Government employee - Rental income

[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?

AI Summary

Government Employee's Rental Income: 'House Property' or 'Business'? Tax Implications and Service Tax Details Explained. A government employee plans to build a commercial complex on personal land, expecting rental income of Rs. 14 lakhs annually, with a loan interest of Rs. 4 lakhs per year. They seek advice on whether the rental income should be classified under 'house property' or 'business' for tax purposes, and if leasing the land to a family-owned company would be beneficial. A respondent advises that unless involved in real estate business, rental income is typically taxed under 'income from house property.' Additionally, the rental income would attract service tax since it exceeds the Rs. 8 lakh exemption limit.