For GONSALO GARCIA TY B.COM STUDENTS 2011-12 BATCH From Jose George

For For GONSALO GARCIA GONSALO GARCIA

TY B.COM STUDENTS TY B.COM STUDENTS

2011-12 BATCH2011-12 BATCH

FromFrom Jose George Jose George

HEADS OF INCOME HEADS OF INCOME

INCOME FROM HOUSE INCOME FROM HOUSE PROPERTYPROPERTY


Charging Section S. 22Charging Section S. 22 , , Annual Value of any property Annual Value of any property consisting of any building or land consisting of any building or land appurtenant thereto of which, the appurtenant thereto of which, the assessee is the owner is chargeable assessee is the owner is chargeable to tax under the head “Income from to tax under the head “Income from House Property”House Property”


following three conditions:following three conditions: property consists of buildings or lands property consists of buildings or lands

appurtenant theretoappurtenant thereto the assessee should be the owner of the assessee should be the owner of

the propertythe property the property should not be used by th the property should not be used by th

owner for his own businessowner for his own business

INCOME FROM HOUSE PROPERTYINCOME FROM HOUSE PROPERTY Owner includes legal as well as Owner includes legal as well as

deemed ownerdeemed owner Deemed owner as per section 27 includes:Deemed owner as per section 27 includes:

Transfer to spouse without an agreement to live apart or Transfer to spouse without an agreement to live apart or to a minor, not a married daughterto a minor, not a married daughter

Holder of an impartible estateHolder of an impartible estate Property held by a member of a co-operative society / Property held by a member of a co-operative society /

company / AOPcompany / AOP A person who has acquired a property under power of A person who has acquired a property under power of

attorney attorney Person acquired a right on a property under lease Person acquired a right on a property under lease

INCOME FROM HOUSE PROPERTYINCOME FROM HOUSE PROPERTY Owner includes legal as well as Owner includes legal as well as

deemed ownerdeemed owner Deemed owner as per section 27 includes:Deemed owner as per section 27 includes:

Transfer to spouse without an agreement to live apart or Transfer to spouse without an agreement to live apart or to a minor, not a married daughterto a minor, not a married daughter

Holder of an impartible estateHolder of an impartible estate Property held by a member of a co-operative society / Property held by a member of a co-operative society /

company / AOPcompany / AOP A person who has acquired a property under power of A person who has acquired a property under power of

attorney attorney Person acquired a right on a property under lease Person acquired a right on a property under lease

INCOME FROM HOUSE PROPERTYINCOME FROM HOUSE PROPERTY Exempted propertyExempted property

income from farm house (u/s 2(1A) (10(1))income from farm house (u/s 2(1A) (10(1)) annual value of any one palace of an ex-ruler annual value of any one palace of an ex-ruler

Se. 10(19A)Se. 10(19A) property income of a local authority (10( 20)property income of a local authority (10( 20) property income of an approved scientific property income of an approved scientific

research association (10(21)research association (10(21) property income of an educational institution property income of an educational institution

(10(20C)(10(20C)

INCOME FROM HOUSE PROPERTYINCOME FROM HOUSE PROPERTY

Exempted propertyExempted propertyproperty income of a trade union (10(24)property income of a trade union (10(24) house property held for charitable house property held for charitable

purpose (11) purpose (11) property income of a political party (13A)property income of a political party (13A)property used for own business or property used for own business or

profession (22)profession (22) one self-occupied property Sec 23(2)one self-occupied property Sec 23(2)

computation of income from house computation of income from house property depends on the type of propertyproperty depends on the type of property

let out House propertylet out House property self -occupied propertyself -occupied property let out property remain vacantlet out property remain vacant partly let out and partly self occupied partly let out and partly self occupied deemed to be let outdeemed to be let out property owned by co-ownersproperty owned by co-owners

Computation of Annual Computation of Annual ValueValue

let out House propertylet out House property Annual ValueAnnual Value

XXXXXX Less Muncipal TaxLess Muncipal Tax XXXXXX Adj. Annual ValueAdj. Annual Value xxxxxx less Deduction u/s 24less Deduction u/s 24 XXXXXX

Income from House PropertyIncome from House Property XXXXXX Tax under the head income from House property is Tax under the head income from House property is

not a tax upon rent of a property. It is tax on the not a tax upon rent of a property. It is tax on the capacity of a building to yield income. The measure capacity of a building to yield income. The measure of such income is called Annual Valueof such income is called Annual Value

Computation of Income Computation of Income from House propertyfrom House property

Annual value is the estimated Annual value is the estimated value of Income expected if the value of Income expected if the property is rented.property is rented.

Annual value is the Annual value is the reasonable letting Value or reasonable letting Value or Actual Rent of the property which ever is Actual Rent of the property which ever is

higher.higher. Reasonable letting value is the Municipal value Reasonable letting value is the Municipal value

or Fair rent which ever is higher restricted to or Fair rent which ever is higher restricted to Standard rent a per Rent Control ActStandard rent a per Rent Control Act

Computation of Annual Value of Let –Computation of Annual Value of Let –out out

reasonable letting value is:reasonable letting value is: Municipal value orMunicipal value or Fair rent Fair rent Which ever greater restricted to Standard rentWhich ever greater restricted to Standard rent

Municipal Valuation is the ratable value fixed by the Municipal Valuation is the ratable value fixed by the municipality for charging municipal tax . municipality for charging municipal tax .

Fair rent is the rent fetched by a similar accommodation in Fair rent is the rent fetched by a similar accommodation in the same or similar localitythe same or similar locality

Standard rent is the maximum rent which a person can legally Standard rent is the maximum rent which a person can legally recover from his tenant under the Rent Control Act. recover from his tenant under the Rent Control Act.

Computation of Annual Value of Computation of Annual Value of

Let –outLet –out

COMPUTATION OF ACTUAL COMPUTATION OF ACTUAL RENTRENT

ACTUAL RENT ACTUAL RENT Actual rent is applicable only to let out Actual rent is applicable only to let out

houses. Actual rent is rent received or houses. Actual rent is rent received or receivable. Actual rent is the rent of the receivable. Actual rent is the rent of the previous year for which the property was previous year for which the property was available for letting out. The unrealised rent, available for letting out. The unrealised rent, if it fulfills the conditions, is allowed to if it fulfills the conditions, is allowed to deduct from actual rent receivablededuct from actual rent receivable

Actual Rent = Actual rent received or Actual Rent = Actual rent received or receivable – allowable unrealised rentreceivable – allowable unrealised rent

Loss due to vacancyLoss due to vacancy If the let out property remain If the let out property remain

vacant for a period, the loss due to vacant for a period, the loss due to vacancy is allowed to be deducted vacancy is allowed to be deducted from the highest value, arrived from the highest value, arrived after comparing reasonable letting after comparing reasonable letting value with Annual Rent. The value with Annual Rent. The balance after the deduction of loss balance after the deduction of loss due to vacancy , if any, is the due to vacancy , if any, is the Annual ValueAnnual Value

Find out the annual ValueFind out the annual ValueH1 H2 H3 H4 H5

Municipal Value 105 105 105 105 105

Fair rent 107 107 107 107 107

Standard rent NA 88 88 135 135

Actual Rent 103 112 86 114 97

Unrealised rent (condition fulfills)

1 2 1 2 1

Period of the previous year (in months)

12 12 12 12 12

Period for which property remain vacant

Nil Nil Nil Nil Nil

AnswerAnswerReasonable letting valueReasonable letting value 107107

(fair rent -107, MV- 105 St Rent nil)(fair rent -107, MV- 105 St Rent nil)Actual Rent (103-1)Actual Rent (103-1) 102102

AR -103; allowable unrealised rent 1 AR -103; allowable unrealised rent 1

The Highest RLV or ARThe Highest RLV or AR 107107

Less loss due to vacancyLess loss due to vacancy NilNil

Annual ValueAnnual Value 107107


(fair rent -107, MV- 105 St Rent 88)(fair rent -107, MV- 105 St Rent 88)Actual Rent (112-2)Actual Rent (112-2) 110110


The Highest RLV or ARThe Highest RLV or AR 110 110

Less loss due to vacancyLess loss due to vacancy Nil Nil



(fair rent -107, MV- 105 St Rent 88)(fair rent -107, MV- 105 St Rent 88)Actual Rent (86-1)Actual Rent (86-1) 8585





AnswerAnswerReasonable letting valueReasonable letting value 107 107

(fair rent -107, MV- 105, St Rent 135)(fair rent -107, MV- 105, St Rent 135)Actual Rent (97-1)Actual Rent (97-1) 96 96


The Highest RLV or ARThe Highest RLV or AR 107 107


Annual ValueAnnual Value 107 107

QuestionQuestionX owns a house property (municipal X owns a house property (municipal

Valuation . 1,45,000, fair rent1,36,000 Valuation . 1,45,000, fair rent1,36,000 standard rent Rs. 1,24,000 it is let out standard rent Rs. 1,24,000 it is let out throughout the previous year(rent being throughout the previous year(rent being 8000 per month upto November 15, 8000 per month upto November 15, 2010 and Rs. 14000 per month 2010 and Rs. 14000 per month thereafter) X transfer the property to Y thereafter) X transfer the property to Y on Jan 31 2011, Find out the annual on Jan 31 2011, Find out the annual Value of the property in the hands of Mr. Value of the property in the hands of Mr. X for the assessment year 2011 - 12 X for the assessment year 2011 - 12

AnswerAnswerReasonable letting valueReasonable letting value 1,03,3331,03,333

(fair rent -1,36,000/12X10=113,333, MV- (fair rent -1,36,000/12X10=113,333, MV- 145000/12X 10=120,833, St Rent 145000/12X 10=120,833, St Rent 124000/12X10=1,03,333)124000/12X10=1,03,333)

Actual Rent (8,000X7 Actual Rent (8,000X7 1/21/2 +14000X2 +14000X2 1/21/2))95000 95000

The Highest RLV or ARThe Highest RLV or AR 1,03,3331,03,333


Annual ValueAnnual Value 1,03,3331,03,333

Loss due to vacancyLoss due to vacancy

If the Annual Rent is less If the Annual Rent is less than the Reasonable letting than the Reasonable letting Value only because of the Value only because of the loss due to vacancy , then loss due to vacancy , then the Annual Rent is to be the Annual Rent is to be taken as Annual Valuetaken as Annual Value

Loss due to vacancyLoss due to vacancy

Fair Rent Rs. 24000, Fair Rent Rs. 24000, Municipal Valuation Rs Municipal Valuation Rs 28000, Actual Rent Rs. 28000, Actual Rent Rs. 36,000 (for 12 month) 36,000 (for 12 month) property remain vacant for property remain vacant for 1 month) calculate the 1 month) calculate the annual Valueannual Value


(fair rent –25000, MV- 28000, (fair rent –25000, MV- 28000, Actual Rent Actual Rent 36000 36000


Less loss due to vacancyLess loss due to vacancy 30003000


AnswerAnswerFair rent Rs. 26,000, Municipal Fair rent Rs. 26,000, Municipal

Valuation Rs. 30000, Rent Rs. Valuation Rs. 30000, Rent Rs. 2000 pr month, 1 month the 2000 pr month, 1 month the property remain vacant and rs. property remain vacant and rs. 2000 unrealised rnt ulfils 2000 unrealised rnt ulfils conitions.conitions.


(fair rent –26000, MV- 30000, (fair rent –26000, MV- 30000, Actual Rent (2000 X 12)Actual Rent (2000 X 12) 24000 24000Less Unrealised Less Unrealised 2000 2000

2200022000


Less Less loss due to vacancy(2000X1)loss due to vacancy(2000X1) 20002000Annual ValueAnnual Value 2800028000

Deduct Municipal TaxesDeduct Municipal Taxes From the annual Value deduct From the annual Value deduct

Municipal Taxes levied by any Municipal Taxes levied by any local authority in respect of the local authority in respect of the house property. This tax is house property. This tax is deductible only if it is actually deductible only if it is actually paid by the owner and only to paid by the owner and only to the extent it is paid during the the extent it is paid during the yearyear

Deduction u/s 24Deduction u/s 24

Standard deduction Standard deduction Interest on borrowedInterest on borrowed

Deduction u/s 24Deduction u/s 24

Standard deduction Standard deduction Interest on borrowedInterest on borrowed

Standard deductionStandard deduction No deduction can be claimed by an No deduction can be claimed by an

assessee other than mentioned in assessee other than mentioned in section 24. Standard deduction is section 24. Standard deduction is allowed irrespective of expenses allowed irrespective of expenses incurred by the assesseeincurred by the assessee

30 % of the adjusted annual 30 % of the adjusted annual valuevalue is deductible irrespective of is deductible irrespective of expenses incurred by the taxpayerexpenses incurred by the taxpayer

Interest on Borrowed Interest on Borrowed CapitalCapital

Interest on Borrowed capital is allowed as Interest on Borrowed capital is allowed as deduction if capital is borrowed for the purpose of deduction if capital is borrowed for the purpose of purchase, construction, repair, renewal or purchase, construction, repair, renewal or reconstruction of the propertyreconstruction of the property

It is deductible on accrual basis. It can be It is deductible on accrual basis. It can be deductible as yearly, it is deductible even if it is deductible as yearly, it is deductible even if it is not actually paid during the previous yearnot actually paid during the previous year

No deduction for any brokerage or any expenses No deduction for any brokerage or any expenses

for arranging the loan is allowedfor arranging the loan is allowed interest of a fresh loan taken for the repayment interest of a fresh loan taken for the repayment

of the earlier loan is allowed as deductionof the earlier loan is allowed as deduction

Interest Payable for pre-Interest Payable for pre-construction periodconstruction period

If interest on Borrowed capital is paid prior If interest on Borrowed capital is paid prior to the acquisition or completion of to the acquisition or completion of construction, the interest paid during that construction, the interest paid during that period is allowed as deduction in five period is allowed as deduction in five equal installments . But if such amount is equal installments . But if such amount is allowed as deduction under any other allowed as deduction under any other provision earlier the amt. so deducted is provision earlier the amt. so deducted is not allowed as deduction under this not allowed as deduction under this provisionprovision

QuestionQuestion Mr. Jeevan has a house in Mumbai, which he used Mr. Jeevan has a house in Mumbai, which he used

for his residence in the previous year 2009-10. Due for his residence in the previous year 2009-10. Due to to his transfer to Nagpur he could not occupy to to his transfer to Nagpur he could not occupy this house in the previous year 2010-11. he stays in this house in the previous year 2010-11. he stays in a rented house in Nagpur, He has let out his a rented house in Nagpur, He has let out his mumbai house property @ Rs. 12000 per month. mumbai house property @ Rs. 12000 per month. He spend Rs. 2000 for insuring the property and He spend Rs. 2000 for insuring the property and 2000 for repairs. Fair rent of the house property 2000 for repairs. Fair rent of the house property comes Rs. 13000 per month. The property remain comes Rs. 13000 per month. The property remain vacant for 2 months and the unrelised which fulfills vacant for 2 months and the unrelised which fulfills conditions Rs. 10000 calculate the income from HP conditions Rs. 10000 calculate the income from HP of Mr. JEEVAN for the assessment year 2011-12 of Mr. JEEVAN for the assessment year 2011-12

AnswerAnswer Let-out HouseLet-out HouseAnnual ValueAnnual Value 3000030000 (Fair rent- 13000 X 12=156000 or MV(Fair rent- 13000 X 12=156000 or MV

Nil, thus RLV =156000, Actual RentNil, thus RLV =156000, Actual Rent

Rs. 12000 X 12 =1,44000 – Unrealised rent Rs. 10, Rs. 12000 X 12 =1,44000 – Unrealised rent Rs. 10, 000 Actual Rent = 144000-10000=134000)000 Actual Rent = 144000-10000=134000)

RLV or Actual rent which ever is higher = 156000RLV or Actual rent which ever is higher = 156000

Less Loss due to Vacancy (12000 X 2) 24000Less Loss due to Vacancy (12000 X 2) 24000

Annual ValueAnnual Value 132000 132000

AnswerAnswer Let-out HouseLet-out HouseAnnual ValueAnnual Value 132000132000Less Municipal TaxLess Municipal Tax NilNilAdjusted Annual ValueAdjusted Annual Value 132000132000Less Less deduction U/S 24deduction U/S 241. Standard deduction1. Standard deduction30% of Adjusted Annual Value30% of Adjusted Annual Value 3960039600

2.Interest on Borrowed Capital2.Interest on Borrowed Capital 2000 2000 41600 41600

Income From House Property Income From House Property 9040090400

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For GONSALO GARCIA TY B.COM STUDENTS 2011-12 BATCH From Jose George