Income from House Property (Tax act 2023)

This slide is based on one of the heads of income ;income from rent of Bangladesh tax act 2023

1. Income from House Property Dr. Md. Saiful Alam Associate Professor Department of Accounting & Information Systems University of Dhaka

2. Agenda 4/1/2023 Income from House Property 2 Introduction Annual Value Self- occupancy Allowable Deductions Non- assessable Income TDS from House Rent

3. Introduction House Property Let Out Fully (Residential/Commercial) Taxable Partly (Residential/Commercial) Taxable 4/1/2023 Income from House Property 3 Self-Occupied Not-taxable

4. Taxable Income 4/1/2023 Income from House Property 5 Annual Value Less: Admissible Deductions Repairs & Maintenance For Residential 25% of Annual Value For Commercial 30% of Annual Value Other Expenses Less: Allowances Vacancy Allowance Allowance for uncollectible rent Income from House Property XXX XXX XXX XXX XXXX (XXX) (XXX) XXXX

5. Annual Value 4/1/2023 Income from House Property 6

6. Illustration 2 Mr. B. Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the flats in second floor for his own residence purpose. Other flats are let out for residential purpose and monthly rent of each flat is Tk. 8,000. Yearly reasonable rent of the whole house is Tk. 1,600,000. Compute annual value.

7. Illustration 3 [In case of tenant’s burden borne by landlord] Mr. B Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the flats in second floor for his own residence purpose. Other flats are let out for residential purpose and monthly rent of each flat is Tk. 8,000 including Tk. 1,000 for water, gas and electricity bill of the tenant. Yearly reasonable rent of the whole house is Tk. 1,600,000. Compute annual value.

8. Illustration 4 [In case of owner’s burden borne by the tenant] Mr. B. Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the flats in second floor for residence purpose. Other flats are let out for residential purpose and monthly rent of each flat is Tk. 8,000. In addition to monthly rent, tenants also bear municipal tax@ Tk. 10,000 per tenant annually. Yearly reasonable rent of the whole house is Tk. 1,600,000. Compute annual value.

9. Illustration 5 Mr. B. Rahman owns a 5 storied building which is let out to a business house. After deducting taxes, Mr. B. Rahman receives Tk. 1,900,000 annually. Mr. B Rahman is responsible to pay for all gas, electricity and water bills of the tenant which amount to Tk. 80,000 annually. However, as per agreement, the business house is required to pay municipal tax and insurance premium for the building which amounts to another Tk. 180,000. Yearly reasonable rent of the house is Tk. 2,000,000. Compute annual value. [Note: Applicable TDS rate is 5%]

10. Self- Occupancy 4/1/2023 Income from House Property 12 If self-occupied for residential purpose : Annual value is not required to be determined since there is no income from house property and no tax as well. If self- occupied for business purpose : It is assessed under section 28 (Income from business or profession). He is not entitled to claim house rent as deduction u/s 29; however, he can claim depreciation on such property.

11. Allowable Deductions [u/s 25] 4/1/2023 Income from House Property 13 any sum payable to Government as land development tax or rent on account of the land comprised in the property; the amount of any premium paid to insure the property against risk of damage or destruction; where the property is subject to mortgage or other capital charge for the purpose of extension or reconstruction or improvement, the amount of any interest payable on such mortgage or charge ; where the property is subject to an annual charge not being a capital charge , the amount of such charge; Explanation.- The expression ''annual charge'', as used in this clause, includes any tax leviable, in respect of property or income from property, by local authority or Government but does not include the tax leviable under this Ordinance;

12. Allowable Deductions [u/s 25] 4/1/2023 Income from House Property 14 where the property is subject to a ground rent , the amount of such rent; where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital from bank or financial institution, the amount of any interest payable on such capital; Where the property has been constructed with borrowed capital form bank or financial institution and no income under section 24 was earned from that property during the period of such construction, the interest payable during that period on such capital, in three equal proportionate instalments for subsequent first three years for which income is assessable from that property;

13. Allowable Deductions [u/s 25] 4/1/2023 Income from House Property 15 in respect of expenditure for repairs, collection of rent, water and sewerage, electricity and salary of darwan, security guard, pump-man, lift- man and caretaker and all other expenditure related to maintenance and provision of basic services:

14. Non- Assessable Income 4/1/2023 Income from House Property 17 Annual value of the house used by the owner for his personal purpose i.e., for his own residence or for the purpose of his business or profession [u/s 24(1)] Where, the whole or part of the property is let out, a sum equal to such portion of the annual value appropriate to the vacant part as is proportionate to the period of the vacancy of such part [u/s 25(1)(j & k)] Any income derived from house property held under trust or other legal obligation, other than NGO, wholly used for religious or charitable purposes [6 th Schedule, Part A, Para 1(1)]

15. 4/1/2023 Income from House Property 18 Formalities to be followed by the landlord receiving monthly rent more than Tk.25,000 According to rule 8A of Income Tax Rules 1984, in case of let out property if the gross monthly rent exceeds Tk. 25,000 the owner shall have to: (a) Maintain bank account and deposit entire monthly rent directly to the account (Irrespective of part or full of rent is received in cash); (b) Maintain a register about tenants, house rent received from the tenants. According to 267 of the Income Tax Act, 2023, if he fails to do so then penalty may be imposed by the income tax authority @ 50% of tax on house property income or Tk. 5,000 whichever is higher.

16. TDS on House Property [u/s 53A] 4/1/2023 Income from House Property 19 (1) Where any specified person is a tenant in respect of a house property or hotel accommodation, the tenant shall deduct tax from the rent of such house property or hotel accommodation at the rate of five per cent at the time of payment of such rent. Explanation.- For the purpose of this section, "rent" means any payment, by whatever name called, under any lease, tenancy or any other agreement or arrangement for the use of any house property or hotel accommodation including any furniture, fittings and the land appurtenant thereto.

17. TDS on House Property [u/s 53A] 4/1/2023 Income from House Property 20 (2) Where, after the assessment made for the relevant year, it is found that no tax was payable by the owner of the house property or the amount of tax deducted is in excess of the amount payable , the amount deducted shall be refunded ,- if no tax was payable, in full; or if the amount deducted is in excess of the amount payable, to the extent of the excess deduction to the owner of the house property.

18. TDS on House Property [u/s 53A] 4/1/2023 Income from House Property 21 (3) Where the Deputy Commissioner of Taxes , on an application made in this behalf, gives a certificate in the prescribed form to an owner of house property that, to the best of his belief, the owner is not likely to have any assessable income during the year or the income is otherwise exempted from payment of income tax under any provision of this Ordinance, payment referred to in sub- section (1) shall be made without any deduction until the certificate is cancelled .

19. Rate of TDS from house property – According to section 109 of the ITA, 2023, every person mentioned in that section who is responsible for making any payment to the owner of a house property on account of house rent shall deduct tax @ 5% on such payment.

20. Worked examples and solutions Worked example 1: Mr. Mushtaque Ahmed’s house is let out at Tk. 10,000 per month. Income year ended on 30 June 2023. Tenant quitted the house on 31 March 2023 and owed Tk. 20,000 for rent being unpaid. House remained vacant for 3 months during the alterations. The owner claimed the following deductions: Tk. Cost of repairs 15,000 Alterations expenses 30,000 Interest on mortgage 12,000 Fire insurance premium 5,000 Municipal tax 10,000 Legal action to recover unpaid rent which was later realized – Tk. 6,000. Required: Compute his house property income.

21. Interest on mortgage 12,000 Fire insurance premium 5,000 Municipal tax 10,000

22. Specified Persons [u/s 52(2)] 4/1/2023 Income from House Property 27 the Government, or any authority, corporation or body of the Government, including its units, the activities of which are authorised by any Act, Ordinance, Order or instrument having the force of law in Bangladesh; a project, programme or activity where the Government has any financial or operational involvement; a joint venture or a consortium; a company as defined in clause (20) of section 2 of this Ordinance; a co- operative bank; a co- operative society; a financial institution; a Non- Government Organisation registered with the NGO Affairs Bureau 9 [or a Micro Credit Organisation having licence with Micro Credit Regulatory Authority]; a school, a college, an institute or a university; a hospital, a clinic or a diagnostic centre; a trust or a fund;

23. Specified Persons [u/s 52(2)] 4/1/2023 Income from House Property 28 a firm; (xiia) an association of persons;] a public- private partnership; a foreign contractor, a foreign enterprise or an association or a body established outside Bangladesh; any e- commerce platform, not being any other specified persons, called by whatever name having annual turnover exceeding Taka one crore; hotel, resort, community center and transport agency having annual turnover exceeding Taka one crore; an artificial juridical person;

24. Thank you Dr. Md. Saiful Alam, FCMA [email protected]