INCOME FROM HOUSE PROPERTY

Shankar BoseInspector of Income-tax

MSTU, Puri

Three Conditions:(a) Property consists of any building or

land appurtenant thereto.

(b) Assesse owns the property

(c) Property not used by the owner for business or profession

GROSS ANNUAL VALUELET OUT PROPERTY

1.Expected rent ( Municipal valuation / Fair rent )

2.Rent received / receivable > expected rent : rent received / receivable.

3.If property remains vacant & rent received / receivable < expected rent : rent received / receivable

Exceptions

Self occupied property ( One house ) - Nil

House not actually occupied owing to employment or business / profession at other place - NIL

COMPUTATION OF INCOME FROM HOUSE PROPERTY

Gross Annual Value minus Municipal Tax = Net Annual Value

Net Annual Value

minus

Standard Deduction (30%) & interest

= Income / Loss from House Property

Note:- In the case of self occupied property only interest on borrowed capital ( Maximum of Rs. 1,50,000/-)

PROPERTY OWNED BY CO-OWNERS

Shall be assessed as individual owner

when

Shares of the Co-owners :

definite & ascertainable

CAPITAL GAINS

Conditions :

1.Transfer

2.Capital Asset

3.Transfer during previous year

4.Profit or Gain arises on Transfer

5.Profit / Gains not exempted u/s 54 to 54 G

Capital Asset meansProperties of any kindExcluding :

1.Personal effect.

2.Agricultural Land

3.Gold Bonds

4.Special Bearer Bonds.

5.Gold deposit bond

6.Any stock in trade , raw material held for business or profession.

Types of Capital Gains

Long termCapital Gains

Short termCapital Gains

Calculation of Capital Gain (Short term)

Full Value of considerationMinus

ExpensesMinus

Cost of acquisition & improvementMinus

Exemption u/s 54B/54D/54G, if applicable

= Short term Capital Gain

Calculation of Long term Capital Gain

Full value of consideration

Minus

Expenses

Minus

Indexed cost of acquisition & improvement

Minus

Exemption u/s 54/54B/54D/54EC/54ED/54F/54G,

= Long term Capital Gain

Indexed cost of acquisition =

Cost of acquisition

Cost inflation index for the year in which the asset was acquired

Cost inflation index for the year in which the asset is transferred

X

Indexed cost of improvement =

Cost of improvement

Cost inflation index for the year in which the asset was improved

Cost inflation index for the year in which the asset is transferred

X

Exemptions :Section Asset Transferred Type of Gain

1 54 Residential House Property

Long Term

2 54B Agricultural Land Short /Long Term

3 54D Land or building forming part of Industrial undertaking

Short /Long Term

4 54EC Long Term Capital Asset

Long Term

5 54ED Units, Shares/ securities

Long Term

6 54F Long Term Capital gain other than residential house

Long Term

7 54G Land building etc. in order to shift industrial Undertaking

Short /Long Term

Section Asset Transferred Type of Gain

Exemption (cont’d)

Exemption in respect of transfer of residential house (Section-54)

Conditions:-

1.Individual or HUF

2.Residential House Property

3.Long term Capital Asset

4.Purchase a residential house (one year before or 2 years after) or construct within 3 years.

Amount of exemption :

• Value of New House >or = Capital Gain - FULL

• Value of New House < Capital Gain

- Value of New House

Consequences

New house property transferred within

3 years from

date of Purchase/ construction

Capital Gain, if any

plus

exemption granted

Short term Capital Gain

Scheme of Deposit :-

Deposit Capital Gain in Capital gain account

= deemed utilised for purchase of new house.

Exemption in respect of transfer of asset other than House Property (54F)

Conditions :-1.Individual or HUF2. Long term Capital asset other than

residential house

3.Purchase a residential house (one year before or 2 years after) or construct within 3 years.

4.Should not own > one residential house other than new house

Amount of exemption :

• Cost of new house > or = net consideration

= Full

• Cost of new house < net consideration

= Investment X Capital Gain

Net Consideration

Scheme of Deposit

Amount deposited ( Capital Gain Account)

= deemed utilised for new house

Not fully utilised within 3 years :-

Proportionate amount = Long Term Capital Gain

Unutilised deposit X Original Capital Gain

Net Consideration

Consequences

Default Consequence

1 Transfer new house within 3 years

1. Short term Capital Gain (new house)

2. Exemption allowed shall be long term Capital Gain

2 Purchase another house within 2 years Or

Constructs another house within 3 years

Exemption allowed

= Long Term capital gain

Capital gain – How charged to TaxShort Term capital Gain

other than sale of securities

Taxed like any other income

Short term Capital gain

sale of securities

10% + Surcharge and education cess

Long Term Capital Gain 20% + Surcharge

(Total income minus Long Term Capital Gain) < Taxable limit, Long term Capital Gain to be reduced to that extent. Applicable also for :- Short Term Capital Gain on transfer of Securities.