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    13 views9 pages

    Income From House Property

    Uploaded by

    Deepak Kumar

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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    4oarzor9 ‘Analysis of Income from House Property or Income Tax (hipstaxguruincategenncamstax))» Arcs (hipstaxqurntypalaricls) » ~ ve ntypoteatred) © Some from House Property (https: Veaxguru.infincome-tax/analysi \come-house-property.htt - staxgunsintauhoriadrin) EESEEEES os:tonearencycan) ps sRaxguruinvcatogoryincome-tan)-Artces(hts:/taxgur.intypetartces/- Featured (tos axg intwp-adminfpostphp?post8540788action-ect) 02 Jul 2016 (tpsaxgursinv2016(07102/) @ 2° hips: ftaxgurinvincome-taxlanalysi-ncome-house-propetyhimiépcomments) Secure Secure Your Bike Your Bike ‘With SEFROMHOUSE PROPERTY? ‘With ICICI Lombard. 55 by owner trom any building or land attached with building 's chargeable undor the head House Pre ICICI Lombard. ‘2 Building or Land appurtenant thereto, Means if there is only a piace of open pt of lang i.e. 0 le under this head But land is attached with a bulding forming pat of bulcing shal be taxable un veaane {pool in a building, playground, backyard, kitchen garden or garage, then all these shall be chargealmeereerwr 2 mae ding: Any stucture having walls and roof thereo! fs Bulling. Building constructed of wood, brick or stone may Ens bulding and it snot always necessary to have roof on top of House property includes al type of house properties, i. residential houses, godowns, cinema buling, workshop bulding, tel buléng, ofc, shop ete Example: Mr- A has one big farm house. I includes vast open area within is boundaries. The farm house has been let out at rent of RS. 5,00,000 pm. out of which rent of Rs. 1,25,000 p.m, is atbutable to the open land. In this case, entire rental income that is 6,00,000 p.m. ks taxable under the head house propery. CATS The Ge Spielen Bauen Sie th Kampttahezeug Building und purposes, this head includes self occupied propery or lt out property. Let out of property may be for residential, factory, godown or office Building used for own business or profession will not be covered under this head 2, Person must be owner of property. Owner may be individual or a Company incorporated for the purposes of buying and development of land, Property wl be taxable under this head even if property is his stock in rade or len out of propery isthe business of assesses, But itis not aways necessary that only the owner of property shall be chargeable to lax under this head, ‘Exampla_Under leasehold agreement, i @ supe irespective of he fact that he has to handover the possession of superstructure after the expiry of lease period. Ownership Includes both fre hold and lease-hold rights and also includes deemed ownership, WHAT ARE THE INCOMES FROM HOUSE PROPERTY? rstucture i bull on a leasehold land, then the lessee shall be taxable under this head 41. RENTAL INCOME: It means the renal income in he hands of the ewner by letting out the house property. Rental income of @ person other than the owner cannot be charged fo lax under the head "Income from house propery”. Hence, renal income received by a tenant fom sub letting cannot be charged to tax under the head “Income from house property". Such income is taxable under the head “Income from other 2. DEEMED RENTALS: Where Rental income is not received by the registered owner of he propery then such renal income is not charged to {ax under the head “Income from house property’ hitps:ftaxguruinfincome-taxlanalysisincome-house-propery ml 19 4oarzor9 ‘Analysis of Income from House Property ite wtb However, in certain cases a person may not be the registered owner ofthe property even though he is treated as owner (.e. deemed owner) of ‘the property and rental income to be considered ae DEEMED RENT and such renal income shall be charged to lax under the head house propery. Few such cases are given hereunder: () Transfer of property to a Minor Child or Spouse without adequate consideration, In this case, ransforor shall be considered as deemed Note «2. Where transfers made to minor maried daughter then such minor daughter shall be trated as ove fr the purposes ofthis head. », Whore transfor of property Is made to spouse under an agreement to Ive apart then such epouse shall be treated as owner for the purposes ofthis head (i) Holder of impartibie estate is deemed as the owner ofthe property comprised in the eslate. Examole: Impartble estate means property hich isnot lagallycvisile i.e. pation of which cannot be done under the prevalent conltons, than holder of such estate shall be treated as. ‘owner forthe purposes of chargeabilty under this head (w) A member of co-operative society, company or other association of persons to whom a bulling/Flat\s allotted or leased under house building scheme of the society, company of associaion, such member are deemed avmet ofthe property. This is imespactiva ofthe fat that ‘ownership of such fat lies with Co-operative society, company or ether association of persons (Ws) A person acauiing property by ‘power of attorney transaction’ by saisfying the conditions of section 53A ofthe Transfer of Property Act, willbe teated as doomed owner (although he may not be te registered owner). Section S2A of said Act proserbes following conditions: () There must be an agreement in wring. (©) The purchase considerations pad or the purchaser swing o pay it (c) Purchaser has taken the possession of the propery in pursuance of the agreement. CATS The Ge Spielen aven Sieh Kompttahrzeue t (0) Incase of lease ofa property for a period excueding 12 years (whether originally fied or provision for extension exists), lessee is deemed to be the over ofthe property. However, any right by way of lease fram month-lo-month of for a period not axcaaing one year isnot covered by this provision. For Example, Where property given on lease for 10 years with aright o extend it for another 2 years, then lessee wl be treated as deemed owner. But, where a property leased out fr one month wih an opion to renew it for a month til next 20 years, then in such case lessee Will not be eated as doomed owner as each lease period fs of one month 3. LOSS IN CASE OF SELF OCCUPIED PROPERTY: n case of Self Occupied property, GAV is to be considered as NIL and deduction of interest on borrowed capital shall be available which will result inte Loss under the head House Property, Such loss infact beneficial (income) for owner as itean be set off against other incomes which will result into lower income and in turn low taxabilty Note: |. Where assesses has more than one Self Occupied Property, then only ane house property (ofthe cholcw of assesses) shall be treated as ‘Self Occupied and rest ofthe properies shall be treated 2s Deemed tobe let out property li Whore propery is not eecupiod due to per Example: Abhishek is having a flat in Delhi whereas he is ving along with his father who i alo living in Delhi. Then in such ease, since [Abhishek is nol occupying his Nat du to his personal convanionce therefore his own fat willbe vealed as doomed tobe lat out property. nal convenience then House Property wil be Leated as deemed to be fot aut property. For li. Where propery is not occupied by the owner forthe reasons of his employment, busines or profession caried out at any other place. xose for deduction on account of interest of Self Occupied Property: Deduction on account of interest on borrowed capital motivates assesses lo invest in property. From such investment assessee gots income lax benelil as well as property In rutskel,ho wil in a Beneficial positon in buying property by taking a loan rather than taking property on rent. STEPS FOR COMPUTATION OF INCOME FROM HOUSE PROPERTY ‘Computation of Income under th head House Property (rose Amat Value a Lose: Mincpal Taxes (00 hitps:ftaxguruinfincome-tax'analysisincome-house-properyniml 29 ‘Analysis of Income from House Property 4oarzor9 Lest: Daduetons unde aecton 24 ‘Standar Decvcton 003 Interest on vorrwod apt 00) Income from house property a Let's discuss each item of computation one by one: Gross Annual Value [Amount which can be eared ina year om house property Its Gross Annual Value. Four components are required for computing Gr Value Le. Municipal Value, Fair Renal Value, Slandard Rent, Actual Rent and computation fs shown in the form of chart hereunder: Computation of rote Amul Vals nidpal value Paes value te Annus tsRessonable Expected nent fut Reaconanie pected Re cannot exceed tara Fentin ease property Tetovered under Rent convol Act Takehigne of pour cual ent . Recenedor reseonable Recenvale star xpectednent Ravenel Lnreaees ent a4 ‘edu oss onaroount of vacancy mount ater dation wll b= Gross ‘annus Vato ‘Components of Gross Annual Value ‘Component 1: Municipal Value: The valuation done by Municipalty ofthe area of property is considered as Municipal value, However, in some big cts, value is determined afer deduction 10% on accaunt of rapa, allowance for sewage and water tax ot. ‘Component 2: Fair Rental Value: This s tho rent which can be gating fom similar property in similar locally ‘Component 3: Standard Rent: This the maximum rent which can be charged from tenant under Rent Contol Act, Component 4: Actual Rent recolved or recolvable for previous year less unrealised rent Note: ‘Meaning or Unrealised Rent: The amount of rant which a landlord is unable fo recover from tenant provided i) landlord has laken reasonable ‘stops to get the property vacated and have taken legal action for recovery of unrealised rent i) tenant has already vacated the property i) such {onant is notin occupation of any other property of landlor, Example: ‘Computation of Gross Annual Value Details nts: axgur.ivincome-taxlanalyss-income-nouse-property him! 39 4oarzor9 ‘Analysis of Income from House Property Fr Rena vate (FR) 1 200 500200400200 Standara Rent (SR) wo 180 400200800100 Unrelead Ron ee © Loss due to Vacancy - ew Solaton Stop 1 Higher of MV and FRY m0 10 = 950020800 step 6 ‘Grose Annual Value (Step 4~Step 5) ee ee ee ee ee) WHAT ARE THE ELIGIBLE DEDUCTIONS? Deduction for the payment of Municipal tax Municipal taxes levied by the local authonty are alowed as a deduction from the Gross Annual Value to arive at the Net Annual Valve. The deduction shall be allowed only if the folowing conitons are me Tho municipal taxes are actually paid during the nancial year ongthonéetion: mae sah eo funsawae? The municipal taxes are actually bore bythe owner Note: The Municipal taxes ave allowed as @ deduction ony in the financial year in which they are actually pad. Ifthe taxes are due but rot pala {are rot allowed as a deduction. However, municipal taxes etc pad during a financial year ae allowed even if they relate lo pastor future years. Simaly, Municipal Taxes paid in foreign county for a House Property situated ouside India shall be allowed as deduction but amount paid to ‘municipal authories or authorisation or regularisation of property shall nol be allowed as deducton ‘Statutory deduction @ 30% of Net Annual Value [A decuction st @ fat rate of 30% of Net Annual Value is allowed to everyone irespective of actual expenditure mage on account of repairs, maintenance, ground rent, insurance etc. For the purpose of statulory deduction Not Annual Value is Gross Annual Value loss taxes paid INTEREST ON HOME LOAN ‘Whenever any home loan is taken for purchase, constuction, repair, renewal or reconstruction of house property ~ the interests allowed as a deduction from the Net Annual Value on accrual basis (accrual basis moans interest is allowed as a deduction even though bye interest is not actualy pai). fs pertinent to note that lalnterast on Loan taken for purchase of land i also deducible under this head asin statute the word Properly is mentionee and not house propery. no deduction is allowed for any brokerage or commision for aranging the loan. In case of a salf occupied house property, this deduction is allowed to be claimed and therefore in such a case, an assessee may have a loss under the head House Property. The total amount allowed towards this deduction fra sof accupied house property is Rs 2,00,000 forthe assessment year 2015-16, Incase ofa let out or a deemed ta bo let out propery, the entire interest lt alowed as deduction under section 24, This Inorest can be chimed when the constuction of the property is complete Pre Acquistion Period interest Pre Acqusiton Period Interest i the Interest on loan taken for acquistion or construction of property for the period ‘Stating : From the date f borrowing Enulng: March 31" immediatly preceding the date of acquisition or constuction of property Deduction of Pre Acquistion Period Interests allowed in five equal instalments commencing rom the year in which construction or aquisiton of propery takes place, hitps:ftaxguruintincome-tax'analysisincome-house-propery ml 49 4oarzor9 ‘Analysis of Income from House Property Date of ompston of constucton oror2016 Inert ate rahe Sohtion re Acquistion Period Slats rom Date of Borowing 1052012 Ends on March 313ml prcooding the dle of constuction sran2015 2012-18 (01.05.2012'6 31032013) ‘1000 1,00.000%12% 1112 2013-16 01052018 31082014) +2000 2014-18 (01.05.2014 31052015) 2000 Tota Pee Acquisition Interest 25000 ‘Deducton wi sta tam exp of Pre Acquston pelo Le 15 of Pre Acqusiten 17000 ‘8000's + 2000 Inert + Curen oar hiorast Additional tax benefits under section 80EE Section SOEE has been revamped. An addtional deduction of Rs 60,000 on home loan interest is allowed to be claimed startng financial year 2016-17, However tobe able to claim this deduction, you must meet the folowing conditions The oan must be taken between 1st Apr 2016 to ist March 2017 As on the date of sanction ofthe loan the taxpayer should rot own ary property

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