Income under the head

“Income from House

Property” and its
Computation
 What is the basis of Charge (Sec. 22)

 Condition-1: The property should consist of any

buildings or lands appurtenant thereto.

 Condition-2: The assessee should be owner of property.

 Condition-3: The property should not be used by the

owner for the purpose of any business or profession
carried on by him, the profits of which are chargeable to
income-tax.
 Deemed Owner
Transfer to spouse or minor child
Holder of impartible estate
Property held by a member of co-operative
society/company or AOP
A person who has acquired a property under a power of
attorney transaction.
A person who has acquired a right in a building under
section 269 UA(f)
 Applicability of Section 22 in certain
typical Cases
House Property in a Foreign Country.
Disputed Ownership
Property held as stock-in-trade
Treatment of Composite rent
When a house property is owned by co-owners
Principle of Mutuality.
When Property Income is not charged to Tax

 Income from Farm House.

 Annual Value of any one palace of an ex-ruler.
 Property income of a local authority
 Property income of an approved scientific research association.
 Property income of an educational institution and hospital
 Property income of a trade union.
 House property held for charitable purposes.
 Property income of a political party.
 Property used for own business or profession.
 One-self occupied property.
 Gross Annual Value
Gross Annual Value is determined as follows

Step:1 Find out reasonable expected rent of the property

Step: 2 Find out rent actually received or receivable after excluding unrealized rent but before
deducting loss due to vacancy

Step: 3 Find out which one is higher amount computed in Step 1 and Step II

Step: 4 Find out loss because of vacancy

Step: 5 Step III minus Step IV is gross annual value

 Basis of Computing Income from a Let-Out House Property

GROSS ANNUAL VALUE` XXXX

Less: Municipal Taxes XX
NET ANNAL VALUE XXX
Less: deductions under section 24:
Standard Deduction-30% 0F
XX
Interest on borrowed Capital XX
INCOME FROM HOUSE PROPERTY XXX
 Calculation of Expected Rent

a) Municipal Valuation of Property

b) Fair Rent of Property
The higher of a) and b) is generally taken as expected rent
Rent Control Act, then the amount so computed cannot
exceed the standard rent.
X owns a house property (Municipal Value-Rs. 1,45,000,
Fair Rent Rs. 1,36,000 and Standard Rent Rs 1,24000.) It
is let out throughout the previous year (Rent being Rs
8,000 p.m. upto November 15, 2019 and Rs. 14,000 p.m.
thereafter). X transfers the property to Y on 31st January
2020. Find out the Gross Annual Value of the property in
the hands of X for the assessment year 2020-21.
 Compute Annual Value

Properties I II III IV V
Fair Rent 30000 25000 28000 -
Municipal 25000 27000 29000 25000 26000
Value
Actual (De 28800 30000 27600 30000 2000 p.m
facto) Rent
Standard - - - 24000 27000
Rent
Municipal Paid for PY Paid for PY Paid for PY Paid for 6
Tax 2018-19 2017-18 and 2018-19 and Months
Rs 2500 2018-19 2019-20 Rs. 1400
Rs. 5400 Rs. 5,800
 Computation of Annual Value of a House under
different situations

I- Let-Out House, neither vacant nor there is unrealised

rent-
II- Let-Out House, which remains vacant for whole or any
part of the previous year
III- Let-Out House, which does not remain vacant during
part of the previous year but there is unrealised rent
IV- Let-Out House, which remains vacant during a part of
the previous year and there is unrealised rent
 Deductions From Annual Value (Let-Out)

1. A sum equal to 30% of annual value. ( whether any

expenditure is incurred or not).
2. Interest on loan taken in respect of house property:
i) Interest on loan, taken for purchase, construction or repair of the
house, relating to previous year.
ii) Interest on loan for the period prior to previous year.
(Pre Construction period starts from the date of loan taken upto the end of financial
year just preceding the year in which the construction of house property has been
completed or date of repayment of loan, whichever is earlier.)
In case of Self Occupied:Max. Deduction: Rs. 2,00,000 ( if capital borrowed
after 31.3.1999) and Rs. 30,000 (if capital borrowed on or before 31.3.1999)
 Buildings Self Occupied For Residential Purposes

1. (a) House or part of a house occupied by the owner

for the full previous year for the purposes of his own
residence
 (b) Unoccupied House

2. House self occupied for part of the previous year and

let-out for part of the previous year.
3. More than one house in the occupation of the owner.
 Computation of Income from Self-Occupied House
Property

Gross Annual Value NIL

Municipal Taxes Not Deductible
----------------------------
Annual Value NIL
Standard Deduction NIL
Interest of Loan 30,000 or 2,00,000 (as the case may be)

--------------------------
Loss From Self-Occupied House XXXXXXXX
-------------------------
 Problems:- Interest on Loan

 X takes a loan of Rs. 45,000 @ 15% p.a. for constructing a house on 1.6.2013.
Construction of the house is completed on 20.1.2019. Date of loan repayment
is 30.9.2016. Compute the duration of pre-construction period and the amount
of interest.

 In the following cases determine the amount of interest deductible for the
Previous Year 2018-19, assuming the loan of Rs. 2,00,000 was taken for the
construction of the house @ 12% p.a. and the house had been let out:

Date of Borrowing Date of Completion of Loan Repaid upto


Construction 31.03.2018
1.04.2011 31.12.2013 Full
1.10.2012 31.03.2014 Half
1.01.2014 30.06.2015 One- fourth and paid Rs.
50,000 on 1.10.2018
Sri Sharada Prasad has a house property let-out for residential purposes. The following are
the details of the property let-out:
Municipal rental value Rs.8,500 p.m
Actual Rent realised Rs. 9,000 p.m.
Rent payable under the Rent Control Act Rs. 8,500 p.m.
The rent payable for a similar house is Rs.9,000 p.m.

He has paid 15% of the Municipal Valuation as local taxes, 2% of valuation as Education
and Health Cess.

The construction of property began in Sept. 2013 and completed in February 2016. He had
borrowed loan for the construction of the house property, on which he has paid Rs.
2,00,000 as interest up to 31.03.2015. and Rs. 50,000 as interest during the Previous
Year. Fire Insurance Premium paid Rs. 2,000 p.a.

Compute the income from house property for the Assessment Year 2019-20.
1. Ram took a loan of Rs. 16 lakh @ 10% p.a. on 1.7.2016 for constructing a house. The
construction of the house was completed in the Previous Year 2018-19. Compute the
amount of interest deductible in computing the income from house property for the
Assessment Year 2019-20 if the house is (i) Let-Out ii) Self-Occupied

2. LIC of India sanctioned a loan of Rs. 16 Lakh to Mr. Ram @12% p.a. for the
construction of a house. The loan was given in installments as under:
I Installment on 1/07/2012 -Rs. 5,00,000
II Installment on1/04/4014- Rs. 6,00,000
III Installment on 01/08/2014 – Rs. 5,00,000
The construction of the house completed in November 2014 and it is self-occupied for
residential purposes . Determine the amount of interest deductible u/s 24 for the A.Y.
2019-20. No part of the loan is repaid till date.
3. On the basis of the following information determine the
annual value of the house:
1. Half of the house is self-occupied.
2. Half of the house let-out for Rs. 7,500 p.m.
3. Municipal Value of the house is Rs. 1,50,000 on which
tax is paid @ 20%
From the following information determine the annual value
of the house:
Municipal Value- Rs. 80,000
Fair Rent Rs. 1,20,000
Standard Rent Rs. 1,00,000
The house was self-occupied for four months and then let-
out (a) Rs. 10,000 p.m (b) Rs. 15,000 p.m.
Municipal Taxes paid by the owner-Rs. 10,000
Mr. X is the owner of two houses which he uses for his residential purposes.
Compute his taxable income from house property fro the Assessment Year 2019-
20 from the following information:
First House: FRV-Rs. 1,20,000
Second House: FRV- Rs. 12000
Municipal Tax paid @ 10% of FRV
Interest paid for the previous year, on the loan taken on 1.4.2017 for purchase of
the first house, Rs. 2,20,000. He borrowed Rs. 40,000 @ 15% on 1.4.2017 for the
construction of the second house which was completed in December 2017. He
could not pay the interest during 2017-18. hence paid interest this year for two
years (including interest on unpaid interest) Rs. 12,600.
Fire Insurance Premium paid Rs. 1,400 and Rs. 200 on the first and second house
respectively.
The assessee specifies the first house for exemption under section 23(2)