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House property (Sec22)

It consists of: a) Any Building or land appurtenant thereto b) Of which assesses is the owner c) Which is not used for the purpose of assesses business or profession Exceptions:a) Building or staff quarters let out to employees .Income from business. b) If let out to authorities income from business. c) Composite letting of building with other assets :Income from other source . d) Paying Guest Accommodation: Business Income

Assesse (OWNER)
Person in whose name property registered. Legal ownership essential not possession. In case of mortgage its mortgager. Deemed Owners: An individual who transfer any house property to his/her spouse, without adequate consideration or not being transfer in connection with an agreement to live apart or to a minor child not being a married daughter. A member of co-operative society or association of persons to whom building or its part is allotted or leased under house building scheme

If a person takes on lease and constructs a house upon it ,he will be deemed owner of the house. Disputed ownership Possession Holder of impartible estate.

Income from farm house. Palace of ex Indian ruler Income from property used for business . Income from self occupied house. Income from property owned by : Local Authority Scientific Research Association Trade union /Charitable trust Political party University.

Annual Value [Sec 23(1)] a) Building let out

a) Sum for which property might be expected to let from year to year. b) Where property or any part is let and actual rent received by owner is in excess of sum refereed to in (a), the amount of rent received or receivable. c) Where property or any part is let and was vacant during whole or any part and owing to such the actual rent is less than the sum referred to in (a) ,the amount so received.

Annual value
Gross annual value Municipal Taxes. E.g Fire tax , water tax, education cess etc.

GAV = Expected Rent or Actual Rent whichever is greater. AV =GAV Municipal Taxes

Determination of expected Rent

A) where standard rent has not been fixed: one of the following(>) is expected rent of the building: i) Municipal value ii) Fair rent B) where standard rent has been fixed(<) i) the value determined under (a) ii) the standard rent fixed under rent control act

Determination of Actual rent

If owner providing facilities : A) Actual rent received cost of such facilities If tenant providing facilities :A) Actual rent received + cost of such facilities No adjustment for:i) Tax paid by tenant to local authority ii) Repairs born by tenant iii) Notional interest for on deposit taken by tenant

Mr. is the owner of four houses which are all let out and are covered by Rent Control Act .From the following particulars calculate Gross annual value: Particular MV FR SR Actual Rent I 30000,36000,30000,40000 ii 26000,28000,35000,30000 iii 35000,30000,36000,32000 Iv 30000,36000,40000,32000

AV in case of let out house neither remains vacant nor there is unrealized rent ER or AR whichever > = GAV

AV in case of let out house neither remains vacant but there is unrealized rent ER or AR whichever > = GAV Taxes paid by owner Unrealised Rent

AV in case of let out house which remains vacant for whole or any part
House remains vacant for full yearNIL House remains vacant for part of year- Actual Rent

Determine AV in the following case :ER- Rs 100000 House let out- Rs 10000 p.m House tax paid by owner 9000 House remains vacant for a)1 month b) 3 months

AV in case of let out house remains vacant and there is unrealized rent
GAV- (Taxes paid by the owner to local authority + Unrealised Rent )

Chart showing Computation

GAV Less: local Taxes Unrealised Rent Annual value----Less : Deductions u/s 24: i) 30% of Annual Value ii) a) Interest on loan taken for purchase ,construction or repair relating to previous year b) Interest on loan for the period prior to the previous year in which the house is completed is also allowable in five equal annual installments

(B) Buliding Self Occupied For Residential purpose

1) a) House or part of a house occupied by the owner for full previous year for the purpose of his own residence [ sec23 (2)(a)] b) Unoccupied House [sec23 (3)] 2)House self occupied for part of the previous year and let out for part of previous year [sec23 (3)] 3)More than 1 house in the occupation of the owner .[sec23(4)]

Self occupied or Unoccupied

GAV NIL Municipal Taxes by the owner- NIL AV- NIL SD- NIL Interest on loan- Deduct up to 30000 or 150000(acquired or constructed after 31/3/99) as the case may be.

Sh. Sridhar Prasad has a house property let out for residential purpose. Municipal rental value: Rs 8500p.m Actual rent realised : Rs9000 p.m Rent under control act : Rs8500p.m Rent payable for similar house :Rs 9000p.m 15% local taxes,2% valuation as education cess Construction of property began in Sept.2005 & completed in Feb 2008.He has borrowed loan for the construction of house property,on which he has paid Rs 200000 as int upto 31.3.2007and Rs 50000 as int during the previous year.Fire Insurance paid Rs 2000p.m Compute for 2011-12.

Points to Note
1) If construction of the building is completed at any time during previous year and thereafter self occupied taken for whole year. 2) Where property acquired constructed with borrowed capital the maximum limit of interest Rs 30000. 3) Where property acquired constructed with borrowed capital after 31.3.1999 the deduction on account of int upto Rs 150000. Acquision should be completed within three year from the end of financial year in which capital is borrowed. 4) Int on unpaid rent not deductible/ Int allowed

2)House self occupied for part of the previous year and let out for part of previous year

AV as determined u/s 23(1)s

More than one house in the occupation of the owner

Except one all other are treated as let out. Deemed house: GAV Less:Municipal Tax _________ AV Less: 30% of AV Int on loan(No limit) Income from house property


Mr. X is the owner of two houses which he use for residential purpose .Compute taxable income for AY-2011-12from HP : First house Fair Rental value Rs 120000 Second House Fair Rental value Rs 12000 Municipal tax paid -10% of Fair Rental value. Int paid for previous year on loan taken on 10.4.2009for purchase of first house Rs 160000 and completed in nov2009. He borrowed Rs 40000 @15% on 1.4.2009 for construction of second house which was completed in Dec2009. He could not pay the int during 2009-10 hence paid int this year Rs 12600 .Fire insurance premium paid Rs 1400 and Rs 200 on first and second house respectively.

Realisation of unrealised Rent

Chargeable to tax and amount of exp not to be deducted from unrealised rent

Assessment of arrears of Rent Received

Chargeable to tax , out of amount received 30% shall be allowed as SD.