Section I: Income Tax and Your House

• Ques: Commercial property is exempt from wealth tax
• Ans: Key points:
  • Usage of a property is immaterial for income/loss to be reported under house property. So, both commercial property (such as office, shop, and godown, etc.), as well as the residential house, should be reported as house property in your return.
  • Rental income from commercial property (typically 8% of property value) is generally more than the rental income from residential property (typically 3%). So, investing in commercial property improves your incoming cash flow.
  • Commercial property is also exempt from wealth tax. Therefore, you should purchase a commercial property instead of a second residential house.
  • Residential property (other than one self occupied house property) which is let out for less than 300 days during the financial year is subject to wealth tax.