Steps Amount Ist Particulars Compute Reasonable Expected Rent [RER) Gross Municipal Value (a) Fair Rent (b) Higher of the (a) and (b) [A] s21 3 Standard rent (B) Reasonable expected rent Lower of (A and B)][C] Actual rent received or receivable (ARR) - Unrealised Rent of the current year (UR) [D] Gross annual value Higher of Cand considered as GAV However, where 'ARR - UR' is lower due to vacancy, then 'ARRUR computed in step 2 will be treated as GAV. ILLUSTRATION (COMPUTATION OF REASONABLE EXPECTED RENT] Calculate Reasonable Expected Rent from the following details: Particulars Gross Municipal Value (a) Fair Rent (b) Higher of the [(a) and (b) [A] Standard Rent as per Rent Control Act [B] Reasonable Expected Rent Lower of [(A) & (B)] House House 2 House House House 1 3 5 10,000 12,000 12,000 18,000 16,000 8,000 16,000 16.000 10,000 17,000 10,000 16.000 16.000 18,000 17,000 10,000 14,000 NA 8.000 20,000 10,000 14.000 16.000 8,000 17.000 H2 H3 H4 HS H6 130 140 150 | 160 180 ILLUSTRATION WHEN THERE IS NEITHER UNREALISED RENT NOR VACANCY PERIOD Calculate Gross Annual Value for the following house properties. (* in '000) Particulars H1 Gross Municipal value for the whole year 120 Fair rent for the whole year 175 Standard rent (for whole year) 165 Actual rent receivable 175 Period of the previous year (in months) 12 12 105 115 135 155 168 NA 100 135 |] 180 144 110 135 200 100 100 12 12 12 10 1,16,000 1,16,000 1/2 x completed year of service x salary p.m. [1/2 x 29 x 8,000) Taxable Gratuity 2,75,385 2,84,000 Case E: Gratuity received after death of employee The Act is silent on treatment of gratuity received after death of employee. However, on following grounds, it can be concluded that gratuity received by a legal heir shall not be taxable in the hands of the recipient - A lump sum payment made gratuitously to widow or legal heir of employee, who dies while in service, by way of compensation or otherwise is not taxable under the head "Salaries". [Circular No.573, Dated 21.08.1990] Unutilized deposit under the capital gains deposit account scheme shall not be taxable in the hands of legal heir. Circular No.743 dated 6/5/1996] Legal representative is not liable for payment of tax on income that has not accrued to the deceased till his death. Leave salary paid to the legal heir of deceased employee is not taxable as salary. [Circulars Letter No. F.35/1/65- IT(B), dated 5/11/1965). Further, leave salary by a legal heir of the Government employee who died in harness is not taxable in the hands of the recipient (Circulars No.309, dated 3/7/1981). 39 ILLUSTRATION Mrs. X is working with ABC Ltd. since last 30 years 9 months. Her salary structure is as under: Basic 5,000 p.m. Dearness allowance 3,000 p.m. On 15/12/2018, she died. State the treatment of gratuity in following cases: Case 1: Mrs. X retired on 10/12/2018 & gratuity 4,00,000 received by her husband (legal heir) as on 18/12/2018. Case 2: Husband of Mrs. X received gratuity on 18/12/2018 falling due after death of Mrs. X. Mrs. X is covered by the Payment of Gratuity Act. Steps Amount Ist Particulars Compute Reasonable Expected Rent [RER) Gross Municipal Value (a) Fair Rent (b) Higher of the (a) and (b) [A] s21 3 Standard rent (B) Reasonable expected rent Lower of (A and B)][C] Actual rent received or receivable (ARR) - Unrealised Rent of the current year (UR) [D] Gross annual value Higher of Cand considered as GAV However, where 'ARR - UR' is lower due to vacancy, then 'ARRUR computed in step 2 will be treated as GAV. ILLUSTRATION (COMPUTATION OF REASONABLE EXPECTED RENT] Calculate Reasonable Expected Rent from the following details: Particulars Gross Municipal Value (a) Fair Rent (b) Higher of the [(a) and (b) [A] Standard Rent as per Rent Control Act [B] Reasonable Expected Rent Lower of [(A) & (B)] House House 2 House House House 1 3 5 10,000 12,000 12,000 18,000 16,000 8,000 16,000 16.000 10,000 17,000 10,000 16.000 16.000 18,000 17,000 10,000 14,000 NA 8.000 20,000 10,000 14.000 16.000 8,000 17.000 H2 H3 H4 HS H6 130 140 150 | 160 180 ILLUSTRATION WHEN THERE IS NEITHER UNREALISED RENT NOR VACANCY PERIOD Calculate Gross Annual Value for the following house properties. (* in '000) Particulars H1 Gross Municipal value for the whole year 120 Fair rent for the whole year 175 Standard rent (for whole year) 165 Actual rent receivable 175 Period of the previous year (in months) 12 12 105 115 135 155 168 NA 100 135 |] 180 144 110 135 200 100 100 12 12 12 10 1,16,000 1,16,000 1/2 x completed year of service x salary p.m. [1/2 x 29 x 8,000) Taxable Gratuity 2,75,385 2,84,000 Case E: Gratuity received after death of employee The Act is silent on treatment of gratuity received after death of employee. However, on following grounds, it can be concluded that gratuity received by a legal heir shall not be taxable in the hands of the recipient - A lump sum payment made gratuitously to widow or legal heir of employee, who dies while in service, by way of compensation or otherwise is not taxable under the head "Salaries". [Circular No.573, Dated 21.08.1990] Unutilized deposit under the capital gains deposit account scheme shall not be taxable in the hands of legal heir. Circular No.743 dated 6/5/1996] Legal representative is not liable for payment of tax on income that has not accrued to the deceased till his death. Leave salary paid to the legal heir of deceased employee is not taxable as salary. [Circulars Letter No. F.35/1/65- IT(B), dated 5/11/1965). Further, leave salary by a legal heir of the Government employee who died in harness is not taxable in the hands of the recipient (Circulars No.309, dated 3/7/1981). 39 ILLUSTRATION Mrs. X is working with ABC Ltd. since last 30 years 9 months. Her salary structure is as under: Basic 5,000 p.m. Dearness allowance 3,000 p.m. On 15/12/2018, she died. State the treatment of gratuity in following cases: Case 1: Mrs. X retired on 10/12/2018 & gratuity 4,00,000 received by her husband (legal heir) as on 18/12/2018. Case 2: Husband of Mrs. X received gratuity on 18/12/2018 falling due after death of Mrs. X. Mrs. X is covered by the Payment of Gratuity Act