Government employee - Rental income

[Asked by Guest]

I AM A GOVENMENT EMPLOYEE AND INTEND TO BUILD A COMMERCIAL COMPLEX( ON MY LAND )AND MAY FETCH A RENT OF RS.14 LAKHS PER ANNUM AND THE INTEREST ON LOAN APPROX WILL BE 4 LAKHS PER ANNUM FOR 7 YEARS. NEED A SUITABLE ADVISE? 1.IF THE COMPLEX IS BUILT IN MY NAME WHETHER THE RENTAL INCOME WILL BE UNDER HOUSE PROPERTY OR BUSINESS HEAD ? 2.WILL IT BE ADVISABLE IF I LEASE THE LAND PROPERTY TO A COMPANY INCORPORATED ( IN WHICH ONLY MY WIFE AND MOTHER WILL BE MEMBERS)WITH THE MAIN OBJECT OF EARNING RENTAL INCOME ( COMPLEX CONSTRUCTED BY THE COMPANY) ? WHICH WILL BE THE BEST OPTION AFTER CONSIDERING BANK INTEREST ,DEPRECIATION AND OTHER TAX PLANNINGS?

As far as Income tax provisions are concerned, unless the assessee is in real estate business, any letting of property (whether for commercial or otherwise) is assessable under the head 'income from house property'. Further, in the instant case, the activity would also attract service tax as the annual rent component exceeds the basic exemption limit Rs.8.00 lakhs.

AI Summary

Rental income classification: letting treated as house property income, with service tax applying if rent exceeds specified exemption.
Letting of immovable property by an individual who is not in the real estate business is assessable under income from house property, with interest on borrowings and other deductions applying; rent receipts may additionally attract service tax if annual rent exceeds the statutory exemption threshold.