The following are the details of income provided by Manish, the assessee for the financial year ended 31st March, 2021 : Rental income from property at Bangalore- ₹5,00,000, Standard Rent- ₹4,50,000, Fair Rent- ₹4,80,000

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The following are the details of income provided by Manish, the assessee for the financial year ended 31st March, 2021 : Rental income from property at Bangalore- ₹5,00,000, Standard Rent- ₹4,50,000, Fair Rent- ₹4,80,000. Municipal and water tax paid during the year 2020-21: Current year ₹35,000, Arrears- ₹1,50,000. Interest on loan borrowed towards major repairs to the property: ₹1,50,000. Arrears of rent of ₹30,000 received during the year, which was not charged to tax in earlier year. Further, the assessee furnished the following additional information regarding sale of property at Chennai : Manish's fathers acquired a residential house in April 2005 for ₹1,25,000 and thereafter gifted this property to the assessee, Manish on 1st March 2006. The property, so gifted, was sold by Manish on 10th June 2020. The consideration received was ₹25,00,000. Stamp duty charges paid by the purchaser at the time of registration @ 14% (as per statutory guidelines) were ₹3,38,000. Out of the sale consideration received: On 2nd January, 2021 the assessee had purchased two adjacent flats, in the same buildings, and made suitable modification to make it as one unit. The investment was made by separate sale deeds, amount being ₹8,00,000 and ₹7,00,000 respectively. On 10th October, 2020 ₹10 Lakh were invested in bonds issued by National Highways Authority of India, but the allotment of the bonds was made of 1st February, 2021. Compute Manish's taxable income for the assessment year 2021-22. Cost inflation index: FY 2005-06: 117, FY 2020-21: 301.

Answer & Explanation:

Computation of Total Income and Tax Payable by Mr. Manish Particulars Amount (₹) Amount (₹) Income from house property Gross Annual Value [Higher of expected Rent & Actual Rent] 5,00,000 Expected Rent (lower of Fair Rent and Standard Rent) 4,50,000 Actual Rent 5,00,000 Less : Municipal taxes paid during the year (including arrears) [₹35,000+1,50,000] (1,85,000) Net Annual value (NAV) 3,15,000 Less : Deduction u/s 24 a) 30% of NAV 94,500 b) Interest on loan borrowed for major repair 1,50,000 (2,44,500) Add: Arrears of rent taxable u/s 25A 30,000 Less: Deduction @ 30% (9,000) 21,000 Income under the head House Property 91,500 Capital Gains Full value of consideration as per section 50C, the full value of consideration would be the higher of Actual consideration or 25,00,000 Stamp Duty Value [3,38,000/14%] 24,14,286 Less : Indexed Cost of Acquisition [₹1,25,000*301/117] As per section 49(1), cost of acquisition of the residential house gifted by Manish's Father to Manish would be a cost for which Manish's father acquired the asset. (3,21,581) Less : Exemption under section 54 (8,00,000+7,00,000) Purchase of residential house within the stipulated time (within one year before or two years after the date sale had effected the necessary modification to make it as one house, the assessee would be entitled to exemption under Section 54 in respect of investment in both the flats, despite the fact that they were purchased by separate sale deeds [CIT v. Ananda Basappa (2009) (Kar.)] (15,00,000) Exemption u/s 54 EC [Investments in bonds of NHAI within six months from the date of transfer. Where the payment for bonds has been made within the 6 month period, exemption under section 54EC would be available even if the allotment of bonds was made after the expiry of the six months [Hindustan Unilever Ltd. (2010) (Born.)] (6,78,419) Long Term Capital Gains Nil Total Income 91,500

Topics: Income Tax Act, 1961

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