House Prpty

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PRESENTED

BY:

VISHAKHA

RANADIVE

B.COM (H)

INCOME

FROM HOUSE

PROPERTY

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The scope of income charged under this head is defined by

section 22 of the Income Tax Act and the computation of

income falling under this head is governed by sections 23 to 27.

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BASIS OF CHARGE::

The annual value of a property, consisting of any buildings or

lands, of which the assessee is the owner, is chargeable to taxunder the head Income from house property. However, if a house

property, or any portion thereof, is occupied by the assessee, for

the purpose of any business or profession, carried on by him, theprofits of which are chargeable to income-tax, the value of

such property is not chargeable to tax under this head.

Thus, three conditions are to be satisfied for property income to betaxable under

this head.

1. The property should consist of buildings or lands.

2. The assessee should be the owner of the property.

3. The property should not be used by the owner for the purpose ofany business or profession carried on by him, the profits of which

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Buildings or lands

Ownership of house property

Deemed owner

Proper ty used for own business or profession

Composite rent

Rental income of a dealer in house property

Disputed ownership

House property in a foreign country

WHAT SORT OF INCOMES ARE TAXABLE

UNDER THIS HEAD??

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Income from a farm house [section 2(1A) (c) and section 10(1)].

Annual value of any one palace of an ex-ruler [section 10(19A)].

Property income of a local authority [section 10(20)].

Property income of an approved scientific research association

[section 10(21)]. Property income of an educational institution and hospital

[section 10(23C)].

Property income of a registered trade union [section 10(24)].

Income from property held for charitable purposes [section 11].

Property income of a political party [section 13A].

Income from property used for own business or profession[section 22].

Annual value of one self occupied property [section 23(2)].

Any house which an assessee could not use due to employment.

THEN WHICH INCOMES FROM HOUSE

PROPERTY ARE TAX FREE??

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Composite Rent :- sometimes the landlord provides someamenities such as gas, e lectricity, water facility, along with

the house. The rent received from such house is called as

composite rent.

Actual rent received :- After deducting the value of Amenities,unrealized rent from previous year , and rent from the vacant

period from composite rent is known as Actual rent received

Fair rent :- The maximum rent which is possible to get isknown as Fair rent

Standard rent :- Rent determines by the Rent control of ficer isknown as Standard rent.

Municipal Tax : -

TERMINOLOGY

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Annual value mean the amount at which the proper ty can be let

out every year

Following points are important regarding Annual values

ANNUAL VALUE

Rent at which the property can be let out every year

Rent received is in excess of estimated rent

If rent received is less than estimated rent due to vacant inthe previous year then such receive rent .

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1. Municipal Valuation

OR

2. Fair rent

OR

3. Actual rent received

HOUSE PROPERTY NOT COVERED UNDER

RENT CONTROL ACT

Which ever is greater

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1. Rent received

2. Municipal value

3. Fair rent

i) Rent received

i) Standard rent

HOUSE PROPERTY COVERED BY RENT

CONTROL ACT

Which ever is

greater

Which ever is

greater

Which ever is

less called

G.A.V

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1st condition : when standard rent is not given in question

Municipal value

OR

Fair rental value

2nd condition : when standard rent is given

Higher value calculated

In 1st condition

OR

Standard rent

EXPECTED RENT

Which ever is

higher

Which ever is

less

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Unrealised rent should be cons ider to calculate Net Annual

value after deducting it from Gross annual value

Gross annual value XXX

Less: municipal tax xxx

Less :Unrealised Rent xxx XXX

UNREALIZED RENT

XXXNet annual Value

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House vacate during the whole year : - if the let out houseproperty remain vacate whole year , then the gross AnnualValue of house will be Nill

House vacate for some month during the year : - if the houseproperty remain vacate for some months in previous year andits actual rent received is less than fair rent, then actual rentreceived will be gross annual value

If muncipal value and fair rent both are less than the actual

rent , the gross annual value will be computed as bellow

Municipal value

Or

Fair rent ( which ever is higher ) XXX

Actual rent received XXX

Less : Rent for Vacant period xxx

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Find the Gross Annual Value in the case of the following

properties:

1 2 3Municipal value 52,000. 1, 00,000 60,000

Fair rent 60,000. 1,02,000 68,000Standard rent NA 90,000. 70,000

Actual rentreceivable

55,000. 95,000. 72,000.Unrealized rent 5,000.

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(1) Since Rent Control Act is not applicable, GAV will be the highest

of municipal value, fai r rent and actual rent. Hence, the GAV will

be Rs. 60,000.

(2) GAV cannot exceed the s tandard rent or actual rent, whicheveris higher. Therefore, GAV will be Rs. 95,000.

(3) Actual rent receivable wil l be reduced by the amount of

unrealized rent i.e. Rs. 72,000 Rs. 5,000 = Rs. 67,000. Now,

GAV will be the highest of municipal value, fair rent and actual

rent, subject to the maximum of standard rent. Hence, GAV will beRs. 68,000.

SOLUTION..

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Income from house property is determined as under :

Gross Annual Value xxxxxxx

Less: Municipal Taxes xxxxxxx

Net Annual Value xxxxxxx

Less: Deductions under Section 24

- Statutory Deduction (30% of NAV) xxxxxxx

- Interest on Borrowed Capital xxxxxxx

Income From House Property xxxxxxx

COMPUTATION OF INCOME FROM

LET OUT HOUSE PROPERTY

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Statutory Deduction :- For all houses let out on rent Statutorydeduction is allowed 30% of Net annual value

Interest on Loan :- If any loan has been taken for constructionor purchase of house , then the deduction on such loan

allowed as followingi. Total interest payable on previous year

ii. If loan has been taken for the construction of house then

except for the current year deduction will be allowed for

1/5 th of the interest amount for last 5 years .

iii . Interest payable on interest will not be al lowed.

iv. When interest is payable outside India, no deduction will be

allowed unless tax is deducted at source or someone in

India is treated as agent of the non-resident

DEDUCTIONS UNDER SECTION 24

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Following are the provisions regarding deduction of interest

on loan taken for a house used as self residence.

a) If loan has been taken before 1 april 1999 : - if loan has beentaken for the purpose of construction, purchase,reconstruction/renovation then the deduction allowed of the

interest on loan is actual interest amount or a maximum of

rs 30000.

b) If loan has been taken on or af ter 1.4.1999 :- Maximum deduction upto 150000

The purchase process has been completed with in 3 years

DEDUCTION OF INTEREST ON LOAN

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c) If part of the loan is taken before 1.4.1999 and part of theloan after 1.4.1999

Deduction upto 30,000 will be allowed on the interest of the

part of the loan taken before 1.4.1999

Deduction upto 1,50,000 will be allowed on loan after

1.4.1999

If total of two interest is in excess of 1 ,50,000 then

maximum deducting available will be 1,50,000

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I. HOUSE USED COMPLETELY FOR SELF

RESIDENCY

II. More than one house for own residency

III. House for own residence remaining vacant forthe whole year

IV. When part of the house is let out and part of it

is used for own Residence

V. House used for own business or profession

ANNUAL VALUE OF HOUSE USED FOR

DIFFERENT PURPOSE

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Mr.Suresh is owner of a large house,the construction of whichcompleted in 2008. 50% area of the house has been let out for a rentof rs.20000 p.m. 25% of the house was used by Mr. Suresh forprofessional purpose and the remaining 25% of the house for his ownresidence.house comes under rent control act.

Muncipal value 3,00,000

Standard rent 6,00,000

Muncipal tax 30,000

Repairs 20,000

Interest on loan taken for repairs 2,00,000

Land revenue 10,000

Annual charges 12,000

Fire insurance premium 15,000 Collection expenses 2000

Compute mr. sureshs taxable income from INCOME FROM HOUSEPROPERTY for year 2012 -13.

QUESTION 2

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COMPUTATION OF INCOME FROM H OUSE PROPERT YSelf occupied port ion: rs .Annual value nil

Less:int. on loan (200000x25%) (30000) 30000

LOSS FROM SELF OCCUPIED PORTION = (30000)LET OUT PORTION 50%G.A.V.m.v. 1,50,000

r.r. (20000x12) 2,40,000

r.R 2,40,000

s.r. 3,00,000

G.A.V 2,40,000Less: m.t.(50% of 30000) (15000)N.A.V = 2,25,000Less: deduction u/s 24:

S.D. (30% of 2,25,000) 67,500

int. on loan(200000x50%) 1,00,000 1,67,500

INCOME FROM LET OUT 57,500TOTAL INCOME FRM HO USE PROPERTY =57,500 30000 = 27,500

SOLUTION

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Mr. Ramesh owns 4 houses.

1st- -M.v. 1,00,000 p.a. ,He lives with his family in this house.

2nd M.v. 1,20,000 p.a. His son lives in this house who study

in university.

3 rd M.v. 90,000 p.a. His brother lives in this house. Insurance

premium 2000

4 th M.v. 50,000 p.a. 5000 spent on repairs.

Hegot the second house constructed by taking a loan from

bank and he repaid the principal amount 40,000 alongwith

interest 6000.

Muncipal tax paid for all houses 10%

Compute income form house property from all houses.

QUESTION 3

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COMPUTATION OF INCOME FROM HOUSE PROPERTYFIRST HOUSE: RS.Annual value nil

SECOND HOUSE:G.A.V. 1,20,000

Less: muncipal tax 10% (12000)

N.A.V 1,08,000Less:S.D. @ 30% 32,400

int. on loan 6000 38,400INCOME FROM 2 ND HOUSE 69,600

SOLUTION..

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THIRD HOUSE: RS. G.A.V 90,000 Less: muncipal tax 10% (9000)

N.A.V. 81000

Less: S.D. @ 30% of 81000 (24,300)INCOME FROM 3 RD HOUSE 56,700FOURTH HOUSE:G.A.V 50,000Less:muncipal tax 10% 5000

N.A.V 45000

Less: S.D. @ 30% of 45000 (13,500)

INCOME FROM 4 TH HOUSE 31,500TOTAL INCOME FROM HOUSE PROPERTY = 1,57,800

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Under section 22 of the Income Tax Act, the annual value ofhouse property, consisting of buildings and landsappurtenant thereto, is taxable under the head 87

Income from house property, in the hands of the owner (ordeemed owner) of the property, provided that the property isnot used by the assessee for the purpose of his ownbusiness or profession.

For determining the annual value of the house property, theactual rent received or receivable from the property, themunicipal valuation, the fair rental value and the standardrent under the Rent Control Act are taken into account.

From the Gross Annual Value of the property, the MunicipalTaxes are deducted to arrive at the Net Annual Value.Section 24 o f the Income Tax Act provides that 30% of theNAV and the inte rest on borrowed capital sha ll be deductedfrom the NAV to obtain the taxable income from houseproperty.

SUM UP..

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As per Section 23(2) of the Income Tax Act, the annual

value of one self occupied house property is taken to be nil.

No deductions are permissible from the annual value of such

property, except the interest on bor rowed capital, subject to

the maximum limit of Rs.1, 50,000 or Rs.30, 000 as the casemay be.

The above provisions may result in loss from house

property, which may be set off against income from another

house property or against incomes under the other heads.

The balance loss may be carried forward, to be set offagainst the income from house property, upto a maximum of

eight assessment years.

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