INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH (ICMAB)
Subject: R1 – Fundamentals of Tax, VAT & Public Financial Management
Lecture Note No.: 04
Faculty: Mainul Huda Tushar
CHAPTER III INCOME FROM RENT (Income Tax Act 2023)
(Sections 35–39)
2. Key Definitions (Section 35)
House Property
Includes:
• Building or house
• Furniture, fixtures, fittings (integral part)
• Land attached to building
Excludes:
• Buildings used entirely as go-down
• Factory building rented with plant & machinery
Rent
• Payment for right to use property without ownership transfer
Exclusion:
• Rent received by banks, leasing companies, etc.
Property
Broad concept:
• House property
• Land
• Machinery
• Personal Vehicles
• Business premises
Important: Not only buildings—any rentable capital asset
3. Income from Rent (Section 36)
Formula:
Income from Rent = Gross Rental Value (GRV) - Allowable Expenses
Important Rules:
• If used for own business → NOT rental income
• Except hotels/hostels/motels/resorts → all rental income regardless of nature, trade,
commerce or business taxed under this head
4. Total Rental Value (TRV) – Section 37
4.1 House Property GRV
Formula:
A = (B + C + D ) – E
Where:
• A = Total Rental Value
• B = Annual Value
• C = NOW INCLUDES:
o Salami / premium
o Refundable security deposit
o Any facility benefit (non-advance)
• D=
o Service charge
o Repair & maintenance
o Any payment by tenant
• E = Vacancy allowance (only with electricity bill proof)
4.2 Other Property
Formula:
A = (B + C)
Where:
• A = Total Rental Value
• B = Annual Value
• C includes:
o Salami/premium
o Security deposit
o Any additional benefit (non-advance)
Annual Value (Section 2(62))
• Expected reasonable rent OR
• Actual rent (if higher)
5. Allowable Deductions (Section 38)
5.1 House Property
Deductible Expenses:
1. Insurance premium - paid
2. Loan interest (bank/financial institution) - paid
3. Municipal tax (non-capital) - paid
4. Pre-rental interest – paid → spread over 3 years
5. Statutory deduction (in respect of rent collection, water and sewerage, electricity, gas,
service charge, repair and maintenance charge and any other basic service):
Type Deduction
Commercial 30%
Non-commercial 25%
Special Rules:
• Partial rent → proportionate deduction
• Part-year rental → proportionate deduction
5.2 Other Property
• Business deductions (Sections 49–55)
• Must be paid via bank transfer (except for the allowable allowance as per 3rd
schedule)
6. Special Income from Rent (Section 39)
39. Computation of special income from rent.––
(1) If any part of statutory deduction in accordance with clause (e) of sub-section (1) of
section 38 is claimed as unspent, that unspent amount shall be deemed to be special
income from rent.
(2) Excepting in cases of accounting adjustments, deductions inadmissible under sub-
section (2) of section 38 shall be deemed as special income from rent.
(3) if the aggregate of adjustable amount received by any person as advance in any income
year exceeds taka 5 (five) lakh in a manner other than bank transfer on account of rent of
his own house property or any other property, the amount so received in that manner shall
be treated as special income from rent for that person in that income year.
Provided that,
(i) In a case where the amount against adjustable advance is received through bank
transfer, the said amount shall be adjusted within five years after year of receipt
or within the tenure of the agreement, whichever is less;
(ii) If the adjustable amount received or a part thereof is remained unadjusted after
the expiry of the aforesaid period, the said unadjusted amount shall be treated
as income from special rental income in the concerned income year.
(4) the unadjustable amount, whatever it is called by name received by the owner in any
income year against rent of his house property or any other property, shall be treated as
special rental income for that person in that income year;
Provided that, as per desire of the assessee, that amount could be spitted in such a
manner so that for the purpose of assessment of tax, the amount can equally be
distributed in the year of receipt and next following four years.
Provided further that, in a case where the taxpayer refunds the whole or any part of the
amount subsequently in any income year, the amount so refunded shall be excluded
from the computation of income from rent of the taxpayer in that income year.
(5) Notwithstanding anything contained in the other provisions of this Act, all expenses
disallowed under clause (a) of section 55 in the case of income from rent of a property
other than house property, shall be treated as special rental income.
(6) Notwithstanding anything contained in any other provisions of the Act, no
deduction, adjustment of loss or carry forward or any allowance under the jurisdiction
of the third schedule shall be allowed in the case of computation of income from
special rental income and tax liability shall be determined on that income at regular
rate.