CA Paras Mehra
Tax is a financial burden on any person. One cannot do financial planning without considering the tax liability. Every person devotes his time and energy to plan his tax liability but still he doesn’t able to save much as he like’s too. The main reason is because mostly financial planning is done conventionally.
Further, in case of salaried employee, his main income is generally from salary and house property on which he only gets limited tax deductions. To break this anomaly, we present you some loop holes in tax laws from which you can benefit to make your tax liability minimum.
Here are innovate ways to save your tax!
1. Income from house property
Consider the example, suppose Mr A rents his house property to Mr B for Rs.10,000/- per month. Mr A being the owner incurred by following expenditure: Depreciation on house property Rs.1,50,000 (assume cost of house Rs.30 lakhs rate of depreciation @ 5%), insurance Rs.5,000, Repairs and other related expenditure Rs.20,000 etc. (let us ignore interest on borrowing for this example)
Now, let us calculate income as per section 22 for the above transaction
Rent income Rs.1,20,000Online GST Certification Course by TaxGuru & MSME- Click here to Join
Less: Standard Deduction @ 30% Rs.36,000
Income from House Property Rs.84,000/-
All the expenses incurred above are not allowed as deduction when income is computed under the head ‘House Property’
Let us do some tax planning!
The agreement between the lessor and lessee should be drafted in such a way to include a condition. The condition is that “the owner will rent the property to the tenant along with certain facilities like furniture and fixtures, air conditioner etc. and the charges the single rent for the above facilities.”
The reason to include the above condition is to beat the section 22. When the letting of building and letting of furniture and fixture is inseparable then rental income is to be assessed under section 56 i.e. income from other sources and not under section 22. This has been decided by Delhi High court in case of Garg Dyeing & Processing Industries v ACIT (2013) 212 taxmann 160 (Del)
Now, suppose in our example, the agreement is revised to include the above condition and rental income is increased from Rs.10,000 to Rs.12,000.
Let us now calculate the income u/s 56
|Less: Deduction allowed u/s 57|
|Income from Other sources (Loss)||(Rs.31,000)|
This loss can even be set off against salary income.
Therefore, with this simple tax planning, you can curb your tax liability drastically.
(For any feedback, Comment or suggestion author may be reached at firstname.lastname@example.org or at +919654622792, Authotr is Co-founder of www.Quickcompany.in)