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INTRODUCTION
The income from houses, buildings, bungalows, godowns etc is to be computed and assessed to tax under the head income from house property. The income under this head is not based upon the actual income from the property but notional income or annual value of that building.
IMPORTANT POINTS
The scope of the head of income under this head is limited to the incomes from buildings or land appurtenant to buildings only. Tax is to be levied on the annual value of the property and not on actual rent received. Assessee should be the owner of the property. The property should not be used for the purposes of assessees business or profession In case of a dispute about ownership, the person who is receiving the benefit will pay the tax till the dispute is settled Letting out of property for smooth conduct of assessees business or profession will not be treated as income from house property. Income from subletting of house property will be taxed as income from other sources and not as income from house property.
DEEMED OWNER
A person ,who transfers his house property to his spouse without adequate consideration , will be the deemed owner of the house. The only exception is when the transfer is in connection with an agreement to live apart An individual, who transfers his property to his minor child who is not an unmarried daughter, without adequate consideration will be the deemed owner of the house The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. A member of a cooperative society to whom a building or a part thereof is allotted or leased under a house building scheme of the society will be deemed to be the owner of that building or part thereof.
ANNUAL VALUE OF LETOUT HOUSE PROPERTY ANNUAL VALUE OF SELF OCCUPIED HOUSE PROPERTY
SITUATION II
House property is letout and there is vacancy
If house property was vacant for full year, the GAV is taken as nil If house property was vacant for part of the year: If rent received or receivable is more than ERV
Compare MRV and FRV and whichever is higher is compared with standard rent and whichever is less is ERV( expected rental value) If actual rent received or receivable for full year is more than ERV, then actual rent received or receivable is Gross Annual Value(GAV). Such GAV is reduced by loss due to vacancy i.e an amount of actual rent in proportion of vacancy
SITUATION III
House property is letout and there is unrealised rent
If rent actually received or receivable, after deducting unrealised rent as per conditions is more than the ERV, such rent received or receivable is GAV If rent actually received or receivable, after deducting unrealised rent as per conditions is less than the ERV, such ERV is the GAV
SITUATION IV
HOUSE PROPERTY IS LETOUT AND THERE IS BOTH VACANCY AND UNREALISED RENT
If rent received or receivable for the full year after deducting the unrealised rent as per conditions, is more than the ERV, then such rent received or receivable is the GAV. If rent received or receivable for the full year after deducting the unrealised rent as per conditions, is less than the ERV, then such ERV is the GAV. Such GAV is reduced by an amount of actual rent in proportion of vacancy.
SITUATION V
If house property is letout for a part of the year because it is purchased or constructed during the previous year 2011-12:
Take all the values only for the period for which the house property is in existence or owned by the assessee during the PY. Compare these and calculate the GAV accordingly
DEDUCTIONS U/S 24
LETOUT HOUSE Standard deduction: 30% of the annual value will be allowed as deduction irrespective of the actual expenses incurred. Interest on loan: interest on loan to construct, purchase, repair or renovate the house is allowed as deduction. Actual interest for the relevant previous year plus 1/5th of the preconstruction interest is allowed as deduction with no limit.
DEDUCTIONS U/S 24
SELF OCCUPIED HOUSE
Only one deduction allowed in case of self occupied house i.e. Actual interest for the relevant previous year plus 1/5th pre construction interest. If the loan was taken before 1.4.1999, the maximum amount of interest on loan allowed is Rs 30,000.( current years interest plus pre construction interest) If the loan is taken on or after 1.4.1999, the maximum limit on interest allowed is Rs 1,50,000, provided the construction of the house for which the loan is taken is completed within three years from the end of the financial year in which the money is borrowed.