Notional interest earned on the security deposit is not to be included to the total rental income
Value of supply— In the instant case, the appellant is engaged in the business of renting of commercial property. They intend to enter into contractual agreements with prospective tenants wherein the premise is rented out for a monthly rent.
the Appellant pays the property tax on the said property to the Municipal authority i.e BBMP which is a statutory levy by the said Authority. In the above background, there are two issues which are before us for determination:
a) Whether the property tax paid by the Appellant to the Municipal Authority can be deducted from the monthly rental income received?
b) Whether the notional interest on the security deposit should be taken into consideration for determining the total income from rental service?
Held that— We modify the advance ruling No KAR ADRG 48/2020 dated 16-09-2020 and answer the questions raised by the Appellant in the original advance ruling application and in this appeal, as follows:
1. For the purpose of arriving at the value of rental income, the Appellant cannot deduct the amount paid as property tax to the Municipal Authority or any other statutory levies levied under any law for the time being in force, other than the CGST, SGST, IGST and Compensation Cess, subject to the condition that it is charged separately by the Appellant.
2. For the purpose of arriving at the total rental income, the notional interest earned on the security deposit is not to be taken into consideration.