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ICWAI Income From House Property for June and December 2009 Examinations

ICWAI Income From House Property for June and December 2009 Examinations

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Published by successgurus
ICWAI Income From House Property for June and December 2009 Examinations
ICWAI Income From House Property for June and December 2009 Examinations

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Published by: successgurus on Mar 26, 2010
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11/21/2010

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1
Tax Supplement
PROBLEMS ON INCOME FROM HOUSE PROPERTY
1. Mr. Mohan Swami owns two houses. Their particulars for the financial year 2008-2009 are givenbelow:ParticularsHouse IHouse IIConstruction completedon 1.04.2008Self-occupiedLet outRsRsMunicipal valuation10,00,00015,00,000Fair rent12,00,00014,00,000Standard rent8,00,00016,00,000Annual rent received /receivableNil18,00,000Municipal taxes paid1,20,000150,000Insurance premium paid10,00015,000Repair expenses1,50,0002,00,000Unrealised rent-conditions of Rule 4 satisfiedNil4,50,000Interest on loan for the pre-construction period3,00,0004,50,000Interest on loan for the post construction periodfor the PY year 2008-20091,00,0001,50,000Date of borrowing the loan31.12.200331.12.2003Certificate of interest attached to the return.NoNoDetermine the income from house property for the assessment year 2009-2010.Would you change your answer if construction is completed on 31-3-2009 and interest certificateis also attached?
Computation of income from house property for the AY 2009-2010
House No. I-Self-occupiedHouse No. II-Let outDate of completionDate ofHouse No. II-Let out Interest1-4-2008 failingcompletioncertificate/Date of competingParticularsafter 3 years from31-3-2008withinconstruction are not relevant.the end of FY in3 years from thewhich loan wasend of FY in whichtakenwhich loan wastakenInterest certificateInterest certificateInterest certi-not relevant (a)attached (b) (I)ficate notattached (b)(ii)RsRsRsRsGross annual value(a) ALVNilNilNil15,00,000(b) Annual rentNilNilNil13,50,000received excludingunrealised rentWhichever is higher, is GAVNilNilNil15,00,000Less: Municipal taxes paidNilNilNil(-) 1,50,000Net annual valueNilNilNil13,50,000Less: Permissible deductions:Less: (I) Statutory deduction :NilNilNil(-) 4,05,00030% of Net annual value(ii) Interest on loan(-) 30,000(-) 1,50,000(-) 30,000(-) 2,40,000Income from house property(-) 30,000(-) 1,50,000(-) 30,0007,05,000
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2
Tax Supplement
Note :
1. Interest for House No. I-Self-occupied:(a)(i) Interest for pre-construction period ¸ 5:3,00,000 ¸ 5 = Rs 60,000(ii) Interest for post-construction period : Rs. 1,00,000(i) + (ii) = Rs. 1,60,000
Where loan is taken on or after 1.04.1999
but the house is not completed within 3 years formthe end of the financial year in which the loan was taken, maximum ceiling of interest, eligible fordeduction is only Rs 30,000. It is operative from the AY 2004-2005 and subsequent years.In the instant case, self-occupied house is completed after the prescribed time-limit of 3 years.Hence, deduction is restricted to Rs 30,000.(b)(i) In the, instant case, self-occupied house has been completed within 3 years from theend of the financial year in which loan was taken and certificate of interest is also attached.Hence, interest on loan, subject to the maximum ceiling of Rs 1,50,000 has been allowed.(ii) construction is completed within the prescribed time-limit of 3 years from the end of the FY which loan was taken but interest certificate is not attached. Hence, interest onloan, subject to a maximum of Rs 30,000, has been allowed.2. Interest for House No. II. Deduction has been worked out as under :(i)Interest for pre-construction period : 4,50,000 5 = 90,000(ii)Interest for post-construction period during 2006-2007 : 1,50,000Interest eligible for deduction (i) + (ii) = 2,40,00003. No deduction is available for insurance premium and repair expenses incurred.
2.
Mr.Som owns two houses, which are occupied by him for his own residence.The detailed particulars of houses and his other incomes for the pervious year 2008-2009 aregiven below:
ParticularsHouse AHouse BRsRs
Fair rent5,00,0005,00,000Municipal value4,20,004,50,000Standard rent4,50,0006,20,000Municipal taxes paid50,00060,000Interest on loan for the FY 2008-20091,60,0002,20,000Date of loan1.12.19981.04.2000Date of completion31.03.200131.03.2002Certificate of interest attached with return of incomeNoYesMr.Som earns income from other sources amounting to Rs 2,00,000Compute his total income and advise him which house should be opted for self-occupation.
Computation of income from house property under different options
ParticularsHouse AHouse BRsRs(a)Assuming both properties are self-occupied (SO)Annual valueNilNilLess : Interest on loan(-) 30,000(-) 1,50,000Loss from house property(-) 30,000(-) 1,50,000
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3
Tax Supplement
(b)Assuming both properties as deemed let out (DLO)Gross annual value4,20,0006,00,000Less : Municipal taxes paid(-) 50,00060,000Net annual value3,70,0005,40,000Less : Permissible deduction :(i) Statutory deduction : 30% of Net annual value(-) 1,11,000(-) 1,62,000(ii) Interest on loan(-) 1,60,000(-) 2,20,000Income from house property99,0001,58,000(c)Criteria for selection of house for self-occupied : LowestOption IOption IItaxable incomeIncome from house A(-) 30,00099,000Income from house B1,58,000(DLO)(DLO)(SO)Income from other sources2,00,0002,00,000Total income3,28,0001,49,000
Conclusion:
House B should be treated as self-occupied.
3.
Dr.(Ms) Priyanka Chopra is the owner of a big house consisting of three units. Unit I consist of 40% area and Unit II and III are equal dimension, each occupying 30% area. The construction of house was completed on 1 April 2003 at a cost of Rs 10,00,000. The municipal value of the housefor the previous year 2008-2009 has been fixed at Rs 2,00,000. Municipal taxes have been leviedand paid @ 15% of rateable value. The rent under the Rent Control Act is Rs 1,50,000. Unit I is letout @ 10,000 p.m. for residential purposes. Unit II is self-occupied. Unit III is used by her for herprofessional purposes. The rent did not pay two months rent and conditions of Rule 4 are satisfied.She paid ground rent, Rs 9,000; interest on loan, taken during 1999-2000 for the construction of the house and payable during the PY 2008-2009 Rs. 1,50,000; insurance premium, Rs 6,000. Shespent Rs 30,000 on repair of the house. Depreciation for the clinic portion is Rs 15,000. Her grossreceipt from professional during the previous year 2008-2009 amount to Rs 5,60,000.Compute her gross total income for the assessment year 2009-2010
Computation of Income from House Property for the Assessment Year 2009-2010
ParticularsHouseHouseLet-outSelf-occupiedRs.Rs.Gross annual value :(a)ALV : House let out(i) 40% of municipal value : Rs 80,000 or(ii) 40% of the standard rent : Rs 60,000ALV is restricted to Rs 60,000(b)Actual rent for 40% portion for 10 months : Rs 1,00,0001,00,000NilGross annual valueLess : Municipal taxes paid by the owner for 40%Portion
1Rs.10040100152,00,000Rs.
=··
12,000NilNet annual value88,000Nil
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