Answer to Question #182900 in Economics for RKP

Question

Mr. Karan is a builder in Kolkata. He constructs residential quarters and let them to the employees so that he can carry on the work more effectively. He mentions that this letting down of quarters is an incidental act to the business. Decide the head of income under which such income will be taxable and explain, why? What would be your answer if by letting out of the residential quarter he earns 50000 rupees as rental income and the letting out activity is not incidental to the business, then, how such rental incomes will be assessed to tax? Give reasons for the same  

Answer 1

The income of an assessee in India is governed by the provisions of the Income-tax Act, 1961. The Act provides for five different heads under which the total gross income can be distributed. These heads are: salary, capital gains, house property, income from Business and Profession, income from Other sources.

So, such income will be taxable as house property.

If by letting out of the residential quarter he earns 50000 rupees as rental income and the letting out activity is not incidental to the business, then, such rental incomes will be assessed to tax as income from Business and Profession.