Readers may be aware that Bollywood superstar Shah Rukh Khan, who owns the palatial Mannat in Mumbai, also has invested in property in Dubai which has now come under scrutiny for taxation. The Income Tax Appellate Tribunal (ITAT) recently passed a rule wherein the notional rent earned through properties overseas (mostly owned by high taxpayers) are liable to tax.
Despite the India-UAE tax treaty, Shah Rukh Khan’s immovable property in Dubai is now under the radar as the actor has been asked to include notional rent whilst filing for IT return in India. Though Shah Rukh Khan tried to contend the same, his contention was rejected by ITAT. According to the bench of Amit Shukla and G S Pannu, credits of taxes paid in the UAE will be allowed as per law.
On the other hand, Shuddhasattwa Ghosh, People Advisory Services at EY India, maintained that for quite some time, Income Tax authorities have been planning on making residential properties overseas (deemed rental ones too) taxable within India and the recent decision of ITAT has only strengthened it further.
Shah Rukh Khan was gifted this villa in 2008 and as per the calculation made by IT for the year 2008-09 the deemed rental value of this Dubai property summed up to Rs. 96 lakhs and with a 30% standard deduction, the taxable sum was Rs. 67.2 lakhs. The superstar resisted the decision of ITAT by referring to an amendment made in 2008.
According to it, in case of India entering a tax treaty with another country, the income of a taxed person in the other country shall first be included within the ‘taxable’ bracket of income in India. Based on the same, Shah Rukh Khan appealed for contention which was however rejected by ITAT.
Ghosh further went on to warn every high tax payer who owns property abroad to be careful asking them to include the rent or deemed rent of their overseas residential assets whilst filing the return in India.