Dear Client,
NO rent so no income derived from house property. NO tax. But make sure that she should not show any amount paid as rent to save taxable income.
Tax implication for renting residential space for starting new company
Hi, I have provided NOC to my sister in law for starting the business at our residential address in [deleted]. Again now she needs a new letter for GST purpose and it states that I am providing the space rent free. I am absolute owner of the house and wanted to know if there is any tax implication derived from leasing out space for the company and is there any issue if I am providing the space rent free. Here is the content from the latest letter where I am suppose to sign. -------------------------------------------------------------------------------------------------------------------------------------- To Whom It May Concern This is to certify that I, Sandeep Upadhyay , residing at 36/1, Chakraborty Para 1st lane, Nona Chandan Pukur, Barrackpore, Dist – 24 Pargana (N) - 700122, is an owner of the above stated building and out of my natural love and affection, I have allowed my sister in law, Smt. Bandana Upadhyay wife of Sri Sanjay Upadhyay residing at 36/1, Chakraborty Para 1st lane, Nona Chandan Pukur, Barrackpore, Dist – 24 Pargana (N) - 700122 to operate his business from the above stated with a table space for the period of 3 year under the trade name of “Let’s Go” absolutely Rent Free. Dated: 09/06/2017 36/1, Chakraborty Para 1st lane Nona Chandan Pukur, Barrackpore -------------------------- Dist – 24 Pargana(N), West Bengal Sandeep Upadhyay Pin – 700122
Asked 7 years ago in Property Law
Religion: Hindu
14 Answers
Sir if no income from renting immovable property is recieved and it is rent free then there is no tax implication. Tax implication arise when only you recover rent for same.
Further retain a copy of original letter with you as in when you require the premises you can ask same back as it is given on premisive possession.
no tax implication as your sister in law is merely a gratituous licensee
a gratitiuous licensee is given a space without any rent or license fee
you just need to check with the local authority as you are using portion residential premises for commercial purpose
but since its only a portion which is being let out, in my opinion, there is no change of user from residential to commercial as the predominant use of the premises is still residential
You can provide table space to your SIL rent free for purpose of carrying on her business
2) may need to obtain licence under shop and establishment act
3) further property would be subject to commercial assessment for property taxes
Thanks a lot Mr. Shubham. I would like to clarify that I am more concerned about property tax (Municipal tax / Khajana etc). Do you think it will have impact on these taxes ? Second thing is it a good idea to mention exact square foot ( e.g a room) in the property as rented space and also a timeframe of 3 years in the letter which I am going to sign rather than keeping everything open ? Thanks Sandeep
Asked 7 years ago
Sir you have to pay these taxes even you don't recovery the rent they are fixed . You can make an agreement with sister that in time she is using the property see needs to pay property tax though renting wont change the amount of tax.
See I would advise you to make an agreement or even you sign the agreement complete details should be mentioned and secondly it should be mentioned that whenever you will require the place they have to hand over the peaceful possession to you .
yes it is always better to specify things
you can also execute a proper formal agreement and have it notarised or registered
in some states, if the premises is given on rent, then the property tax is re-assessed and enhanced property tax may have to be paid
in this case, you are not receiving any rent, so no question of re-assessment
You should mention exact square foot area given to sister in law and period for which table space has been given for business purposes
Hello,
I would advise you to not sign any such document wherein it is mentioned that you will be giving the property for free and out of love and affection
It will not have any impact.
It will be good if you mention the exact square feet / are in the letter
Since you are not collecting any rent from your sister in law, there will be no Income Tax implication on your for your such allowing your premises to be allowed by her for running her business.
Since you are allowing your premises to be used for conducting business, it will be considered as commercial as nature for levying Khazana, Municipal Tax etc.
Whether leaving the premises on lease for rent or free of cost is your own decision, especially if you have decided to leave it on the basis of love and affection, but you may not claim tax exemption on this.
The property tax cannot be avoided just because you are not collecting rent for the premises.
You can lease it out for a limited period also.
It will not have any tax implications but it can have legal implications if trust issues crops between you and your sister
