Taxability Of Immoveable Property Under The Act And The Tax Treaties - A Brief Analysis

Adv Sherry Samuel Oommen: This article is authored by Adv Sherry Samuel Oommen. Adv Oommen, who specializes in constitution, tax and corporate laws has also cleared the final exams of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. He has also completed his Masters Degree in Commerce, apart from obtaining a Post Graduate Diploma in Business and Corporate Laws from Symbiosis Pune. The views expressly are personal and should not be construed as a legal [e-mail].

- Sherry Samuel Oommen

1. An Introduction

In the past couple of weeks, I have received numerous queries from NRI on the taxability of income from the immoveable property. The questions relate to whether income earned from the immoveable property in India would be liable to tax in the state of residence of the concerned NRI. In this article, I intend to shed some light on the taxability of income from immoveable property both under the Income-tax Act, 1961 and the concerned tax treaty.

The taxability of income from immovable properties is typically covered under Article 6 of the concerned tax treaty. At the outset, it would be relevant to understand the meaning of the term "immoveable property" 1.1 Meaning of the term

"immoveable property"

It deserves to be noted that the term "immovable property" has not been defined in the tax treaty or the Model Convention. Thus, the said term would need to be understood based on its interpretation under the law of the applicable contracting state. From an Indian context, the term "immoveable property" has been defined under a few legislations. The said definition and its related interpretation has been detailed in the ensuing paragraphs.

However, section 2(26) of the General Clause Act, 1897 defines the term 'immovable property' in an inclusive manner so as to cover land, benefits arise out land and things attached to the earth or permanently fastened to anything attached to the earth.

Further, Section 2(z) of the Real Estate (Regulation & Development) Act, 2016, states that immovable property includes "land, buildings, rights of ways, lights or any other benefit arising out of land and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, standing crops or grass".