## Composite Rent

### What is composite rent?

Sometimes the owner receives, along with rent for the building, amounts for:

Other assets — furniture, plant, machinery; and/or
Services — lifts, security, power backup.

The total of all these is composite rent.

### Splitting the composite rent — the decisive test is separability

Case 1 — Letting is INSEPARABLE (tenant must take the building and the other assets together):

The entire composite rent is taxed as PGBP or Income from Other Sources.
This holds even if separate amounts are fixed for the building and for the assets.

Case 2 — Letting is SEPARABLE (tenant can rent the building and the assets independently):

Rent for the building → Income from House Property (Section 22).
Rent for other assets (e.g. furniture) → PGBP or IFOS.

### General rule for service charges

Where composite rent covers building rent plus service charges, split it:

Portion for use of property → House Property (Section 22).
Portion for services → PGBP or IFOS, depending on the facts.

Worked example

### Example 1

Inseparable letting: A owns a building fitted with machinery and lets both together on terms that the tenant cannot take one without the other. Even though the rent agreement separately states ₹50,000 for the building and ₹20,000 for the machinery, because the letting is inseparable the entire ₹70,000 is assessed under PGBP / IFOS — not under House Property.

### Example 2

Separable letting: B lets a building for ₹40,000 and, under a distinct arrangement that the tenant could decline, furniture for ₹10,000. Here ₹40,000 is taxed under Income from House Property and ₹10,000 under PGBP / IFOS.

⚠️ Common exam mistakes

Splitting composite rent into House Property and IFOS even when the letting is inseparable — if inseparable, the WHOLE amount goes to PGBP/IFOS, regardless of separate figures stated.
Assuming that because separate amounts are mentioned in the agreement the letting is automatically separable — separability depends on whether the tenant CAN rent them independently, not on the rent break-up.

Reference: Section 22 — Income-tax Act, 1961

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Composite Rent — separable vs inseparable letting

Worked example

⚠️ Common exam mistakes