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Composite rent

COMPOSITE RENT

I.Meaning of composite rent:

The owner of property may sometimes receive rent in respect of building as well as:

1.Other assets like furniture, plant and machinery.

2.for different services provided in the building, for example-

(a)Lifts

(b)Security

(c)Power back up etc.,

The amount so received is known as “composite rent”.

II.Tax treatment of composite rent:

(1)Where composite rent includes

(i)rent of building and

(ii)charges for different services

then composite rent is has to be split up in the following manner-

(a)the sum attributable to use of property is to be assessed under section 22 as “Income from house property”.

(b) the sum attributable to use of services is charged to tax under the head “Profits and gains of business or profession” or under the head “Income from Other Sources”.

(2) Where composite rent includes rent of building and charges for different services and the two lettings are not separable

(a)then the rent is  charged to tax under the head “Profits and gains of business or profession” or under the head “Income from Other Sources”.

(b)this is applicable even if sum receivable for the two lettings is fixed separately.

(3) Where composite rent includes rent of building and charges for different services and the two lettings are separable

(a)the rent from letting out of building is assessed under section 22 as “Income from house property”.

(b) the rent from letting out of other assets is charged to tax under the head “Profits and gains of business or profession” or under the head “Income from Other Sources”.

(c)this is applicable even if a composite rent is received by the assessee from his tenant for the two lettings.

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