4B.

INCOME FROM HOUSE PROPERTY

Q1. X has built a house on a Leasehold Land. He has let-out the above property & claims that the rental
Income from such Property is taxable u/h "IFOS", & deducted Expenses on Repair, Security Charges,
Insurance & Collection Charges, in all amounting to 40% of receipts. State the head of income under
which the receipt is to be assessed & comment.
Answer:
▪ Mr. X is the owner of the house property.
▪ The fact that the house is built on leasehold land is irrelevant. Ownership of the building is relevant &
not the ownership of the land on which building stands.
▪ Thus Income from such house is liable to tax, u/h “Income from House Property”. Since it is chargeable
under the head House Property, deduction u/s 24 alone can be claimed & no other deductions are
allowed.

Q2. Arvind commenced construction of a residential house intended exclusively for his residence, on
1.11.2017 He raised a loan of Rs. 7 Lacs @ 16% Interest for the purpose of construction on
1.11.2017 Finding that there was an overrun in the cost of construction he raised a further loan of Rs. 10
Lacs at the same rate of interest on 01.10.2018.
What is the interest allowable u/s 24, assuming that the construction was completed on 31.03.2019? [M
2000]
Solution: Computation of Interest u/s 24
1. Prior Period: 01.11.2017 to 31.03.2018
2. Prior Period Interest Calculation: Loan -1: Rs. 7,00,000 x 5/12 x 16% 46,667
3. 1/5th of Prior Period interest: (1/5 x 46,667) 9,333
4. Interest for Current Year: Loan – 1: Rs. 7,00,000 x 16% 1,12,000
Loan – 2: Rs. 10,00,000 x 16% x 6/12 80,000 1,92,000
5. Total Interest (3 + 4) 2,01,333
6. Deduction Allowable u/s 24 in respect of Interest on Borrowed Capital (Note) 2,00,000

Note: In case of Self Occupied Property, the maximum permissible interest deduction is Rs. 2,00,000.

Q3. Compute gross annual value in the following cases for the AY 2019-20: [Modified May 2012]
Particulars Situation 1 Situation 2 Situation 3 Situation 4
Fair Rent (p.m.) 9,000 13,000 12,000 16,000
Municipal Valuation (p.m.) 10,000 9,000 9,000 18,000
Standard Rent (p.m.) 12,000 11,000 7,000 16,000
Rent received/ receivable (p.m.) 7,000 11,500 20,000 16,500
Vacancy 1 month 1 month 2 month 2 months
Solution:
Situation 1
(a) Fair Rent (9,000 x 12) 1,08,000
(b) Municipal Valuation (10,000 x 12) 1,20,000
(c) Higher of (a) or (b) 1,20,000
(d) Standard Rent (12,000 x 12) 1,44,000
(e) Expected Rent {Lower of (c) or (d)} 1,20,000
(f) Actual Rent Received/Receivable (7,000 x 11) 77,000
▪ If there was no vacancy, in that case actual rent received/receivable would have been Rs. 84,000.

Situation 2
(a) Fair Rent (13,000 x 12) 1,56,000
(b) Municipal Valuation (9,000 x 12) 1,08,000
(c) Higher of (a) or (b) 1,56,000
(d) Standard Rent (11,000 x 12) 1,32,000
(e) Expected Rent {Lower of (c) or (d)} 1,32,000
(f) Actual Rent Received/Receivable (11,500 x 11) 1,26,500
▪ In this case, if there was no vacancy, ARR would have been Rs. 1,38,000.
▪ Thus we can say that ARR < ER due to vacancy & thus GAV = ARR = 1,26,500.

Situation 3
(a) Fair Rent (12,000 x 12) 1,44,000
(b) Municipal Valuation (9,000 x 12) 1,08,000
(c) Higher of (a) or (b) 1,44,000
(d) Standard Rent (7,000 x 12) 84,000
(e) Expected Rent {Lower of (c) or (d)} 84,000
(f) Actual Rent Received/Receivable (20,000 x 10) 2,00,000
▪ Since ARR > ER despite vacancy, GAV = ARR = 2,00,000.

Situation 4
(a) Fair Rent (16,000 x 12) 1,92,000
(b) Municipal Valuation (18,000 x 12) 2,16,000
(c) Higher of (a) or (b) 2,16,000
(d) Standard Rent (16,000 x 12) 1,92,000
(e) Expected Rent {Lower of (c) or (d)} 1,92,000
(f) Actual Rent Received/Receivable (16,500 x 10) 1,65,000
▪ In this case, if there was no vacancy, ARR would have been Rs. 1,98,000.
▪ Thus we can say that ARR < ER due to vacancy & thus GAV = ARR = 1,65,500.

Q4. Mr. Ganesh owns a Commercial Building whose construction got completed in June 2017. He took a
Loan of Rs. 15 Lacs from his friend on 1.8.2016 & had been paying Interest calculated at 15% p.a.
Mr. Ganesh has let out the Commercial Building at a monthly rent of Rs. 40,000 during FY 2018-19. He
paid
Municipal Tax of Rs. 18,000 each for PY 2017-18 & PY 2018-19 on 1.5.2018 & 5.4.2019 respectively.
Compute Income under the head 'House Property' of Mr. Ganesh for AY 2019-20. [May 17]
Solution:
Gross Annual Value = Actual Rent Receivable ( Rs. 40,000 x 12 months) 4,80,000
Less: Municipal Taxes (deductible only on actual payment basis, during PY i.e 01.05.2017 (18,000)
Net Annual Value 4,62,000
Less: Deductions u/s 24
(a) Standard Deduction at 30% of Net Annual Value (1,38,600)
(b) Interest on loan borrowed: Current Year Interest: Rs. 15,00,000 x 15% = 2,25,000
: Pre-Construction Interest at 1/5th of Rs. 1,50,000 = 30,000 (2,55,000)
Income from House Property 68,400
Note:
• Pre-Construction Period Interest = Rs. 15,00,000 x 15% 8/12 (from 01.08.2015 to 31.03.2016) =
Rs. 1,50,000.
• This is deductible in 5 years form PY 2017-2018 onwards. Hence, Share of this Interest for PY
2018-2019 = 1/5th.

Q5. R owns a house property in Delhi, which is let out for Rs. 8,000 p.m. Municipal Value of the house is
Rs. 60,000 & Fair Rent is Rs. 90,000. Standard Rent of the house property was Rs. 80,000. Municipal taxes
of the house for the relevant PY were Rs. 20,000 but the assessee paid the municipal taxes of the next five
years also in advance. The house remained vacant for March 2019. Compute the income under the head
house property for the AY 2019-20.
The other particulars of the house were as under:
(i) Repairs & collection charges = Rs. 3,000; (ii) Interest on money borrowed for purchase: Rs. 10,000;

Solution:
Particulars Amount
Gross Annual Value [WN1] Rs. 88,000
Less: Municipal tax paid by the owner (Rs. 1,20,000)
Net Annual Value [GAV – MT] (Rs. 32,000)
Less: Deduction u/s 24
24(a): Std Deduction @ 30% Nil
24(b): Interest (10,000)
Income from House Property (42,000)

Working Note: Since ARR > ER, GAV = ARR; ER = 80,000; ARR: 8,000 x 11= Rs. 88,000; GAV = Rs. 88,000.

Q6. For AY 2019-20, R submits the following information, Determine the taxable income of R for the AY
2019-20.
Particulars House A House B
Fair Rent 1,20,000 1,40,000
Actual Rent 1,32,000 1,06,000
Standard Rent 1,26,000 1,20,000
Municipal Tax due 18,000 20,000
Repairs 6,000 8,000
Insurance 3,000 4,000
Land revenue (paid) 4,000 2,000
Ground rent 2,000 5,000
Interest on capital borrowed by mortgaging A (funds are used for construction of B) 30,000

Solution: Computation of taxable income of X

Particulars House A House B
GAV 1,32,000 1,20,000
Less: Municipal taxes [Not paid] Nil Nil
NAV 1,32,000 1,20,000
Less: Deduction u/s 24
24(a): Standard deduction @ 30% (39,600) (36,000)
24(b): Interest - (30,000)
 Income from house property 92,400 54,000

Income from house property [Rs. 92,400+ Rs. 54,000] = 1,46,400

Q7. R is the owner of a residential house whose construction was completed on 31.8.2008. It has been let
out from 1.1.2009 for residential purposes. Its particulars for the financial year 2018-19 are given below:
Municipal valuation (p.a.) 65,000
Fair Rent (p.a.) 72,000
Standard rent under the Rent Control Act (p.m.) 7,000
Actual rent (p.m.) 7,000
Municipal taxes paid (including Rs. 5,000 paid by tenant) 20,000
Water/sewerage benefit tax, levied by State Government paid under protest 5,000
Interest on loan taken for the construction of the house. Interest has been paid o/s India to NR 15,000
without TDS (NR had agreed to pay income-tax on such Interest direct to the Government)
Legal charges for the recovery of rent 4,000
Stamp duty & registration charges incurred in respect of lease agreement of house 2,000

The unrealised rent for PY 2009-10 is recovered of Rs. 20,000 from the defaulting tenants. Compute
Income from house property for the AY 2019-20.

Solution: Computation of Income from House Property

Gross Annual rent 84,000
Less: Municipal taxes paid by owner 15,000
Net Annual value 69,000
Less: Deduction u/s 24
24(a) - Standard deduction @ 30% (20,700)
24(a) - Interest: Paid to NR without deducting TDS, hence, not deductible Nil (20,700)
48,300
Add: Unrealised rent recovered [20,000 * 70%] 14,000
Income from house property 62,300

Q8. Mr. X owns one residential house in Mumbai. The house is having 2 units. 1 st unit of the house is self-
occupied by Mr. X & another unit is rented for Rs. 8,000 p.m. Rented unit was vacant for 2 months during
the year. The particulars of the house for the Previous Year 2018-2019 are as under:
Standard Rent Rs. 1,62,000 p.a.
Fair Rent Rs. 1,85,000 p.a
Municipal Value Rs. 1,90,000
Light & Water Charges Rs. 500 p.m.
Money Repairs Rs. 1,200 p.m
Municipal Tax paid 15 %
Interest on Borrowed Capital Rs. 1,500 p.m.

Compute Income from House Property of Mr. X for AY 2019-20. [NOV - 13/Nov 2008/Mod. Nov
2012] Solution: Computation of Income from House Property
Particulars 1st Unit SOP 2nd Unit LOP
Gross Annual Value NIL 80,000
Less: Municipal Taxes (assumed as paid during PY) [Rs. 1,90,000 x 15% x 50%] NIL (14,250)
Net Annual Value NIL 65,750
Less: Deduction u/s 24
Deduction at 30% of NAV (Rs. 65,750 x 30%) NIL (19,725)
Interest on Borrowed Capital (Rs. 750 p.m. x 12 months) each for 2 units (9,000) (9,000)
Income from House Property (9,000) 37,025
Taxable Income from House Property 28,025

Working Note:
1. GAV of 2nd Unit is determined as:
Expected Rent = Higher of MV (Rs. 95,000) or FR (Rs. 92,500) subject to Maximum of SR (Rs. 81,000) =
Rs. 81,000.
Actual Rent Receivable = Rs. 80,000 (8,000 x 10)
If there would have been no vacancy, ARR would be Rs. 96,000. Thus, we can say that ARR < ER due to
vacancy, GAV = ARR = Rs. 80,000.
2. Annual Value of 1st Unit: Since the House Property is self-occupied by the Assessee, GAV is taken
as NIL.
3. Light & Water Charges, Lease Money, Insurance charges & Repairs are not allowable as
deduction u/s 24.
4. Set-off of Losses: Loss from one House property can be set off against Income from another
Property, u/s 70.

*Q9. A owns a house property at Delhi. 60% of house property is self-occupied for residence & 40% is let
out on monthly rent of Rs. 5,000. Let-out portion was also self-occupied from 1.10.2018 to 31.12.2018.
However, w.e.f. 1.1.2019, entire house was let out for Rs. 12,500 pm. Construction of house property was
completed on 31.12.1998. The following expenses were incurred for the above house property during the
year ending on 31.3.2019.
Municipal Tax paid for FY 2016-17 : 5,000 FY 2017-18 : 10,000 FY 2018-19 : 15,000

Insurance premium paid: 3,000; Land revenue due: 6,000; Interest on money borrowed for construction:
18,000 Calculate income under the head house property of A for the AY 2019-20.
Solution: As both the unit are let out for the part of the year & self-occupied for some part of the year,
benefit of self-occupation for residential purpose u/s 23(2) will not be available & NAV of both units shall
be determined as per section 23(1).
(a) ER 12,500 x 12 1,50,000
(b) AR
Rs. 5,000 x 6 30,000
Rs. 12,500 x 3 37,500 67,500
Thus GAV = 1,50,000
Less: Municipal tax paid (5,000 + 10,000 + 15,000) (30,000)
NAV 1,20,000
Less: Standard deduction @ 30% (36,000)
Interest (18,000) 54,000
Income from House Property 66,000

*Q10. Ganesh has two houses, both of which are SOP. The particulars of the houses for the PY 2018-19
are as under:
Particulars House I House II
Municipal valuation p.a. 1,00,000 1,50,000
Fair rent p.a. 75,000 1,75,000
 Standard rent p.a. 90,000 1,60,000
Date of completion 31.3.1999 31.3.2001
Repairs Rs. 12,000 Rs. 4,000
Insurance Premium Rs. 1,500 Rs. 1,800
Municipal taxes paid during the year 12% 8%
Interest on money borrowed for repair of property during the current year - 55,000
Compute Ganesh’s income from house property for AY 2019-20 & suggest which house should be opted
by Ganesh to be assessed as self-occupied so that his tax liability is minimum. [May 14/SM]

Solution: Computation of income from house property of Ganesh for AY 2019-20

Let us first calculate the income from each house property assuming that they are deemed to be let out.
Particulars Amount in Rs.
House I House II
GAV [ER = GAV since both are SOP [Higher of MV & FR, but restricted to SR] 90,000 1,60,000
Less: Municipal taxes (paid by the owner during the PY) 12,000 12,000
NAV 78,000 1,48,000
Less: Deductions u/s 24
(a) 30% of NAV 23,400 44,400
(b) Interest on borrowed capital - 55,000
Income from house property 54,600 48,600

OPTION 1 (House I: SOP & House II: DLOP)

If House I is opted to be self-occupied, the income from house property shall be –
Particulars Amount
House I (Self-occupied) Nil
House II (Deemed to be let-out) 48,600
Income from house property 48,600

OPTION 2 (House I: DLOP & House II: SOP)

Particulars Amount
House I (Deemed to be let-out) 54,600
House II (Self-occupied) (interest deduction restricted to Rs. 30,000) (30,000)
Income from house property 24,600

Since Option 2 is more beneficial, Ganesh should opt to treat House II as SOP & House I as DLOP. His
income from house property would be Rs. 24,600 for the AY 2019-20.

Note:
1. Gross Annual Value for SOP is Nil. Municipal Taxes paid for SOP shall not be allowed as
deduction.
2. For Loan taken for repair, Interest on Housing Loan shall be allowed as deduction u/s 24 up to a
maximum of Rs. 30,000 in case of SOP.

Q11. Mrs. R is the owner of a two storied house in Madras. She gets a monthly rent Rs. 7,000 from her
tenant in the ground floor. The first floor, identical in all respect with the ground floor used to be
occupied by a friend of Mrs. R from whom she charged a rent of Rs. 5,000 per month. During the year
ended 31.3.2019, the friend stayed in Mrs. R house up to 31.12.2018. On 1.1.2019 it was again let out to
tenant at a rent of Rs.7,000 per month. Details of expenses incurred by Mrs. R during the year ending
31.3.2019 in respect of the house were as under:
(a) Cost of repairing ground floor: Rs. 7,500; (b) Cost of repairing first floor: Rs. 50,000
 (c) Interest on loan taken for construction of first floor: Rs. 20,000;
(d) Municipal, tax paid by owner: Rs. 6,000
(e) Monthly salary of an employee for collecting rent: Rs. 1,000.
Compute Mrs. R's income from house property for the AY 2019-20.
Solution: Computation of Income from house property of Mrs. R
Ground Floor
GAV 84,000
Less: Municipal Taxes paid 3,000
NAV 81,000
Less: Deduction u/s 24
Standard deduction @ 30% 24,300
Income from ground floor 56,700
First Floor
GAV, higher of the following two:
ER (7,000 x 12) 84,000
AR (5,000 x 9) + (7,000 x 3) 66,000 84,000
Less: Municipal taxes paid 3,000
NAV 81,000
Less: Deductions u/s 24
(a) Standard deduction @ 30% 24,300
(b) Interest on borrowed capital 20,000 44,300
Income from first floor 36,700

Total income from House Property (Rs. 56,700 + Rs. 36,700) = Rs. 93,400.

Q12. R has a property which consists of three identical flats. Construction of the property started in 1988
& on completion the property was occupied for the first time on 5.9.1994. One flat is let-out on Rs. 5,000
p.m., & second for Rs. 6,000 p.m., third is occupied by R himself. Other relevant details are given below:
(i) MV: Rs. 1,50,000; (ii) SR: Rs. 1,98,000; (iii) FR: Rs. 2,00,000; (iv) Municipal tax paid: Rs.
24,000; (v) Ground rent paid: Rs. 3,000; (vi) Insurance premium on property: Rs. 1,500.
R had borrowed Rs. 1,00,000 against his fixed deposits to repair the tenanted portion of the flat which is
let out for Rs. 5,000 p.m. He paid interest of Rs. 12,000 on the said loan. He had spent Rs. 4,000 for
collection of rent. The second unit which was let for Rs.6,000 p.m. remained vacant for a period of 2
months during the year.
Compute the income under the head house property for the AY 2019-20.
Solution:
Unit I Unit II Unit III
LOP for Rs. 5,000 p.m. LOP for Rs. 6,000 p.m. SOP
Annual municipal valuation 50,000 50,000 50,000
FR 66,667 66,667 66,667
Standard Rent 66,000 66,000 66,000
AR exclusive of vacancy allowance 60,000 60,000 Nil
GAV 66,000 60,000 Nil
Less: Municipal taxes paid 8,000 8,000 Nil
58,000 52,000 Nil
Less: Deductions u/s 24
Standard deduction @ 30% 17,400 15,600 Nil
Interest on money borrowed for repairs 12,000 - -
Income from 3 units 28,600 36,400 Nil
Income from house property Rs. 28,600 + 36,400 = Rs. 65,000.

Q13. Prem owns a house in Madras. During PY 2018-19, 2/3 rd portion of the house was self-occupied &
1/3rd portion was let out for residential purposes at a rent of Rs. 8,000 p.m. MV = Rs. 3,00,000 p.a., FR =
Rs. 2,70,000 p.a. & SR = Rs. 3,30,000 p.a. He paid MT @10% during the year. A loan of Rs. 25,00,000 was
taken by him during the year 2013 for acquiring the property. Interest on loan paid during PY 2018-19
was Rs. 1,20,000. Compute Prem’s
income from house property for the AY 2019-20. [Similar to Nov 2012]
Solution:
▪ There are two units of the house. Unit I with 2/3rd area is used by Prem for self- occupation
throughout the year & no benefit is derived from that unit, hence it will be treated as SOP & its NAV
will be Nil.
▪ Unit 2 with 1/3rd area is let-out throughout the previous year & its NAV has to be determined as
per sec 23(1).

Computation of Income from house property of Mr. Prem for AY 2019-20 Unit I (2/3 rd
area: Self-occupied)
NAV Annual Value Nil
Less: Deduction u/s 24(b) 2/3rd of Rs. 1,20,000 (80,000)

Unit II (1/3rd area: Let out)

Particulars Reason/ Analysis Amount
Gross Annual Value Higher of ER = 1,00,000; ARR: 8,000 x 12 = Rs. 96,000 Rs. 1,00,000
Less: Municipal tax paid [1/3rd of (10% of Rs. 3 lacs)] = Rs. 30,000/3 (Rs. 10,000)
Net Annual Value GAV – MT Rs. 90,000
Less: Deduction u/s 24
24(a): Std Deduction @ 30% 30% of Rs. 90,000 (Rs. 27,000)
24(b): Interest 1/3rd of Rs. 1,20,000 (Rs. 40,000)
Income from Unit II (let-out) Rs. 23,000

▪ Total Income from House Property = (Rs. 80,000) + Rs. 23,000 = (Rs. 57,000).

Q13. X owns a building consisting of 3 identical units. Construction of the building was completed on
1.9.2018. The building was occupied from 1.4.2018 onwards. Particulars for PY 2018-19 are given below:
Particulars Unit I Unit II Unit III
Fair Rent 60,000 60,000 60,000
Rent received - 72,000 -
Municipal taxes Paid 3,000 5,000 3,000
Municipal taxes Due but not yet paid 3,000 5,000 3,000
Land revenue due but outstanding 1,200 1,200 1,200
Ground rent due, but not yet paid 2,400 2,400 2,400
Nature of occupation SOP (Residence) LOP (Residence) Business Use

On 1.4.2016, X had borrowed a sum of Rs. 7,50,000 bearing interest at 8% p.a for construction of this
building. The total cost of construction of the building was Rs. 12,00,000. Compute Income from HP" for
AY 2019-20. Solution:
Particulars I II III
SOP LOP Not
GAV Nil 72,000 taxable
Less: Municipal tax - 5,000 as used
NAV Nil 67,000 for
business
Less: Deductions u/s 24 - (20,100)
(a) Standard deduction @ 30% (28,000) (28,000)
(b) Interest for each unit (8,000 (pre) + 20,000 (current year interest)
(28,000) 18,900
Income from House Property (Rs. 9,100)

Calculation of Interest Deductible for PY 2018-19:

(i) Current Year Interest:
Interest for PY 2018-19: Rs. 7,50,000 * 8% = Rs. 60,000.
Interest of Rs. 60,000 is for all 3 units. Thus Interest proportionate to Unit 1 = Rs. 60,000/3 = Rs. 20,000.

(ii) Pre-Construction Period Interest: From 1.4.2016 – 31.3.2018 Interest = Rs.

7,50,000 * 8% = Rs. 60,000 * 2 Years. = Rs. 1,20,000.
Interest of Rs. 1,20,000 is for all 3 units. Thus Interest proportionate to Unit 1 = Rs. 1,20,000/3 = Rs.
40,000.
Thus Interest Allowed as deduction in PY 2018-19 = 1/5th of Rs. 40,000 = Rs. 8,000.
Total Deduction of Interest in PY 2018-19 = Rs. 20,000 + Rs. 8,000 = Rs. 28,000.

Q14. K constructed a house property in old Hubli consisting of two units on a leasehold land. The
construction was completed on 30.6.2003 & its municipal valuation was at Rs. 80,000. He let out one of
them for commercial purposes & was himself residing in the other. The self-occupied portion was 2/5 th of
the house. Rent is fixed at Rs. 6,000 per month. His income from other sources is Rs. 15,000. His expenses
for PY 2018-19 were as under: (i) Municipal taxes: Rs. 6,000; (ii) Ground rent: Rs. 1,000; (iii) Insurance:
Rs. 400; (iv) Collection charge: Rs. 2,000 Interest on loan for: (i) Construction of house: Rs. 30,000; (ii)
Purchase of car: Rs. 20,000.
Calculate his income from house property.
Solution:
Let out unit
GAV higher of the following two:
(a) MV 3/5 of Rs. 80,000 = 48,000
(b) AR (Rs. 6,000 x 12) = 72,000 72,000
Less: Municipal taxes 3/5th 3,600
NAV 68,400
Less: Deductions u/s 24
(a) Standard deduction @ 30% 20,520
(b) Interest (60%) 18,000 38,520 29,880
Self-occupied unit
Annual value Nil
Less: Interest 12,000 (-) 12,000
Income from House Property 17,880

Q15. From the particulars given below compute income from house property:
Fair value Rs. 72,000
Date of completion 1.11.1999
Self-occupied 2/3 portion
Let-out 1/3 portion from 1.4.2018 to 31.8.2018 @ Rs. 2,500 p.m. & SOP from 1.9.2018.
Municipal taxes paid Rs. 15,000 p.a.
Insurance premium Rs.2,000 p.a.
 Ground rent Rs.2,000 p.a.
Solution: Computation of House Property Income
(i) Self occupied 2/3rd portion Nil
rd
(ii) Let out portion 1/3
Fair Value (72,000 x 1/3) 24,000
Actual rent receivable (2500 x 5) 12,500
Annual rental value (treating as fully let-out during the year) 24,000
Less: Municipal taxes 5,000
NAV 19,000
Deductions
Standard deduction @ 30% 5,700
Income from l/3rd portion 13,300

Income from house property = Nil + 13,300 = Rs. 13,300.

Q16. R owns three houses properties. He has furnished the following particulars for the financial year
2018-19: First House: Its Municipal valuation is Rs. 1,00,000. This is used by him for his residence. He
has paid fire insurance premium Rs. 2,000 & Municipal taxes Rs. 10,000. He has also paid interest on loan
Rs. 16,000. This loan was taken to repay another loan which he had taken for the construction of this
house.
Second House: Its Municipal valuation is Rs.60,000 & it has been let-out at a rent of Rs.6,000 p.m. He has
made the following payments in respect of this house:-
Municipal taxes Rs.6,000; Repairs Rs.10,000; Land Revenue Rs.2,000; Legal expenses for getting the
house vacated Rs. 5,000. Annual charge Rs.30,000. The house remained vacant for 3 months.
Third House: The construction of this house was completed on 31.3.2005. Its Municipal valuation is Rs.
1,20,000. It consists of two identical units, each of which has been let-out at a rent of Rs.7,500 p.m. He has
made the following payments in respect of in house: Municipal Taxes Rs. 12,000; Ground Rent Rs.6,000;
Interest on loan taken for construction Rs.40,000. The second unit remained vacant for two months.
Compute his taxable income from house property for AY 2019-20.

Solution: Income from House Property

H1 (SOP) H 2 (LOP) H 3 – Unit I (LOP) H 3 – Unit II (LOP)
GAV Nil 54,000* 90,000 75,000
Less: Municipal taxes N/A (6,000) (6,000) (6,000)
NAV Nil 48,000 84,000 69,000
Deduction u/s 24(a) @ 30% - (14,400) (25,200) (20,700)
Interest on loan u/s 24(b) (16,000) - (20,000) (20,000)
Income from HP (16,000) 33,600 38,800 28,300

Income from HP = (16,000) + 33,600 + 38,800 + 28,300 = Rs.

84,700. * Actual rent received exclusive of vacancy 6,000 x 9 =
Rs. 54,000.

Q17. Mr. X has let out one house along with generator facility & has charged Rs. 40,000 p.m. as rent, out of
which Rs. 3,000 p.m. is attributable to the generator. He has paid Rs. 2,300 & the tenant has paid Rs. 900
towards municipal taxes. The interest on the capital borrowed for construction of the house is Rs. 7,000.
Mr. X has paid repair charge of the generator Rs. 3,400, fuel charges Rs. 5,600 & operator’s salary Rs. 300
p.m. Compute the tax liability of Mr. X for AY 2019-20.
Solution: Computation of income under the head House Property
Gross Annual Value (37,000 x 12) 4,44,000
 Less: Municipal Taxes (2,300)
Net Annual Value 4,41,700
Less: 30% of NAV u/s 24(a) (1,32,510)
Less: Interest on capital borrowed u/s 24(b) (7,000)
Income under the head House Property 3,02,190

Computation of Income u/h “Other Sources”

Income from generator (3,000 x 12) 36,000
Less: Repair charges + Fuel charges + Operator Salary (300x12) [3,400 + 5,600 + 3,600] (12,600)
Income under the head Other Sources 23,400

Computation of Total Income

Income under the head House Property 3,02,190
Income under the head Other Sources 23,400
Gross Total Income 3,25,590
Less: Deduction u/s 80C to 80U Nil
Total Income 3,25,590

Q18. Two brothers Arun & Bimal are Co-Owners of a House Property with equal share. The property was
constructed during PY 1998 - 99. The property consists of eight identical units & is situated at Cochin.
During PY 2018 - 19, each Co-Owner occupied one unit for residence & the balance of six units were let
out at a rent of Rs. 12,000 per Month per unit. The Municipal Value of the House Property is Rs. 9,00,000
& the Municipal Taxes are 20% of Municipal Value, which were paid during the year. Other expenses
were as follows: (i) Repairs: Rs. 40,000; (ii) Insurance premium (paid): Rs. 15,000; (iii) Interest payable
on loan taken for construction of house: Rs. 3 lacs.
One of the Let – Out units remained vacant for 4 months during PY. Arun could not occupy his unit for 6
months as he was transferred to Chennai. He does not own any other house. The Other Income of Mr.
Arun & Mr. Bimal are Rs. 2,90,000 & Rs. 1,80,000 respectively for the Previous Year 2018-2019.
Compute the Income under the head
Income from House Property & the Total Income of two brothers for AY 2019-20.
[Nov 12] Solution: 1. Computation of Income from Let-Out House Property (6 Units)
Gross Annual Value: Municipal Value or Actual Rent whichever is higher 8,16,000
Rs. 9,00,000 x 6/8 (OR) Rs. 12,000 x 12 months x 6 Units, 6,75,000 (or) 8,64,000
(But owing to vacancy in one of the let-out property, the Annual Value received with respect to that property is
reduced to actual rent received i.e. Rs. 12,000 x 8 = Rs. 96,000)
[Therefore, the Annual Value is ( Rs. 12,000 x 12 months x 5 units) + Rs. 96,000]
Less: Municipal Taxes Paid (20% on Municipal Value) [( Rs. 9,00,000 x 6/8) x 20%)] (1,35,000)
Net Annual Value 6,81,000
Less: Deductions u/s 24: (a) 30% of Net Annual Value (2,04,300)
(b) Interest ( Rs. 3,00,000 x 6/8) (2,25,000)
Income from House Property 2,51,700

2. Computation of Total Income of Mr. Arun

1. Income from House Property – Self Occupied, So, Annual Value u/s 22 NIL (30,000)
Less: Deduction u/s 24 – Interest [WN 1] (30,000) 1,25,850
Income from Self-occupied Property 2,90,000
Share of Income from Let-out Property ( Rs. 2,51,700 2) 2.
Other Income
Total Income 3,85,850
 3. Computation of Total Income of Mr. Bimal
1. Income from House Property – Self Occupied, So, Annual Value u/s 22 NIL
Less: Deduction u/s 24 – Interest [WN 1] (30,000)
Income from Self-occupied Property (30,000)
Share of Income from Let-out Property (Rs. 2,51,700 + 2) 2. 1,25,850
Other Income 1,80,000
Total Income 2,75,850

Working Note:
1. Interest on Loan is Rs. 3,00,000 + 8 Units = Rs. 37,500. Since the loan is taken prior to
01.04.1999, maximum allowable interest is only Rs. 30,000.
2. Repairs & Insurance Premium are not allowed as deduction.
3. Municipal Taxes paid is not allowed as deduction while computing income from Self-occupied
property.

Q19. Mr. Raman is a Co-Owner of a House Property along with his brother. [Nov 09]
Municipal Value of the Property 1,60,000
Fair Rent 1,50,000
Standard Rent under the Rent Control Act 1,70,000
Rent Received 15,000 p.m.
The loan for the construction of this property is jointly taken & the interest charged by the bank is Rs.
25,000 out of which 21,000 have been paid. Interest on the unpaid interest is 450. To repay this loan,
Raman & his brother have taken a fresh loan & interest charged on this loan is Rs. 5,000. Municipal Taxes
of Rs. 5,100 have been paid by the Tenant. Compute Income from this house property chargeable in the
hands of Mr. Raman for AY 2019-20. Solution: Shares of each co-owner is not given. If share of each Co-
Owner of the property is not definite, then Income from property will be determined & charged to tax in
the capacity of an AOP (Sec. 26). Computation of Income from House Property
Gross Annual Value [Note 1] 1,80,000
Less: Municipal Taxes paid [Note 2] (Nil)
Net Annual Value of the House Property 1,80,000
Less: Deduction u/s 24(a): 30% of NAV = 30% of Rs. 1,80,000 (54,000)
Deduction u/s 24(b): Interest on original loan + Loan taken to repay the original loan (30,000)
Income from House Property 96,000

Note:
1. GAV = Higher of ER or ARR.
(i) ER = Higher of FR (1,50,000) & MR (1,60,000) sub to Max. of SR (1,70,000) =
1,60,000 (ii) ARR = Rs. 1,80,000 (15,000 x 12).
2. Since Municipal Taxes have been paid by the tenant, it shall not be allowed as a deduction to
owner.
3. Interest on interest of Rs. 450 shall not be allowed as deduction u/s 24.
4. Interest shall be allowed on accrual basis even though it is not paid during the Relevant Previous
Year.
5. It is assumed the interest of Rs. 25,000 does not include the interest on interest of Rs. 450.
6. If it is assumed that the Mr. Raman is an equal owner of the House Property, then the Taxable
Income from House Property in the hands of Mr. Raman is Rs. 48,000 (Rs. 96,000 + 2).

Q20. Mrs. Rohini Ravi, a Citizen of the USA is a Resident & Ordinarily Resident in India during the
Previous Year 2018-2019. She owns a House Property at Los Angeles, U.S.A. which is used as her
residence. The annual value of the house is $ 15,000. The value of 1 USD ($) may be taken as Rs. 60. She
took ownership & possession of a flat in Chennai on 01.07.2018, which is used for Self- Occupation, while
she is in India.
The flat was used by her for 7 months only during the year ended 31.03.2019. Whilst the Municipal
Valuation is Rs. 32,000 p.m, the Fair Rent is Rs. 4,20,000 p.a. She paid the following to Corporation of
Chennai – Property Tax Rs. 16,200 & Sewerage Tax Rs. 1,800.
She had taken a Loan from Standard Chartered Bank for purchasing this flat. Interest on Loan was
Period prior to 01.04.2018 49,200
01.04.2018 to 30.06.2018 50,800
01.07.2018 to 31.03.2019 1,31,200
She had a house property in Bangalore, which was sold in March, 2018. In respect of this house, she
received arrears of rent of Rs. 60,000 in March, 2019. This amount has not been charged to tax earlier.
Compute the Income
from House Property of Mrs. Rohini Ravi for AY 2019-20 exercising the most beneficial option available.
[May 09]
Solution: Computation of Income from House Property
Particulars Option I Option II
US (SOP) Indian DLOP US DLOP Indian SOP
Gross Annual Value Nil 3,15,000 9,00,000 Nil
1. Fair Rent or Municipal Value, whichever is higher.
India: 32,000x9 = 2,88,000 or (4,20,000x9/12)= 3,15,000 2.
US: $15,000 x Rs. 60 (given)
Less: Municipal Taxes paid (16,200 + 1,800) NA (18,000) Nil NA
Net Annual Value Nil 2,97,000 9,00,000 Nil
Less: Deductions u/s 24
(a) 30% of Net Annual Value - (89,100) (2,70,000) -
(b) Interest on borrowings (Refer Note 2) - (1,91,840) - (1,91,840)
Income from House Property (A) Nil 16,060 6,30,000 (1,91,840)
(before considering Arrears of Rent) 16,060 4,38,160
Arrears of Rent received [70% of amount received) 42,000 42,000
Net Income from House Property (A+B) 58,060 4,80,160

Conclusion: Option I is chosen, due to lower chargeable Income. Hence, Income from House Property is
Rs. 58,060.

Notes:
1. Since Mrs. Rohini Ravi is a resident in India, her global income is taxable in India.
2. Deductions for Interest on Capital borrowed:
▪ Prior Period Interest = 49,200/5 = Rs. 9,840 (assuming conditions u/s 24 are satisfied)
▪ Interest for the Indian Property = 9,840 + 50,800 + 1,31,200 = 1,91,840
▪ If the Indian Property is considered as Self Occupied, deduction for interest is restricted to Rs.
2,00,000 ▪ If the Indian Property is considered as Deemed Let Out, then there is no ceiling limit for
interest deduction.
3. Since the ownership of the Indian property is from 01.07.2018, Income shall be computed only
for 9 months.

Q21. R owns three house properties, which are situated in three different cities. All the house properties
are meant for self-occupation of the assessee. The particulars of the house properties are as under.
Particulars Property A Property B Property C
Municipal valuation 7,00,000 7,20,000 7,40,000
Fair Rent 7,40,000 7,50,000 7,60,000
 Standard rent 7,30,000 7,60,000 7,50,000
Municipal taxes paid 30,000 20,000 80,000
Interest on money borrowed (on purchase/construction) 2,35,000 1,80,000 85,000
Ground rent due 5,000 - 8,000
Land revenue due - 6,000 -
Compute income u/h House Property by making assumption in such a manner that tax liability of R is
minimum. Solution: We shall first assume all the three houses deemed to be let out.
Particulars House A House B House C
GAV 7,30,000 7,50,000 7,50,000
Less: Municipal taxes paid 30,000 20,000 80,000
NAV 7,00,000 7,30,000 6,70,000
Less: Deduction u/s 24
Standard deduction @ 30% 30,000 39,000 21,000
Interest 2,35,000 1,80,000 85,000
Income from House Property 4,35,000 5,11,000 5,64,000
Option I: Assume House A as self-occupied:
Annual value of House A Nil
Less: Deduction u/s 24 Interest on money borrowed Rs. 2,35,000 limited to Rs. 2,00,000 (2,00,000)
Income from house property A 2,00,000

Income from House Property A + B + C = (2,00,000) + 5,11,000 + 5,64,000 = 8,75,000

Option II: Assume house B as self occupied:
Annual value of House B Nil
Less: Deduction u/s 24(b): Interest on money borrowed for construction of house (1,80,000)
Income from House B 1,80,000

Income from House Property A + B + C = (4,35,000 - 1,80,000 + 5,64,000) = 8,19,000

Option III: Assume house C as self occupied:

Annual value of house C Nil
Less: Deduction u/s 24(b) Interest on money borrowed (85,000)
Income from HP (85,000)

Income from House Property A + B + C = (4,35,000 + 5,11,000 - 85,000) = 8,61,000

Conclusion: As Income from house property is minimum under option II. Hence House B should be opted
as selfoccupied & other two should be deemed let out property.

Q22. Mr. Raj has let out his house. The particulars are as follows: Annual Rent: Rs. 60,000; MV: Rs.
48,000;
Municipal taxes (paid by tenant): Rs. 4,000; Expenses incurred are: Repairs met by tenant: Rs. 3,000; Fire
Insurance premium paid: Rs. 1,500; Electricity & water charges paid by Shri Goel: Rs. 5,400; Lift
maintenance charges paid by Shri Goel: Rs. 2,400; Collection charges (including Rs. 300 of litigation
expenses): Rs. 750. During PY 2010-11, he had claimed a deduction of unrealised rent of Rs. 22,500 out of
which Rs. 16,500 was allowed as deduction for that year. On 10.8.2018, he recovered Rs. 10,500 from
defaulting tenant. Rs. 60,000 is a composite rent of property, as well as amenities provided to the tenant.
Compute "income from HP" for AY 2019-20.

Solution:
 Composite Rent of Property + Amenities Rs. 60,000
Less: Amenities Charges (Electricity & water charges + lift charges) (Rs. 7,800)
GAV of the House property Rs. 52,200
Less: Municipal taxes (not allowed as paid by tenant) Nil
NAV 52,200
Less: Deductions u/s 24: Standard deduction @ 30% (Rs. 15,660)
Rs. 36,540
Add: Unrealized Rent recovered in the PY @ 70% Rs. 3,150
Income from House Property Rs. 39,690

Q23. Miss Charlie, an American national, got married to Mr. Radhey of India in USA on 2.3.2018 & came to
India for the first time on 16.03.2018. She left for USA on 23.09.2018. She returned to India again on
27.03.2019. While in India, she had purchased a show room in Mumbai on 22.04.2018, which was leased
out to a company on a rent of Rs. 25,000 p.m. from 01.05.2018. She had taken loan from a bank for
purchase of this show room on which bank had charged interest of Rs. 97,500 upto 31.03.2019.
She had received the following gifts from her relatives & friends during 01.04.2018 to 30.06.2018:
- From parents of husband: Rs. 51,000.
- From married sister of husband: Rs. 11,000.
- From two very close friends of her husband: Rs. 1,51,000 & Rs. 21,000 = Rs. 1,72,000.
Determine her residential status & compute total taxable income for AY 2019-20. [MAY - 2007]

Solution:
▪ Her stay in India during the previous year 2018-19 & in the preceding four years is as under:-
▪ PY 2018-19: 176 days (1.4.2018 to 23.9.2018) + 5 days (27.3.2019 to 31.03.2019) = 181 days
▪ Since Miss Charlie is not able to comply with any of the basic condition, she is a non-resident in
PY 2018-19.

Stay in India in 4 preceding PYs

PY 2017- 2018 [16.3.2018 to 31.3.2018] = 16 days; PY 2016- 2017 [1.4.2016 to 31.3.2017] = Nil
PY 2015- 2016 [1.4.2015 to 31.3.2016] = Nil; PY 2014- 2015 [1.4.2014 to 31.3.2015] = Nil
Total 16 days

Computation of total income of Miss. Charlie for AY 2019-20

(I) Income from house property
Gross Annual Value [25,000 x 11] 2,75,000
Less: Municipal taxes Nil
Net Annual Value 2,75,000
Less: Standard deduction 30% of NAV u/s 24(a) (82,500)
Less: Interest on loan 24(b) (97,500)
Income under the Head House Property 95,000
(II) Income from other sources
- Rs. 51,000 received from parents of husband – Exempt: Nil
- Rs. 11,000 received from married sister of husband – Exempt: Nil
- From 2 friends of husband Rs. 1,51,000 & Rs. 21,000: Rs. 1,72,000 1,72,000
Total Income 2,67,000

Note:
1. Actual rent received has been taken as the gross annual value in the absence of other information
(i.e. Municipal value, fair rental value & standard rent) in the question.
2. Rebate u/s 87A is not allowed to non-resident.
Q24. R has the following properties:
(a) Flat in Mumbai purchased on 1.6.2014 which is let out on a monthly rent of Rs. 4,000. The
building in which the flat is located was completed on 1.5.2014.
(b) Flat in Delhi (construction completed on 10.5.2015) which is self-occupied.
(c) Godown in Kolkatta constructed in 1999 which is let out on a monthly rent of Rs. 8,000. The
expenses actually incurred during the year against rental income are:

Particulars Mumbai Delhi Kolkatta

Municipal taxes actually paid during PY ending 31.3.2019 7,000 2,400 11,000
Building co-operative maintenance charges 2,000 900 -
Electricity charges - 4,200 6,800
Fire insurance premium - - 2,600
Collection charges 750 - 1,400
Repairs 320 1,900 14,000

The following further information is given:

(i) The flat in Delhi, if let out, would fetch a monthly rent of Rs.7,000; however, standard rent of the
house according to the Delhi Rent Control Act is Rs. 6,000 per month.
(ii) R carries on business in which he suffered a loss of Rs. 600 during year ended on 31.3.2019.
(iii) R received a consolidated salary of Rs. 4,000 per month during the year from a part-time
employment.
(iv) R took a loan of Rs. 3,60,000 on 1.4.2011 from a bank at 12% interest p.a, to construct the house
in Delhi. However, on 5.5.2015 it is repaid along with interest. Compute R's total taxable income for
AY 2019-20.

Solution:
Income from salary
Gross salary 48,000
Income from House Property at Mumbai
GAV (4,000 x 12) 48,000
Less: Municipal Taxes 7,000
NAV 41,000
Less: Deductions u/s 24
Standard deduction @ 30% 12,300
Income from flat at Mumbai 28,700
Income from let out godown at Kolkata:
GAV ( Rs. 8000 x 12) 96,000
Less: Municipal taxes 11,000
NAV 85,000
Less: Deductions u/s 24
Standard deduction @ 30% 25,500
Income from godown at Kolkatta 59,500
Income from self-occupied property in Delhi
Annual value Nil
Less: Deduction u/s 24(b) = 1/5th of 1,72,800 = 34,560 [Restricted to maximum Rs. 30,000] 30,000
Pre-construction period interest 3,60,000 x 12% x 4 = 1,72,800
Income from self-occupied property (-) 30,000
 Computation of taxable income of R
Salary 48,000
Income from house property
Flat at Mumbai 28,700
Flat at Delhi (-) 30,000
Godown at Kolkatta 59,500 58,200
Business loss (-) 600
Total taxable income 1,05,600

Note: Since the construction of flat in Delhi was completed after 3 years from the end of the financial year
in which money was borrowed, deduction of interest shall be limited to Rs.30,000.

Q25. A is employed in B Ltd. on a salary of Rs. 10,000 p.m. He owns a house at Delhi whose construction
was completed on 31.12.2016. He has let out this house from 1.4.2018 @ Rs. 6,300 p.m. The house is
vacated by the tenant on 1.9.2018. From 1.11.2018, he has let out the house to his employer B Ltd. @
Rs.7,000 p.m. The company has allotted the house to A. Other particulars in respect of the house for the
financial year 2018-19 are given below. MV Rs. 60,000 p.a.; Municipal tax paid Rs.6,000; He borrowed Rs.
1,25,000 from HUDCO on 1.4.2012 @ 12% p.a. interest for the construction of the house. He refunded
entire loan in lump sum on 31.12.2018. Compute the total income of A for the AY 2019-20.

Solution:
Salary: 10,000 x 12 1,20,000
Value of rent-free house: 15% of salary for 5 months (10,000 x 5) 7,500
Gross Salary 1,27,500
Less: Deduction u/s 16 (40,000)
Income under the head salary 87,500
Income from house property:
Gross rental value exclusive of vacancy period (6,300 x 5 + 7,000 x 5) 66,500
Less: Municipal taxes paid (6,000)
Annual value 60,500
Deduction u/s 24:
(i) Standard deduction @ 30% (18,150)
th
(ii) Interest for pre-construction period (1/5 of Rs. 45,000) (9,000)
(iii) Interest for current year for 9 months (11,250) (20,250) 22,100
Total income 1,49,600

*Q26. Mrs. Deepali (aged 40 years) is working with M/s Good Company Ltd, a manufacturer of tyres
based at Mumbai, has received the following payments during the Previous Year 2018-2019 from her
employer:
(a) Basic Salary – Rs. 60,000 per month; (b) Dearness Allowance – 40% of Basic Salary.
Her employer has taken on rent her own house on a monthly rent of Rs. 15,000 & the same has been
provided for residence of Mrs. Deepali. Company is recovering Rs. 2,000 per month as rent of house.
Mrs. Deepali has further furnished the following details:
(i) Contribution to PPF Rs. 60,000.
(ii) She has paid Professional Tax of Rs. 6,000 during Financial Year 2018-2019.
 (iii) She is owning only one house & payment of Interest of Rs. 1,75,000 & Principal of X 1,00,000 was
made for Housing Loan taken for purchase of House.
(iv) She has also taken a Loan of Rs. 2,00,000 from her employer for study of her son. SBI Rate for
such Loan is 10%. Her employer has recovered Rs. 10,000 as Interest from her Salary for such Loan
during the year.
Compute Taxable Income & Tax Liability for Assessment Year 2019-2020. [Nov 11] Solution
Computation of Total Income & Tax Liability
Particulars Rs. Rs.
Income under the Head Salary - Basic (60,000 x 12) 7,20,000
DA (40% of 7,20,000) 2,88,000
Value of Accommodation taken on Lease by the Employer Least of: 1,27,200
(i) Rent paid by employer (15,000 x 12) 1,80,000
(ii) 15% of Salary (15% of 10,08,000) 1,51,200
Less: Amount Recovered from Employee (2,000 x 12) (24,000)
Taxable value of Concessional Loan (Loan o/s @ SBI Rate – Actual Rate is Taxable) = 10,000
(2,00,000 x 10%)- 10,000
Gross Salary 11,45,200
Less: Deductions u/s 16(ia) Standard Deduction (40,000)
Less: Deduction u/s 16(iii) – Professional Tax (6,000) 10,99,200
Income u/h House Property: Let out Property
Gross Annual Value (15,000 x 12) 1,80,000
Less : Deduction u/s 24 @ 30% of NAV (54,000)
Interest on Housing Loan (1,75,000) (49,000)
Gross Total Income 10,50,200
Less: Deduction under Chapter VI A
U/s 80C - Housing Loan Principal 1,00,000 + NSC 60,000 (Max. 1,50,000) (1,50,000)
Total Taxable Income 9,00,200

Tax on Total Income = [12,500 + (9,00,200 – 5,00,000) x 20%] + HEC @ 4% = 92,540 + 3,702 = Rs.
96,240.