Income Tax: Income From House Property

INCOME TAX
INCOME FROM HOUSE PROPERTY
Compiled by CA Arpit Rajawat – 8058700725

https://www.youtube.com/c/TaxGuruCAArpitRajawat
INCOME FROM HOUSE PROPERTY

Section 22. Charge
Law: The Annual Value of building or land attached thereto of which
assessee is the owner not occupying the building for his own business or
Profession.
Annual Value
Building. (Construction should be completed)
Land attached with building
Owner
Owner not occupying the building for his own business or
profession.

COMPUTATION OF INCOME FROM HOUSE PROPERTY
Income from let out house property is computed as under Rs.
Gross annual value
XXXX
Less: Municipal taxes paid by owner
XXXX
Net Annual value
XXXX
Less: Deduction under section 24
- Standard on borrowed capital
XXXX
- Interest on borrowed capital
XXXX
Income from House Property
XXXX
DEDUCTION FOR MUNICIPALITY TAXES
(a)Deduction is given subject to 2 conditions:
(i) Should be come by the assessee &
(ii)Should be actually paid during the P.Y.(i.e. allowed on cash basis).
(a)If paid in a later year-then deduction is given for that later year.
(b)Properties situated outside the country deductible.
(c)If municipal taxes paid > GAV, NAV could be negative.

 If Actual rent is lower than ER owing to vacancy, then Actual rent is
the GAV.
 If Actual rent is lower than ER due to other reasons, then ER is the
GAV.
 However, in spite of vacancy, if the actual rent is higher than the ER,
then Actual rent is the GAV.

House property held as stock in trade :-
 In case a house property is held as stock in trade
 Which could not be let out whole or part of the previous
year
 Annual value of the house will be taken as NIL
 This benefit will be available for 2 years from the date of
completion certificate by prescribed Authority.

HOUSE PROPERTY SELF OCCUPIED:-
If any person has two houses which are self-occupied,
its GAV shall be nil and municipal tax are not allowed to be
deducted and NAV shall also be nil.
Where the property is self-
occupied for own residence
Then
throughout the previous
year.
Where the property is un-
occupied due to job or Then
business outside the city

Where the assessee having more
than two property which are self- Then
occupied or un-occupied

HOUSE PROPERTY SELF OCCUPIED FOR PART OF YEAR AND LET OUT
FOR PART OF YEAR
In that case Municipal Value, Fair rent and Standard rent will
be taken for whole year but only actual rent will be taken for
let out period only.

Deductions: U/S 24(a) Standard deduction
30% of annual value shall be allowed as a standard deduction.
Deductions : U/S 24 (b) : Interest on borrowed capital

Conditions
 The assessee has actually borrowed funds,
 Interest is paid / payable on such money
 Money borrowed is utilised for acquisition, construction
repairs, renewal or reconstruction of house property

Interest on Loans:
Allowed on “accrual” basis.
Given in two – Current year interest & Pre – Construction period (PCP) interest.
Purpose of borrowing: Purchase, Construction Renovation, Repairing and
Reconstruction.
PCP interest: In 5 equal installments – 1st installment is from the year in which
construction of property is completed.
PCP = From the date of borrowing to (31st March immediately prior to the date
of completion of construction or Date of repayment of loan, whichever is
earlier).
Interest relating to the year of completion of construction fully claimed
irrespective of date of completion.
Limits applicable in respect of deduction – Self occupied / unoccupied
properties:
Up to 2,00,000: 3 conditions are to be satisfied.
Borrowed on or after 01.04.99 for acquiring or construction &
Should be completed within 5 years from the end of financial year in
which the capital was borrowed
The lender should certify that loan was taken for specified purpose only.
Up to 30,000: If any of the above three conditions [(a) or (b)
or (c)] are not satisfied
Points to be noted:
Limits NOT applicable for Let out property / DLOP
If a fresh loan raised to repay the original loan – interest on fresh loan
admissible
Interest on interest is not deductible.
No deduction is allowed for any brokerage or commission for arranging the
loan.
Note: if we converts due amount into loan with respect to purchase of
property – it qualifies for deduction.
RECOVERY OF UNREALISED RENT & ARREARS OF RENT – SEC. 25 A
Arrears of Rent / Unrealised Rent:

(i) Taxable in the year of receipt / realisation.
(ii) Deduction @ 30% of rent received/realised.
(iii Taxable even if assessee is not the owner of the property in the
) financial /realisation.

COMPOSITE RENT
Composite rent
Property + Facilities Property + Machinery
Separable In Separable Separable In Separable
Rent portion Total income Rent portion Total income

taxable under taxable under the taxable under taxable under
head house head PGBP OR head house the head PGBP
property other sources property OR other
sources
Portion of Facilities Portion of machinery
taxable under the taxable under the
head other sources head other sources

CO-OWNERSHIP – SEC. 26
(a)If SOP-annual value for each of such co-owner shall be nil and each
that be entitled to the deduction of Rs. 30,000/2,00,000.
(b)If LOP-shall be first computed as if this property/part is owned by
one owner and then apportion among each co-owner as his share.

HOUSE PROPERTY IN A FOREIGN COUNTRY
A resident assessee is taxable U/S 22 even if property is satisfied outside India, then
annual value computed as if the property is situated in India.
Note: Municipal taxes paid outside the country are also deductible.
The following points should br remembered while solving practical questions in House
Property
1. Fair Rent should be given the question. If it is not given then actual rent is treated as fair rent.
2. Expected rent is always computed for 12 months. It can be less than 12 months only if the
property comes into existence in same PY of computation.
3. Interest is limited only in case of SOP- R. In remaining cases (LOP) actual of interest is allowed
as deduction.
4. MT is allowed as deduction on paid basis. SD on uniform basis.

Deemed Owner (Sec. 27): Chargeable to tax even if not the owner.
Transfer to spouse / minor child

Part performance of a contract (u/s 53A of Transfer
of Property Act)
Member of a Co-operative Society Co, AOP
Holder of an impartible estate

Right in a building


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INCOME TAX

INCOME FROM HOUSE PROPERTY

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Deductions : U/S 24 (b) : Interest on borrowed capital

Compiled by CA Arpit Rajawat – 8058700725

Arrears of Rent / Unrealised Rent:

Compiled by CA Arpit Rajawat – 8058700725

Property + Facilities Property + Machinery

Separable In Separable Separable In Separable

Rent portion Total income Rent portion Total income

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Compiled by CA Arpit Rajawat – 8058700725

Transfer to spouse / minor child

Member of a Co-operative Society Co, AOP

Holder of an impartible estate

Compiled by CA Arpit Rajawat – 8058700725

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