Taxability of Income from Letting Out Machinery, Plant or Furniture [Section 56(2)(ii)]

1. Applicability

Section 56(2)(ii) covers rental income from:

• Machinery
• Plant(equipment, tools, vehicles)
• Furniture
  when not chargeableunder:
• Business income (PGBP), or
• House property income

Key Condition: The letting must be separate from building/land. If let along with building, it may fall under composite rent (taxed differently).

2. Tax Treatment

• Taxable under “Income from Other Sources”
• Gross Rent Receivedis taxable
• Deductions Allowedunder Section 57:
  • Depreciation(as per Section 32)
  • Repairs & Maintenance
  • Insurance Premiums
  • Collection Charges(e.g., broker fees)

3. Computation of Income

Gross Rental Income 

(-) Deductions (Section 57) 

= Taxable Income from Letting

4. Key Points

• No Standard Deduction(unlike house property)
• TDS @ 10%if rent exceeds ₹2.4 lakh/year (Section 194-I)
• Lossescan be set off against other income under same head

5. Judicial Precedents

• Sultan Brothers Case:If machinery + building are inseparable, entire rent is taxable under “Other Sources”
• Composite Rent:Must be split between building (house property) and machinery (other sources)

6. Example

Mr. X lets out machinery for ₹3 lakh/year:

• Deductions:
  • Depreciation: ₹50,000
  • Repairs: ₹20,000
• Taxable Income:₹3 lakh – ₹70,000 = ₹2.3 lakh

7. Documentation Required

• Rental agreement
• Maintenance bills
• Depreciation calculations
• TDS certificates (Form 16A)

Note: If letting is part of business operations, declare under PGBP instead. For complex cases (e.g., leasing vs. hiring), professional advice is recommended.