HEADS OF INCOME

INCOME FROM HOUSE

PROPERTY

By
Dr. M. S. Khan
 INCOME FROM HOUSE
PROPERTY
 Charging Section 22, Annual Value of any
property consisting of any building or land
appurtenant thereto of which, the assessee is the
owner is chargeable to tax under the head “Income
from House Property”
 INCOME FROM HOUSE
PROPERTY
 following three conditions:
 property consists of buildings or lands appurtenant
thereto
 the assessee should be the owner of the property
 the property should not be used by th owner for his own
business
 INCOME FROM HOUSE PROPERTY
 Owner includes legal as well as deemed owner
 Deemed owner as per section 27 includes:
 Transfer to spouse without an agreement to live apart or to a
minor, not a married daughter
 Holder of an impartible estate
 Property held by a member of a co-operative society /
company / AOP
 A person who has acquired a property under power of
attorney
 Person acquired a right on a property under lease
 INCOME FROM HOUSE PROPERTY
 Exempted property
 income from farm house (u/s 2(1A) (10(1))
 annual value of any one palace of an ex-ruler Se.
10(19A)
 property income of a local authority (10( 20)
 property income of an approved scientific research
association (10(21)
 property income of an educational institution (10(20C)
 INCOME FROM HOUSE PROPERTY

 Exempted property
 property income of a trade union (10(24)
 house property held for charitable purpose (11)
 property income of a political party (13A)
 property used for own business or profession (22)
 one self-occupied property Sec 23(2)
 Computation of Annual Value
 computation of income from house property depends on the
type of property
 let out House property
 self -occupied property
 let out property remain vacant
 partly let out and partly self occupied
 deemed to be let out
 property owned by co-owners
Computation of Income from House property
 let out House property

 Annual Value XXX

 Less Muncipal Tax XXX
 Adj. Annual Value xxx
 less Deduction u/s 24 XXX
 Income from House Property XXX
 Tax under the head income from House property is not a tax upon rent
of a property. It is tax on the capacity of a building to yield income. The
measure of such income is called Annual Value
 Computation of Annual Value of Let –out

 Annual value is the estimated value of

Income expected if the property is rented.
 Annual value is the
 reasonable letting Valueor
 Actual Rent of the property which ever is higher.

 Reasonable letting value is the Municipal value or Fair rent

which ever is higher restricted to Standard rent a per Rent
Control Act
 Computation of Annual Value of Let –out
 reasonable letting value is:
 Municipal value or
 Fair rent
Which ever greater restricted to Standard rent
 Municipal Valuation is the ratable value fixed by the
municipality for charging municipal tax .
 Fair rent is the rent fetched by a similar accommodation in
the same or similar locality
 Standard rent is the maximum rent which a person can
legally recover from his tenant under the Rent Control Act.
 COMPUTATION OF ACTUAL RENT

ACTUAL RENT
 Actual rent is applicable only to let out houses.
Actual rent is rent received or receivable. Actual rent
is the rent of the previous year for which the property
was available for letting out. The unrealised rent, if it
fulfills the conditions, is allowed to deduct from
actual rent receivable
 Actual Rent = Actual rent received or receivable –
allowable unrealised rent
 Loss due to vacancy
 If the let out property remain vacant for a
period, the loss due to vacancy is allowed to be
deducted from the highest value, arrived after
comparing reasonable letting value with
Annual Rent. The balance after the deduction
of loss due to vacancy , if any, is the Annual
Value
  Find out the annual Value
H1 H2 H3 H4 H5
Municipal Value 105 105 105 105 105
Fair rent 107 107 107 107 107
Standard rent NA 88 88 135 135
Actual Rent 103 112 86 114 97
Unrealised rent (condition 1 2 1 2 1
fulfills)
Period of the previous year (in 12 12 12 12 12
months)
Period for which property Nil Nil Nil Nil Nil
remain vacant
 Answer
 Reasonable letting value 107
(fair rent -107, MV- 105 St Rent nil)
 Actual Rent (103-1) 102
AR -103; allowable unrealised rent 1
The Highest RLV or AR 107
Less loss due to vacancy Nil
Annual Value 107
 Answer
 Reasonable letting value 88
(fair rent -107, MV- 105 St Rent 88)
 Actual Rent (112-2) 110
AR -112; allowable unrealised rent 2
The Highest RLV or AR 110
Less loss due to vacancy Nil
Annual Value 110
 Answer
 Reasonable letting value 88
(fair rent -107, MV- 105 St Rent 88)
 Actual Rent (86-1) 85
AR -86; allowable unrealised rent 1
The Highest RLV or AR 88
Less loss due to vacancy Nil
Annual Value 88
 Answer
 Reasonable letting value 107
(fair rent -107, MV- 105, St Rent 135)
 Actual Rent (97-1) 96
AR -97; allowable unrealised rent 1
The Highest RLV or AR 107
Less loss due to vacancy Nil
Annual Value 107
 Question
 X owns a house property (municipal Valuation .
1,45,000, fair rent1,36,000 standard rent Rs.
1,24,000 it is let out throughout the previous
year(rent being 8000 per month upto November
15, 2018 and Rs. 14000 per month thereafter) X
transfer the property to Y on Jan 31 2019,
Find out the annual Value of the property in
the hands of Mr. X for the assessment year
2019 - 20
 Answer
 Reasonable letting value 1,03,333
(fair rent -1,36,000/12X10=113,333, MV-
145000/12X 10=120,833, St Rent
124000/12X10=1,03,333)
 Actual Rent (8,000X7 1/2 +14000X2 1/2)
95000
The Highest RLV or AR 1,03,333
Less loss due to vacancy Nil
Annual Value 1,03,333
 Loss due to vacancy
If the Annual Rent is less than the
Reasonable letting Value only because
of the loss due to vacancy , then the
Annual Rent is to be taken as Annual
Value
 Loss due to vacancy
Fair Rent Rs. 24000, Municipal
Valuation Rs 28000, Actual Rent Rs.
36,000 (for 12 month) property remain
vacant for 1 month) calculate the
annual Value
 Answer
 Reasonable letting value 28000
(fair rent –25000, MV- 28000,
 Actual Rent 36000
The Highest RLV or AR 36000
Less loss due to vacancy 3000
Annual Value 33000
 Answer
 Fair rent Rs. 26,000, Municipal Valuation Rs.
30000, Rent Rs. 2000 pr month, 1 month the
property remain vacant and rs. 2000 unrealised
rnt ulfils conitions.
 Answer
 Reasonable letting value 30000
(fair rent –26000, MV- 30000,
 Actual Rent (2000 X 12) 24000
 Less Unrealised 2000
22000
The Highest RLV or AR 30000
Less loss due to vacancy(2000X1) 2000 Annual Value
28000
 Deduct Municipal Taxes
From the annual Value deduct
Municipal Taxes levied by any local
authority in respect of the house
property. This tax is deductible only if
it is actually paid by the owner and
only to the extent it is paid during the
year
 Deduction u/s 24
Standard deduction
 Interest on borrowed
 Deduction u/s 24
Standard deduction
 Interest on borrowed
 Standard deduction
 No deduction can be claimed by an assessee
other than mentioned in section 24. Standard
deduction is allowed irrespective of expenses
incurred by the assessee
 30 % of the adjusted annual value is
deductible irrespective of expenses incurred by
the taxpayer
 Interest on Borrowed Capital
 Interest on Borrowed capital is allowed as deduction if
capital is borrowed for the purpose of purchase, construction,
repair, renewal or reconstruction of the property
 It is deductible on accrual basis. It can be deductible as
yearly, it is deductible even if it is not actually paid during
the previous year
 No deduction for any brokerage or any expenses for arranging
the loan is allowed
 interest of a fresh loan taken for the repayment of the
earlier loan is allowed as deduction
 Interest Payable for pre-construction
period
 If interest on Borrowed capital is paid prior to the
acquisition or completion of construction, the interest paid
during that period is allowed as deduction in five equal
installments . But if such amount is allowed as deduction
under any other provision earlier the amt. so deducted is not
allowed as deduction under this provision
 Question
 Mr. Jeevan has a house in Mumbai, which he used for his
residence in the previous year 2009-10. Due to to his transfer
to Nagpur he could not occupy this house in the previous year
2010-11. he stays in a rented house in Nagpur, He has let out
his mumbai house property @ Rs. 12000 per month. He spend
Rs. 2000 for insuring the property and 2000 for repairs. Fair
rent of the house property comes Rs. 13000 per month. The
property remain vacant for 2 months and the unrelised which
fulfills conditions Rs. 10000 calculate the income from HP of
Mr. JEEVAN for the assessment year 2011-12
 Answer
 Let-out House
 Annual Value 30000
(Fair rent- 13000 X 12=156000 or MV
Nil, thus RLV =156000, Actual Rent
Rs. 12000 X 12 =1,44000 – Unrealised rent Rs. 10, 000 Actual
Rent = 144000-10000=134000)
RLV or Actual rent which ever is higher = 156000
Less Loss due to Vacancy (12000 X 2) 24000
Annual Value 132000
 Answer
 Let-out House
 Annual Value 132000
 Less Municipal Tax Nil
 Adjusted Annual Value 132000
 Less deduction U/S 24
 1. Standard deduction
30% of Adjusted Annual Value 39600
2.Interest on Borrowed Capital 2000 41600

Income From House Property 90400