Income From Property Chapter- 08
Land or
building:These terms are also not defined in the ordinance; however, considering the generic
meaning, we can say that it may include followings:
Land Open Plots, playgrounds, gardens, Buses stand, cattle sheds etc.Building (^) The building includes open air theatres, swimming pools, stadiums, residential
houses, building let out for office use, or for storage or for use of a factory, music
halls, theatre hall, inns, lecture halls and other public auditorium used for cinema and
stage shows.
Rent chargeable to tax includes:
(i) Actual rent received or receivable (including forfeited deposit) by a person or fair market rent
whichever is higher. ADD
(ii) 1/10TH of non adjustable advance (if any) [U/s 16(1)].
Fair market value (rent) [U/s 68]
(a) Fair market value (rent) means the value of any property, rent, asset, service, benefit or
perquisite at a particular time shall ordinarily fetch on sale or supply in the open market.
(b) FMV other than the price of immoveable property shall be determined by CIR even where it is not
determinable for income tax purposes.
(c) Notwithstanding anything contained in this section, the fair market value of immovable property
shall be determined on the basis of valuation made by the Board and notified in the official
Gazette from time to time.
Example On the first day of July 202 2 , Mr. Kaleem rented out his house at a monthly rent of
Rs.15,000 and also received Rs.100,000 as advance not adjustable against rent. Compute rent
chargeable to tax for the year.
Solution:
Rs.
Annual rent (15,000 x 12) (Higher of actual rent or FMR) 180,000
Add: 1/10th of advance not adjustable against rent (100,000/10) 10,000
Rent chargeable to tax 190,000
Example: On July 1st, 20 22 Mr. Kaleem received Rs. 60,000 as advance from Mr. Faheem under a
contract of sale of his property for Rs. 600,000. After 2 months Mr Faheem failed to pay the remaining
amount and advance of Rs.60,000 was forfeited by Mr. Kaleem. Compute income of Mr. Kaleem
chargeable to tax under the head “income from property” for the tax year 20 23.
Solution:
Rs.
Advance deposit forfeited treated as property income 60,000
Rent Chargeable to Tax 60,000
Self Hiring of property: Where property owned by employee and after taking on rent from employee
by employer given the same for accommodation to employee [U/s 15(5)]
Where the employee is the owner of the property and FMV of accommodation has been included in
the salary income of the employee then actual rent shall be included under the head property income
without comparing it with the FMV of rented premises.
Example: Mr. Asif has received Rs. 30,000 as monthly basic salary from his employer. The
accommodation facility has also been provided by the employer. The accommodation is actually been
in the ownership of the employee.
You are required to compute the income from salary and property income for the tax year 202 3 under
the following situation.
Assuming that the actual rent of accommodation is Rs. 200,000 and FMV of the rented premises is
Rs. 250,000.