Published On: Fri, Mar 24th, 2017

Dubai Property owned by Indian are subject to Tax as Notional Rent in India

srkBy Accommodation Times Bureau

The Income Tax Appellate Tribunal (ITAT) Mumbai have directed Actor Shahrukh Khan to pay tax on Notional Rent of Villa he owns at Dubai. The ITAT rejects SRK’s contention that under the India-UAE tax treaty, income from immovable property in Dubai would be liable to tax in the UAE.

Income from house property is taxable in the hands of its legal owner in whose name the property stands. „Owner? for this purpose means a person who can exercise the rights of the owner not on behalf of the owner but in his own right. A person entitled to receive income from a property in his own right is to be treated as its owner, even if no registered document is executed in his name. The following three conditions must be satisfied before the income of the property can be taxed under the head “Income from House Property”: ? The property must consist of buildings and lands appurtenant thereto; ? The assessee must be the owner of such house property; ? The property may be used for any purpose, but it should not be used by the owner for the purpose of any business or profession carried on by him, the profit of which is chargeable to tax. If the property is used for own business or profession, it shall not be chargeable to tax. Ownership includes both free-hold and lease-hold rights and also includes deemed ownership.

The annual value of property consisting of any building or lands appurtenant thereto of which the assessee is the owner shall be subject to Income-tax under the head „Income from House Property? after claiming deduction under Sec. 24, provided such property or any portion of such property is not used by the assessee for the purpose of any business or profession, carried on by him, the profits of which are chargeable to Income-tax.

Income from house property is taxable on the basis of annual value. Even if the property is not let out, notional rent receivable is taxable as its annual value. As per Sec. 23(1)(a) the annual value of any property shall be the sum for which the property might reasonably be expected to be let out from year-to-year. In determining the annual value there are four factors which are normally taken into consideration. These are: i) Actual rent received or receivable, ii) Municipal value, iii) Fair rent of the property, iv) Standard rent.

The hon’ble Bench had rejected the claim of SRK that the property tax paid in UAE and according to treaty between Indian and UAE these taxes are not applicable in India.

 


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