INCOME FROM

HOUSE PROPERTY [HP]

CA. PUJAN J. KAPADIA
- Chartered Accountant
- DISA
- M. Com. (Finance & Taxation)
- NET (Commerce)
- NET (Management)
 BASIS OF CHARGE [SEC. 22]
 The assessee must be the owner of house property.
 Income from land appurtenant to the building is also taxable under
this head.
 The property should NOT have been used for his own business or
profession.
 Income-Tax is assessed on “Annual Value” and not on actual rent.

TYPES OF PROPERTY
 Self-Occupied: Used by self for residence OR Not given on Rent.
 Let-Out: Given on rent to someone for any purpose (Resi/Business).
 Self-Occupied for Own Business/Profession: Not included in HP.

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

 INCOME FROM HP EXEMPT FROM TAX
 Income from Farm Building.
 Income of any one palace of an ex-Ruler.
 Income derived from HP of Local Authority; Scientific Research
Association; Recognized University/Educational Institutions; Recognized
Hospitals; Approved Charitable Institutions; Recognized Sports
Association.
 Income derived from HP of a registered trade union.
 Property Income of a Political Party.
 HP owned & used by the assessee for his business or profession.
 HP of a Statutory Corporation/ Institution/ Association financed by
govt. for promoting interests of members of SC/ ST/ Minority
Community/ Ex-Servicemen.
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
 DEEMED OWNERSHIP [SEC. 27]
 A deemed owner is an owner by implication, although he may not be
the owner in the real/legal sense. However, such a person is treated as
an owner and is liable to tax in the same manner as in case of owner.
 In the following cases the person is deemed to be owner of the
property even if they are not the legal owners of the property:-

1) An individual who transferred his property without adequate

consideration to his or her spouse (otherwise than in connection with
an agreement to live apart) OR to his/her minor child (not being
married daughter) is deemed to be owner of that property.
NOTE: If an individual transfers another asset and his spouse or minor
child purchase house property from that asset, then such individual is
not treated as deemed owner.

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

2) If property is allotted by company/co-operative society to its
shareholders/members, then technically the company/co-operative
society may be the owner. But the shareholder/member to whom
property is allotted is deemed to be owner of property.
3) If buyer has taken the possession of the property without getting the
sale deed registered is deemed to be owner of the property.
A person who is allowed to take or retain possession of any building (or
part thereof) in part performance of a contract of the nature referred to
in section 53A of the Transfer of Property Act, 1882, is also deemed as
the owner of that building (or part thereof).
4) A person who acquires any rights (excluding any rights by way of a
lease from month to month or for a period not exceeding one year) in or
with respect to any building (or part thereof) by virtue of any such
transaction as is referred to in section 269UA(f) [i.e. if a person takes a
house on lease for a period of not less than 12 years]
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
 UNREALISED RENT
 The amount of rent which the assessee cannot realise shall be equal
to the amount remaining unpaid by a tenant and so proved to be lost or
irrecoverable provided that :
(1) Tenancy is bonafide.
(2) Defaulting tenant has vacated or steps have been initiated to compel
him to vacate the property.
(3) Defaulting tenant is not in occupation of any other house owned by
the assessee.
(4) Assessee has taken all reasonable steps for the recovery of unpaid
rent OR the Income Tax Officer is satisfied that such steps are futile
due to insolvency, death of tenant or any other event.
 It is Deducted from Annual Rent to arrive at Actual Rent Received.
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
 STEPS FOR COMPUTATION OF INCOME FROM HP
1. Municipal Value [MV] (as per Municipal Records)
2. Fair Rent (Market Realisable Rent from a property)
3. (1) OR (2) Whichever is HIGHER
4. Standard Rent (as per Rent Control Act)
5. (3) OR (4) Which is LOWER  Reasonable Expected Rent (Step : 1)
6. Annual Rent Received/ Receivable
7. Unrealised Rent
8. Expenses for facilities provided to tenant
9. (6) – (7) – (8)  Actual Rent Received/Receivable (Step : 2)
10. Step (1) OR Step (2) Whichever is HIGHER  (Step : 3)
11. Loss Due to Vacancy (Step : 4)
12. Step (3) – Step (4)  GROSS ANNUAL VALUE (GAV) (Step : 5)
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
13. Municipal/ Local Taxes (Paid by Owner for last years & current year) (% of MV)
14. (12) – (13)  Net Annual Value (NAV)
SPECIFIC DEDUCTIONS U/S. 24:
15. Standard Deduction  30% of NAV
16. Interest on Borrowed Capital
(a) Let-Out Property: No Limit
(b) Self-Occupied Property:
(i) For Purchase/Construction/Acquisition : Max. Rs. 2 Lacs p.a.
(ii) For REpairs, REnewals, REconstruction : Max. Rs. 30,000 p.a.
PRE-CONSTRUCTION PERIOD:
(1/5th interest deductible from year of construction completion)
STARTS : Date of Taking Loan
ENDS : (i) 31ST March immediately preceding the year of construction completion, OR
(ii) Date of Repayment of Loan; Whichever is Earlier.
17. Income from House Property = (14) – (15) – (16).
NOTE:  In case of Self-Occupied Property, NAV = 0.
 If assessee owns 2 or more Self Occupied HP, then he can take maximum 2
HP as Self Occupied; remaining will be treated as “Deemed to Be Let Out”.
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
 CA. PUJAN J. KAPADIA

SHORT SUMS

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2017 : LIC sanctioned a loan of Rs. 16,00,000 to Mr. Sudhir at
12% p.a. for construction of house. Loan was given in instalments as :
1st Inst. On 01.07.2012 - Rs. 5,00,000
2nd Inst. On 01.04.2014 - Rs. 6,00,000
3rd Inst. On 01.08.2014 - Rs. 5,00,000
The construction completed in November 2014 and HP is self-occupied.
Determine Interest Deductible u/s. 24 for A.Y. 2019-20 assuming no part
of loan is repaid till date.
SOLUTION :
PRE-CONSTRUCTION PERIOD:
(1/5th interest deductible from year of construction completion)
STARTS : Date of Taking Loan
ENDS : (i) 31ST March immediately preceding the year of construction completion, OR
(ii) Date of Repayment of Loan; Whichever is Earlier.

Pre-Construction Period Interest for 1st Inst.

Period : 01.07.2012 to 31.03.2014 = 21 Months
Interest : 5,00,000 * 12/100 * 21/12 = Rs. 1,05,000
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
Year of Completion of Construction  2014. So, 1/5th deduction will
start from the P. Y. 2014-15 i.e. A. Y. 2015-16. Therefore, A. Y. 2019-20
will be the 5th year of Deduction.
So, amount of Pre-Construction Period Interest to be deducted –
= 1/5th of 1,05,000 = Rs. 21,000 [A]
 No Pre-construction Period in case of 2nd or 3rd Inst. as Loan Granted
after the end of 31.03.2014.
Regular Interest on Loan Outstanding :
16,00,000 * 12/100 = Rs. 1,92,000 [B]
 Total Interest Deductible : 21,000 [A] + 1,92,000 [B] = Rs. 2,13,000.
 Maximum Permissible Interest Deductible u/s. 24 is Rs. 2,00,000.
 Interest Deductible u/s. 24 for A.Y. 2019-20 = Rs. 2,00,000/-

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2018 : Following are details of Mr. X of his 2 house properties:

PARTICULARS A B
Purpose Self-Occupied Let-Out to BOB for 11 Years
Original Purchase Cost Rs. 50,00,000 Rs. 60,00,000
Loan Borrowed @ 8.35% p.a. Rs. 30,00,000 -----
from BOB on 01.04.2016
Rent Receivable ----- Rs. 38,000 per month
Municipal Taxes paid by Mr. X Rs. 20,000 Rs. 56,000
Loan Outstanding on 01.04.18 Rs. 25,00,000 -----

Compute Taxable Income from House Property for A. Y. 2019-20.

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

SOLUTION :
PARTICULARS (HOUSE ‘A’) AMOUNT
Net Annual Value NIL
LESS : Standard Deduction (30% of NAV) NIL
LESS : Interest [(25,00,000 * 8.35/100) = 2,08,750] 2,00,000
Taxable Income (2,00,000)

PARTICULARS (HOUSE ‘B’) AMOUNT

Gross Annual Value (Rs. 38,000 * 12 months) 4,56,000
LESS : Municipal Tax 56,000
Net Annual Value 4,00,000
LESS : Standard Deduction (30% of NAV) 1,20,000
Taxable Income 2,80,000

Taxable Income from House Property for A. Y. 2019-20 [A+B] = Rs. 80,000/-
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
 CA. PUJAN J. KAPADIA

LONG SUMS

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2017 :

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2017 :

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

SOLUTION : Calculation of Interest for A. Y. 2016-17
PARTICULARS “G” “O” “D”

PRE-CONSTRUCTION INTEREST FOR A. Y. 2016-17

1) START: Loan Start Date 01.09.2011 01.05.2015 01.12.2012

2) Construction Completed ----- 28.02.2016 15.09.2014

3) Prior 31st March ----- 31.03.2015 31.03.2014

4) Loan Repaid Date 31.12.2014 ----- -----

5) END: (3) or (4)  W.E.E. 31.12.2014 31.03.2015 31.03.2014

6) Pre-construction Period 40 Months --- N. A. --- 15 Months

7) Pre-construction Interest 24L * 0.12 * 40/12 --- N. A. --- 6L * 0.12 * 15/12

= 9,60,000 = 90,000
8) 1/5th Share 1,92,000 --- N. A. --- 18,000

REGULAR INTEREST FOR A. Y. 2016-17 ON OUTSTANDING LOAN AMOUNT

9) Current Interest ----- (Loan Repaid) 10L * 0.12 * 11/12 6L * 0.12 * 12/12
= 1,10,000 = 72,000
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
SOLUTION : (A) Assuming All Properties as Deemed to be Let Out
PARTICULARS “G” “O” “D”

1) Municipal Valuation 7,00,000 7,20,000 7,40,000

2) Fair Rent 7,40,000 7,50,000 7,60,000

3) (1) or (2) WEH  GAV 7,40,000 7,50,000 7,60,000

4) LESS : Municipal Tax Paid 30,000 20,000 80,000

5) NAV [(3) – (4)] 7,10,000 7,30,000 6,80,000

6) Standard Deduction (30%) 2,13,000 2,19,000 2,04,000

7) 1/5th Pre-construction Int. 1,92,000 --- 18,000

8) Current Interest --- 1,10,000 72,000

9) Income from HP [5-6-7-8] 3,05,000 4,01,000 3,86,000

NOTE : From A. Y. 2020-21; 2 properties can be selected as Self-

Occupied. So in given sum we will take 2 properties as Self-Occupied & 1
property as Deemed to be Let Out.
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
SOLUTION : (B) Assuming All Properties as Self Occupied
PARTICULARS “G” “O” “D”

1) NAV NIL NIL NIL

2) Standard Deduction (30%) NIL NIL NIL

3) 1/5th Pre-construction Int. 1,92,000 --- 18,000

4) Current Interest --- 1,10,000 72,000

5) Income from HP [5-6-7-8] (1,92,000) (1,10,000) (90,000)

PARTICULARS Option 1 (DLO – G) Option 2 (DLO – O) Option 3 (DLO – D)

G 3,05,000 (1,92,000) (1,92,000)

O (1,10,000) 4,01,000 (1,10,000)

D (90,000) (90,000) 3,86,000

Total Taxable Income 3,05,000 – 2,00,000 4,01,000 – 2,00,000 3,86,000 – 2,00,000

= 1,05,000 = 2,01,000 = 1,86,000
Option Selected YES NO NO

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2018 :

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2018 :

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

SOLUTION :
PARTICULARS Nirant Visamo Chhanyado
1. Municipal Value 6,12,000 12,00,000 7,50,000
2. Fair Rent 6,06,000 14,40,000 10,00,000
3. (1) or (2) WEH 6,12,000 14,40,000 10,00,000
4. Standard Rent 6,24,000 13,20,000 11,00,000
5. RER – (3) or (4) WEL (Step:1) 6,12,000 13,20,000 10,00,000
6. Annual Rent Receivable 8,40,000 12,00,000 14,40,000
7. Unrealised Rent 70,000 3,00,000 ---
8. Actual Rent [7-8] (Step:2) 7,70,000 9,00,000 14,40,000
9. (5) or (8) WEH (Step:3) 7,70,000 13,20,000 14,40,000
10. Vacancy Period ½ Month 1 Month ---
11. Loss Due To Vacancy (Step:4) 8,40,000 * 0.5 / 12 12,00,000 * 1/12 ---
= 35,000 = 1,00,000
12. GAV (Step:5) [(9) – (11)] 7,35,000 12,20,000 14,40,000
13. Municipal Tax Paid by Owner 25,000 60,000 [12L * 5%] --- (Being Unpaid)
14. NAV [(12) – (13)] 7,10,000 11,60,000 14,40,000
INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA
SOLUTION :
PARTICULARS Aaram (S.O.) Nirant Visamo Chhanyado
14. NAV NIL 7,10,000 11,60,000 14,40,000
15. Std. Dedn. [30% of NAV] NIL 2,13,000 3,48,000 4,32,000
16. Int. on Loan – Construction 1,50,000 1,11,000 --- 30,000
17. Int. on Loan – Repairs --- --- 50,000 ---
18. Int. on Loan – M. Tax N.A. N. A. N. A. N. A.
19. 1/5th Pre-construction Int. N. A. (> 5 Years) --- 15,000 10,000
20. Income from HP [14-15-16-17-18-19] (1,50,000) 3,86,000 7,47,000 9,68,000
TAXABLE INCOME FOR A.Y. 19-20 Rs. 19,51,000

NOTE : “Vishram” is used for Own Business, so it is kept out of the

purview of the calculation as per Sec. 22 of the Act.

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

VNSGU 2019 :

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

SOLUTION :
PARTICULARS HOUSE “1” HOUSE “2”
Nature of Use Let Out Let Out
1. Municipal Value 3,60,000 5,60,000
2. Fair Rent 4,60,000 6,00,000
3. (1) or (2) WEH 4,60,000 6,00,000
4. Standard Rent 3,80,000 5,40,000
5. RER – (3) or (4) WEL (Step:1) 3,80,000 5,40,000
6. Annual Rent (Step:2) 3,96,000 *12 /10 6,90,000* 12/11
= 4,75,200 = 7,52,727
7. (5) or (6) WEH (Step:3) 4,75,200 7,52,727
8. Vacancy Period 2 Months 1 Month
9. Loss Due To Vacancy (Step:4) 4,75,200 * 2 / 12 62,727
= 79,200
10. GAV (Step:5) [(7) – (9)] 3,96,000 6,90,000
11. Municipal Tax Paid by Owner 12,000 24,000
12. NAV [(10) – (11)] 3,84,000 6,66,000

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

SOLUTION :
PARTICULARS HOUSE “1” HOUSE “2” HOUSE “3” HOUSE “4”
12. NAV 3,84,000 6,66,000 NIL NIL
13. Standard Dedn. (30% of NAV) 1,15,200 1,99,800 NIL NIL
14. 1/5TH of Capitalised Interest 40,000 N.A. ( >5 Yrs ) N.A. ( >5 Yrs ) N.A. ( >5 Yrs )

15. Taxable Income from HP 2,28,800 4,66,200 NIL NIL

Income from HP for A. Y. 2018-19 = Rs. 2,28,800 + 4,66,200 + 0 + 0

= Rs. 6,94,200

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA

 CA. PUJAN J. KAPADIA

THANK
YOU

INCOME FROM HOUSE PROPERTY : By CA. PUJAN KAPADIA