s) to which it relates.
Non adjustable amount received by the owner of the building from the tenant shall be treated as rent chargeable to tax under the head “Income from Property” in the tax year in which it was received and following 9 tax years in equal proportion. Sec16(1).
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The text of subsection (1) of section 15 of Income Tax Ordinance, 2001 would imply that advance received by a taxpayer would be chargeable to tax in the year of receipt. Subsection (1) has been amended to remove the anomaly whereby income from property including advance receipt would be charged to tax in the tax year to which the income pertain. Sub-section (3A) has also been added in section 15 by virtue of which rent received in respect of provision of amenities, utilities or any other service connected with the renting of the building shall be chargeable to tax under the head “Income from Other Sources” instead of “Income from Property”. Corresponding amendment to this effect has also been made in section 39. The amendment is applicable prospectively.
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Solution:
According to him only the gross rental income of one year in the tax year is taxable, or the income of second or so on years are the liability of taxpayer
.............
its an advance rent (can be called security) if advance is for ten years 120000 then it will spread over ten years 120000/10=12000 that is taxable every years up to ten years.
.......
The rent is an income which is derived from property; it is taxable if received or receivable by a person in a tax year other than rent will be exempt from tax.
Sec 15 (1)
ILLUSTRATION
Say non-adjustable advance rent received Rs. 120,000.
Amount adjustable shall be 120,000/10 = Rs. 12,000 Rs12,000 shall be adjustable for ten years.
............
N-1:
Non adjustable amount received by the owner of the building from the tenant shall be treated as rent
chargeable to tax under the head “Income from Property” in the tax year in which it was received and following 9 tax years in equal proportion. Sec16.
.................
Advance rent received during a tax year is chargeable to tax only to the extent it relates to that tax year. Unadjusted balance of advance rent is chargeable to tax in the following tax year (s) to which it relates.
Non adjustable amount received by the owner of the building from the tenant shall be treated as rent chargeable to tax under the head “Income from Property” in the tax year in which it was received and following 9 tax years in equal proportion. Sec16(1).
..............
The text of subsection (1) of section 15 of Income Tax Ordinance, 2001 would imply that advance received by a taxpayer would be chargeable to tax in the year of receipt. Subsection (1) has been amended to remove the anomaly whereby income from property including advance receipt would be charged to tax in the tax year to which the income pertain. Sub-section (3A) has also been added in section 15 by virtue of which rent received in respect of provision of amenities, utilities or any other service connected with the renting of the building shall be chargeable to tax under the head “Income from Other Sources” instead of “Income from Property”. Corresponding amendment to this effect has also been made in section 39. The amendment is applicable prospectively.
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