Section 10(19A) of the Income Tax Act, 1961, exempts the annual value of one palace in the occupation of a former ruler from tax. However, if the palace is let out, the income from the rental is taxable.
The term “palace” is not defined in the Income Tax Act, but it is generally understood to mean a large and luxurious residence. The exemption under Section 10(19A) is available to all former rulers, regardless of their title or rank.
To claim the exemption under Section 10(19A), the former ruler will need to file their income tax return and attach a copy of a document that proves their ownership of the palace. This could be a title deed, a property tax receipt, or any other relevant document.
Here are some examples of situations where the exemption under Section 10(19A) would be available:
- A former Maharaja lives in his palace with his family. The annual value of the palace is exempt from tax.
- A former Raja rents out his palace to a hotel chain. The income from the rental is taxable.
- A former Nawab lives in a portion of his palace and rents out the rest of the palace to tenants. The annual value of the portion of the palace that he occupies is exempt from tax, but the income from the rental of the rest of the palace is taxable.
Conditions for Exemption
Section 10(19A) provides exemption from tax on the annual value of a palace if the following conditions are fulfilled:
- The palace is owned by an ex-ruler who was in power before India became a republic.
- The palace is used for residential purposes by the ex-ruler or his/her family.
- The palace is not used for commercial purposes.
- The palace is not let out on rent.
- The palace is maintained by the ex-ruler or his/her family.
Section 10(19A) of the Income Tax Act provides relief to ex-rulers by exempting the annual value of their palaces from taxation. The annual value is determined based on factors such as location, size, amenities, historical significance, and market value. However, certain conditions need to be fulfilled for this exemption to apply. It is important for ex-rulers and their families to understand the provisions of Section 10(19A) to ensure compliance with the income tax laws.