Rental Income-Allowable Deduction-section-38(ITA-2023)

 

Allowable deductions in computing rental income under Section 38 | Bangladesh Income Tax Act -2023:

Allowable Deductions for Computing Rental Income

(1) Rental income from house property owned by the taxpayer

The following expenses are deductible when calculating rental income:

(a) Insurance premiums paid to cover risks of damage or destruction of the property.

(b) Interest or profit paid on loans taken from banks or financial institutions for acquiring, constructing, renovating, or reconstructing the property.

(c) Taxes, fees, or other annual charges paid on the property, provided they are not capital in nature.

(d) Interest or profit paid on loans used for acquisition, construction, repair, remodeling, or reconstruction during the pre-rental period shall be deductible in equal installments over 3 consecutive income years, starting from the year the property is first rented out.

• However, no such deduction shall be allowed after this 3-year period.

(e) A standard deduction for certain expenses (such as rent collection, utilities, service charges, repairs, and maintenance) shall be allowed as follows:

Type of Property	Deduction (% of total rental value)
House property Commercial use	30%
House property Non-commercial use	25%

(f) If only part of the property is rented out, deductions shall be allowed proportionately.

(g) If the property is rented for only part of the income year, deductions shall be allowed proportionately for that period.

(2) Rental income from property other than house property

Deductions shall be allowed subject to the following conditions:

(a) Expenses permitted under sections 49–55 (business income provisions), subject to their applicable limits and conditions.

(b) All deductions (except those under the Third Schedule) must be made through bank transfer to qualify.

Free Asked Questions FAQs:

1. What are allowable deductions under Section 38 of the Bangladesh Income Tax Act 2023?

Allowable deductions under Section 38 include expenses like repairs, municipal taxes, insurance, and interest on loans used for rental property.

2. How is gross rental value (GRV) calculated in Bangladesh?

Gross Rental Value is calculated based on actual rent received or receivable, including advance rent and any additional benefits from tenants.

3. Can maintenance expenses be deducted from rental income?

Yes, reasonable maintenance and repair expenses necessary to keep the property in rentable condition are deductible.

4. Is loan interest deductible from rental income in Bangladesh?

Yes, interest paid on loans taken for acquiring or constructing rental property is fully deductible under Section 38.

5. Are municipal taxes deductible when computing rental income?

Yes, municipal taxes paid by the property owner during the income year are allowed as deductions.

6. What expenses are not allowed as deductions under Section 38?

Capital expenditures, personal expenses, and costs not directly related to rental income are not allowable deductions.