DEPARTMENT OF

MANAGEMENT
STUDIES (BBA)

Subject Name : INCOME TAX

Module No. and Name : UNIT-3

Title of the Sub-topic : Income from House Property

Class & Section (Optional) : VI SEM A & B SEC

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 DEPARTMENT OF
MANAGEMENT

INCOME FROM HOUSE PROPERTY

STUDIES (BBA)

 Introduction:
 Income from House property is the second source of income which can be
taxed under the head Income from House Property as defined under
sections 22 to 27 of Income Tax Act. Under this head the basis of charges is
the annual value of property. The income is taxable if all the following
conditions are satisfied (U/S 22).
1. There must be building and land appurtenant thereto.
2. The assessee must be the owner of the property.
3. The property must not be used by the assessee for
his/her own business or profession.

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

The following are the exceptions when the rental income of the building
is not treated as house property income:
A) House property let out to employees and others
B) House property let out to Government/ Authorities
C) Composite letting out of building along with furniture
D) Paying Guest accommodation
E) Income from sub-letting of house property

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 DEPARTMENT OF
MANAGEMENT

Exempted Income from House property

STUDIES (BBA)

1) Agricultural House property under sec 2 (1) (C )

2) House property held for charitable Institution
3) Self occupied but vacant house
4) House used for own business or profession
5) property held for registered trade union
6) Annual value of one palace in the occupation of ex-ruler

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

7) Income from an approved scientific research association

8) Income from house property in the hands of a political party.
9) Income from one self occupied house
10) House property held by local authority
11) House property held by a university or other recognised educational
institution not for the purpose to earn profit.
12) House property held by Hospital or Medical Institution not for the
purpose to earn profit.

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 DEPARTMENT OF
MANAGEMENT

Determination of Annual Value

STUDIES (BBA)

 The income from house property is computed not on the basis of actual
rent received by the owner as the property but on the basis of its
“annual value” . Thus it is very important to know property the methods
of determining the annual value of the house property.

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 The annual value is computed on the basis of the factors of house

property. Such as:
1) Local conditions of the house property
2) Demand of the house in the same locality
3) Valuation of house property by local authority
4) Rent paid for similar house in the same locality
5) Type and cost of building
6) Rent paid by the tenant etc.

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

 In order to compute the annual value , first we have to determine the gross
annual value. The gross annual value generally determined taking into
consideration of different rental value. Such as;
1. Annual rent payable by tenant./ Actual Rent- Rs15,000+3000
2. Municipal rental value. 13,000
3.Fair rental value. 13,500 – WHICH EVER IS HIGHER
4.Standanrd rent fixed under rent control act of the state.
5.Expected Rental value(ERV)- Municipal / Fair rental value – Whichever is
higher
6. Unrealised rent
7. Vacancy period rent 10,000* 7= 70,000 50,000

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 DEPARTMENT OF
MANAGEMENT

TYPES OF House Property

STUDIES (BBA)

1. Let out property for residence or commercial

2. Self- occupied property for residence
3. Deemed to be let-out property
4. Partly let out and partly self-occupied property

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 DEPARTMENT OF
MANAGEMENT

1.Let out property

STUDIES (BBA)

 Format for Computing taxable Income from let out Property

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 DEPARTMENT OF
MANAGEMENT
STUDIES (BBA)

Particulars Rs.
Gross Annual Value (GAV) xxx
Less: Municipal taxes paid by the assessee during the P.Y xxx
Net Annual Value( NAV) xxx
Deductions U/S 24
(a) Standard Deduction- 30% of NAV xxx
(b) Interest on borrowed capital
(i) Previous year interest xx
(ii) Pre-completion Interest xx xxx
Add: Unrealised rent recovered xxx
Add: Arrears of rent received xxx

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 DEPARTMENT OF
MANAGEMENT

Determination of Gross Annual Value

STUDIES (BBA)

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