Income From Rent

What is income from rent

1. Any asset’s rental value less allowable expenses
2. If rents come from business then it will be regarded as
business income not rental income.
3. Any sort of rental income will be regarded as rental
income. Such as rent from tenants, business, so on.
Property means house property, land, furniture, fixture,
factory building, business premises, machineries, personal
vehicle and any other real assets that can be rented.

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 Scope and
Conditions Legal owner, Joint
owner
Income from rent less
admissible expenses
Residential and
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commercial purpose 3
 Rent
• Giving right to use the property for a specified period of time without sacrificing the
ownership right;
• Irrespective of the ownership of the asset, it does not include the rent provided by
• Any schedule bank;
• Any investment bank;
• Any development financial institution or mudaraba or leasing company to others.

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 When the house property is owned by more than one individual

a) When the share of individual ownership of the house property is certain and specific– then
the proportional (at that specific rate) income from that house property will be added to the
individual’s income;
b) When the share of individual ownership of the house property is not specifically determined
– for the purpose of determining income from rent of that house property, the individuals will
be treated as Association of Persons.

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 Total Rental Value Determination

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 Rental Status of the Property
1. Fully let out property: Actual rental value or
Reasonable/Municipal Value whichever is higher.
2. Partly Let out house property: Proportional Actual rental
value or Reasonable/Municipal Value whichever is
higher.
3. Fully occupied house property: N/A

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 Allowable Deductions [u/s 38]
a) Premium paid for any insurance policy to cover the damage or destruction of the property;
b) Interest or profit paid for any capital loan received from a financial institution for the
acquisition, building, renovation, rebuilding or renovation of the property;
c) Any property tax, fee or other annual charge paid for the property which are not capital
charge in nature;
d) For repair, collection of rent, water and sewerage, electricity, maintenance and any other
basic service related expenses are to be determined as per the following table:
SL No. Property Type Deductible Amount
(% of Total Rental Value)
1 House property used for commercial purpose 30%
2 House property used for non-commercial purpose 25%
3 Other Property (in applicable cases) 10%

But provided that, if the tenant pays for items mentioned here as service charges along with
the rent, no deduction is allowed.

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 Allowable Deductions [u/s 38]
e) For interest or profit paid, prior to the rental income received from the property, for any

capital loan received from a financial institution for the acquisition, building, renovation,

rebuilding or renovation of the property, the interest of that period needs to be a adjusted in

three equal instalments. The unadjusted amount of interest or profit will not be allowed

thereafter.

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 Restrictions on the Allowable Deductions [u/s 39]
1. If tax is not deducted at source on applicable expenses or
deducted tax is not deposited to the government as per the
provision of this act, the expense will not be allowed.

2. For partially rented house property, allowable deductions will be

partially/proportionately determined.

3. If house property is rented for a partial period (not for full year),
allowable deductions will be determined as per the partial period.

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 Example-Property at residential area
Mr. Mushtaque Ahmed’s house is let out at Tk. 20,000 per month. Income year
ended on 30 June 2023. The Municipal value is Taka 260,000.
Taka
Cost of repairs 60,000
Rent collection expenses 30,000
Interest on mortgage 12,000
Fire insurance premium 5,000
Municipal tax 10,000

Required: Compute his rent income.

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 Commercial Area
Mr. Marwari has a house at Mohakhali C/A with an area of 4,800 square feet. He let
out this house to a computer firm at an annual rent of Tk. 600,000. The reasonable
rent per square feet at Mohakhali commercial area is 120.The following expenses
were incurred in the income year 2022-23 for that house:
1. Repair expense Tk. 90,000;
2. City Corporation Tax Tk. 15,000;
3. Fire insurance premium Tk. 9,000;
4. Night guard's salary Tk. 7,000;
5. Installation of electricity line Tk. 25,000;
During the year Mr. Marwari paid instalment of loan to HBFC Tk.67,500 (out of which
principal amount is Tk. 64,000). According to the agreement the owner bears the
water and gas bill of the tenant which amounted to Tk. 20,000 for the year. Compute
the rent income from house property for the income year ended 30th June 2023.

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 Property let out for different purposes
Dhanmondi Agrabad Uttara
Number of Storied 3 1 2
Number of flats in each floor 2 1 4
Rental Status Fully rent Personal use Partly rent
Purpose Residential Commercial
Municipal Value (Annual) 900,000 120,000 700,000
Rent (each flat) 12,000 7,000
Expenses During the year
Repair and Maintenance 240,000 25,000 195,000
Insurance Premium 2,000 1500
(Quarterly)
Salary of guard 15,000 5,000 17,000
Ground rent 2000 3000
Municipal Tax(per month) 1200 600 500
Interest on borrowed fund 5,000 4,000
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 One flat of Dhanmondi house remained vacant for two
months, two flats of Uttara are occupied by dependants.

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 Mr Arup has a 5 storied building at Mohakhali. Each floor has two flats. He
resides in second floor. All other floors are rented for residential purpose at Taka
10k month rent. The municipal value is Taka 10,00,000. He received TK 60k as
advanced from new tenant and refund Taka 50k to leaving tenant. Expenses
incurred during the period includes: repair expenses Taka 200,000; City
Corporation Tax Taka 25,000; Caretaker’s salary Taka 30,000; alteration cost of
ground floor Taka 20,000; interest on borrowed fund Taka 8,000, Installation of
IPS Taka 25,000. During the year, one of the ground floor tenants left the house
without paying one month rent. Besides this, the flat was vacant for two months.
Mr. Arup borrowed loan of Taka 10,00,000 before the construction of the
building. Before completion of the building he paid two installation of Taka
200,000 each. Total interest expense during construction period was
Taka150,000. He purchased a life insurance policy for Tk.250,000. He paid
insurance premium of Tk.3,000 per month. He deposited Tk. 500 per month on a
Deposit Pension Scheme. Compute total income from rent, investment
allowance and the tax liability.

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 Taka Taka
Rental Income (Notes A) 960,000
Advanced Received from tenant 60,000
Refund of Advanced to tenant (50,000)
Vacancy allowances (Notes B) (20,000)
Income Received from rent 950,000
Less: Allowable expenses
Repair and Maintenance (960,00*25%) 240,000
City Corporation tax (25,000*8/10) 20,000
Interest on borrowed fund (8,000*8/10) 6400
Interest during construction period 50,000 (316,400)
(150,000*1/3)
Taxable Income from rent 633,600

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 Calculation of tax payable
For the first 350,00 0 0
For next 100,000 5% 5,000
For next 273,600 10% 27,360
Total tax payable 32,360
Less: Investment (4,650)
Allowances(Notes 3)
Net tax payable 27,710

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 Notes & Workings
1. Rent received during the year: 8*10,000*12= 960,000
Or Municipal Value = (10,00,000*8/10) = 800,000
2. Uncollectable rent is not allowable expenses. Vacancy
allowances = (10,000*2=20,000)
3. Investment allowances
15% of actual investment = 15%* (25,000+6,000)= 4,650
Or 3% of taxable income = 633,600*3% = 19,008
Or Taka 10 lacs whichever is lower

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