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Unit 11: Taxation Planning

b. Income from letting-out machinery, plant, furniture or buildings on hire if they are not Notes
chargeable to tax under the head profits and gains from business or profession.
c. Interest received on a tax refund.

d. Ground rent.
e. Royalty.
Directors fees from a company.

11.6 Tax Planning of Income from House Property

The annual value of a property, consisting of any buildings or lands appurtenant thereto, of
which the assessee is the owner, is chargeable to tax under the head ‘Income from house property’.
However, if a house property, or any portion thereof, is occupied by the assessee, for the
purpose of any business or profession, carried on by him, the profits of which are chargeable to
income-tax, the value of such property is not chargeable to tax under this head. Thus, three
conditions are to be satisfied for property income to be taxable under this head. These are:
1. The property should consist of buildings or lands appurtenant thereto.
2. The assessee should be the owner of the property.

3. The property should not be used by the owner for the purpose of any business or profession
carried on by him, the profits of which are chargeable to income-tax.

11.6.1 Exempted House Property Income

Some incomes from house property are exempt from tax. They are neither taxable nor included
in the total income of the assessee for the rate purposes. These are:
1. Income from a farm house [section 2(1A) (c) and section 10(1)].
2. Annual value of one palace in the occupation of an ex-ruler [section 10(19A)].

3. Property income of a local authority [section 10(20)].
4. Property income of an approved scientific research association [section 10(21)].
5. Property income of an educational institution and hospital [section 10(23C)].
6. Property income of a registered trade union [section 10(24)].

7. Income from property held for charitable purposes [section 11].
8. Property income of a political party [section 13A].
9. Income from property used for own business or profession [section 22].
10. Annual value of one self occupied property [section 23(2)].

11.7 Tax Planning of Business Income

The income from business and profession is known as profit and gains. While calculating the
profit and gains, we deduct various expenses from it. The expenses to be deducted for calculating
the gain are defined in the income tax act. Sections 30 to 37 cover expenses, which are expressly
allowed as deduction while computing business income, sections 40, 40A and 43B cover expenses
which are not deductible.

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