Q1. What are the incomes from house property which are exempted from tax?Ans:-
The term 'House property' consists of buildings or land appurtenant to such buildings.Income from letting out of vacant plots of land when there is no adjoining building will not betaxed under this head (but will be taxed as income from other sources). The existence of a building is, therefore, an essential prerequisite for taxation of income from house property.'Building' will include residential house (whether let out or self-occupied), office building,factory building, godowns, flats etc. But, the purpose for which the building is used by the tenantis also immaterial. It does not make any difference at all if the property is owned by a limitedcompany or a firm. However, if the building or part thereof is used by the owner himself for the purpose of his own business then there will be no income from such portion of the house property.Under the Income-tax Act, the basis of calculating income from House property is the '
'. This is the inherent capacity of the property to earn income and it has been defined as thesum for which the property might reasonably be expected to let from year to year. Where theactual rent received is more than the reasonable return, it has been specifically provided that theactual rent will be the annual value. Where, however, the actual rent is less than the reasonablerent , the latter will be the annual value.The annual value of property consisting of any buildings or lands appurtenant thereto of whichthe assessee is the owner shall be subjected to Income Tax under the head '
'after claiming deductions (
) provided such property, or any portionof such property is not used by the assessee for the purposes of any business or profession,carried on by him, the profits of which are chargeable to income tax.
PROPERTY INCOMES EXEMPT FROM TAX
Some incomes from house property are exempt from tax. They are neither taxable nor includedin the total income of the assessee for the rate purposes. These are:i.Income from any farmhouse forming part of agricultural income;ii.Annual value of any one palace in the occupation of an ex-ruler;iii.Property Income of a local authority;iv.Property Income of an authority, constituted for the purpose of dealing with andsatisfying the need for housing accommodation or for the purposes of planningdevelopment or improvement of cities, towns and villages or for both. (The Finance Act,2002, w.e.f. 1.4.2003 shall delete this provision.);v.Property income of any registered trade union;vi.Property income of a member of a Scheduled Tribe;vii.Property income of a statutory corporation or an institution or association financed by theGovernment for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both;