Allowable deductions under the House Property and Agriculture Income

Allowable deductions under the House Property and Agriculture Income

Allowable deductions under the head house property and agriculture income:

Income tax is a typical example of a direct tax. The tax imposed on a person or entity under the orbit of income tax law is called income tax. It is the tax levied directly on personal income. Following expenses are allowed to be deducted from the annual value of the house property to calculate income from this head:

(a) Land Development tax or rent: Any sum payable to the government as land development tax or rent on account of the land comprised in the property.

(b) Insurance premium: The amount of any premium paid to ensure the property against the risk of damage or destruction.

(c) Interest on mortgage loan: Where the property is subject to a mortgage or other capital charges for the purpose of extending the amount of any interest payable on such mortgage or charge.

(d) Annual tax: Where the property is subject to an annual charge by local authority or government but does not include the tax leviable under this Ordinance.

(e) Ground rent: When the assessee is the lessee of the land on which the building is erected, he/she may need to pay ground rent in respect of the land.

(f) Vacancy allowance: When the property was vacant during a part of the year, a sum equal to such portion of the annual value of the property an admissible as vacancy allowance.

(g) Local Tax: Any tax, local rate, or cost paid in respect of the agriculture land is subject to allowable deduction, provided that no such deduction is allowed if the tax is charged any income arising or accruing from agriculture operations.

(h) Production costs: allowable deduction as production costs includes:

  • For cultivating the land or raising livestock thereon
  • For performing any process ordinarily employed by a cultivator to render marketable the produce of the land

(g) Depreciation: Depreciation expense relating to all the assets and facilities from which agricultural income is derived can be considered as an allowable deduction.