Income from house_property_ppt

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Income from house_property_ppt

  1. 1. Income from House property<br />
  2. 2. Basis of charge is Sec 22<br />Income is taxable under the head “ Income from House property” if the following three conditions are satisfied:<br /> a. Property should consist of any buildings or lands appurtenant thereto.<br /> b. Assessee should be owner of the property.<br /> c. 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 <br />
  3. 3. illustrations<br />1. X owns a building and it is given on rent. <br /> Income of the property is taxable under the head “ Income from house property” as all the three conditions are satisfied.<br />Y owns a building and it is used by him for carrying on a business or he uses the building as his office/factory/godown.<br /> In this case, no income is taxable under the head <br /> “ Income from house property” as third condition is not satisfied.<br />
  4. 4. <ul><li> “Building” includes </li></ul> residential houses ( let out or self occupied )<br /> building let out for office use, storage,factory,etc<br /><ul><li>Appurtenant lands in respect of a building may be in the form of compounds, backyards, car parking,etc
  5. 5. “Owner” includes a legal owner as well as deemed owner. “Owner” may be an individual, HUF, firm, company, society or AoP
  6. 6. Annual value of the property is assessed to tax u/s 22 in the hands of the owner even if he is not in receipt of income.</li></li></ul><li>Mr. X owns a house property. On April 1,2010, he transfers the property without any consideration to his wife.<br /> Rental income is received by Mrs. X after April 1,2010. <br /> However, for the purpose of charging tax on rental income, Mr. X will be deemed as “owner” of the property. <br /> Consequently, income would be taxable in the hands of Mr.X.<br />
  7. 7. Mr.Y gifts Rs. 15 Lakhs to Mrs.Y and she purchases a house property out of the gifted money. <br /> In this case, Mr. Y will not be deemed as “owner” of the property because he has not transferred a house property.<br /> Consequently, income from property would be computed in the hands of Mrs.Y<br />
  8. 8. Mr.Y gifts Rs. 15 Lakhs to Mrs.Y and she purchases a house property out of the gifted money. <br /> In this case, Mr. Y will not be deemed as “owner” of the property because he has not transferred a house property.<br /> Consequently, income from property would be computed in the hands of Mrs.Y<br />3. Rental income from a vacant plot is not chargeable to tax under the head “Income from house property” but is taxable under income from other sources.<br />
  9. 9. In the following cases, rental income is not charged to tax<br />Income from farm house<br />Annual value of any one palace of an Ex-ruler<br /> Property income of <br />c. a local authority.<br />d. an approved scientific research association.<br />e. an educational institution and hospital.<br /> a trade union. <br /> a charitable institution.<br /> a political party.<br /> one self occupied property.<br />
  10. 10. Basis of computing income from a let out house property<br />Gross Annual Value - XXXXXX <br />Less : Municipal taxes - xxxxxx<br /> Net Annual value - xxxxxx<br />Less : Deduction u/s 24<br />Standard Deduction - xxxxx<br />Interest on borrowed capital - xxxxxx<br /> Income from House property - xxxxx <br />
  11. 11. Gross Annual Value : <br /> Tax under the head “Income from house property” is not a tax upon rent of a property. It is tax on inherent capacity of a building to yield income.<br /> The standard selected as a measure of the income to be taxed is “ Gross Annual Value ”<br />
  12. 12. Determination of Gross Annual Value : <br />Step 1 : Find out reasonable expected rent of property.<br />Step 2 : Find out rent actually received or receivable after excluding unrealised rent.<br />Step 3 : Find out higher amount in Step -1 or Step-2.<br />Step 4 : Find out loss because of vacancy.<br />Step 5 : Step 3 minus Step 4 is Gross Annual Value<br />
  13. 13. Step 1 : Reasonable expected rent of property<br />The higher amount of Municipal valuation(MV) and Fair Rent of property (FR), subject to maximum of Standard Rent (SR) is reasonable expected rent of property.<br />
  14. 14. Step 1 : Reasonable expected rent of property<br />( Amount in Rs. Thousands)<br />ParticularsABCDE<br />MV 40 40 40 40 40<br />FR 46 46 46 48 51<br />SR NA 45 35 45 63<br />Reasonable 46 45 35 45 51<br />Expected rent<br />( Step 1 )<br />
  15. 15. Step 2 : Find out rent actually received or receivable after excluding unrealised rent.<br />Rent of the previous year( or part of the previous year) for which the property is available for letting out - Rs.xxxxxx<br />Less : Unrealised rent if a few conditions - Rs.xxxxxx are satisfied<br /> Rent received or receivable before - Rs.xxxxxx deducting loss due to vacancy<br />
  16. 16. When unrealised rent shall be excluded : <br />Unrealised rent( which the owner could not realise) shall be excluded only if the following conditions are satisfied.<br /> 1. The tenancy is bonafide.<br /> 2. The defaulting tenant has vacated or steps have been taken to compel him to vacate the property.<br /> 3. The defaulting tenant is not occupying any other property of the assessee.<br /> 4. The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent<br />
  17. 17. A, B, C, D , E separately own the following properties.<br />Find out Gross annual value for AY 2010 – ’11<br />( Amount in Rs. Thousands)<br />ParticularsABCDE<br />MV 105 105 105 105 105<br />FR 107 107 107 107 107<br />SR NA 88 88 135 135<br />Actual Rent 103 112 86 114 97<br />Unrealised Rent 1 2 1 2 1<br />(conditions are satisfied)<br />
  18. 18. Computation of Gross annual value.<br />( Amount in Rs. Thousands)<br />ParticularsABCDE<br />Step 1 107 88 88 107 107<br />Step 2 102 110 85 112 96<br />Step 3 107 110 88 112 107 <br />Step 4 NIL NILNILNILNIL<br />Step 5 ( G.A.V) 107 110 88 112 107 <br />
  19. 19. X,Y,Z separately own the following properties.<br />Find out Gross annual value for AY 2010 – ’11<br />( Amount in Rs. Thousands)<br />ParticularsXYZ<br />MV 95 60 60 <br />FR 96 54 55<br />SR 94 78 79 <br />Actual Rent 93 106 78 <br />Unrealised Rent nil nilnil<br />
  20. 20. Find out Gross annual value for AY 2011 – ’12<br /> ( Amount in Rs.)<br />ParticularsXY<br />MV 61,000 61,000 <br />FR 1,08,000 30,000<br />SR 60,000 60,000<br />Rent received<br />From Tenant 1<br />(1.4.10 to 30.6.10 ) 5000 P.M 2000 P.M.<br />From Tenant 2<br />(1.7.10 to 31.12.10) 9000 P.M. 2500 P.M,<br />Period when the property<br />Remains unoccupied 1.1.11 to 31.3.11 1.1.11 to 31.3.11 <br />Actual rent receivable 96,000 28,500<br />Loss due to vacancy 27,000 7,500<br />
  21. 21. Deduct Municipal taxes<br /> 1. From the Gross Annual Value computed, deduct municipal taxes(incl. Service taxes) levied by any local authority in respect of the house property.<br /> 2. Municipal taxes are deductible only if <br /> a) these taxes are borne by the owner and <br /> b) these are actually paid by the owner during the previous year<br />
  22. 22. Deduction u/s 24<br /> 1. Standard Deduction<br /> 30 % of net annual value is deductible irrespective of any expenditure incurred by the tax payer.<br /> 2. Interest on borrowed capital is allowable as deduction, if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property.<br />3. Interest on borrowed capital is deductible fully without any maximum ceiling( in the case of a let out property)<br />
  23. 23. Find out Income from property chargeable to tax for AY 2011 – ’12 in the following cases.<br /> ( Amount in Rs.)<br />ParticularsHouse AHouse B<br />MV 1,20,000 1,20,000 <br />FR 1,30,000 1,30,000 <br />SR 1,10,000 1,10,000<br />Actual Rent 1,26,000 1,26,000<br />Unrealised Rent 10,500 NIL<br />Loss due to vacancy 10,500 NIL<br />Municipal taxes<br />Paid by owner (FY 2010-11) 18000 NIL<br />Paid by owner (FY 2011-12) NIL 7000<br />Paid by tenants (FY 2010-11) NIL 9000<br />Interest on borrowed capital 25000 15000<br />
  24. 24. How to compute taxable income from self occupied property<br />Gross Annual Value Nil<br />Less : Municipal Taxes Nil<br /> Net Annual Value Nil<br />Less: Deduction u/s 24<br />Standard deduction Nil<br />Interest on borrowed capital xxxxx<br /> Income from one self occupied property xxxxx<br />
  25. 25. Interest on borrowed capital( self occupied property)<br />1. If the capital is borrowed on or after April 1,1999 for acquiring or constructing a property, interest on borrowed capital is deductible upto Rs. 1.5 Lakhs<br />2. If the capital is borrowed on or before April 1,1999, interest on borrowed capital is deductible upto Rs.30,000.<br />3. If the capital is borrowed on or after April 1, 1999 for reconstruction, repairs , interest on borrowed capital is deductible upto Rs.30,000<br />
  26. 26. Mr. X owns a house property and it is used by him throughout the previous year 2010 – 11 for his residence.<br />M.V = Rs.1,66,000 , F.R= Rs.1,76,000<br />S.R = Rs.1,50,000<br />Expenses :<br /> Repairs = Rs.20,000, M.Tax = Rs.16,000<br /> Insurance = Rs.2000<br /> Interest on borrowed capital to construct property = Rs.1,36,000<br />( Capital borrowed on 25.7.2005)<br />Income of Mr.X from business is Rs.7,10,000<br />Find out net income of Mr.X for AY 2011 – 12.<br />
  27. 27. Computation of taxable income of Mr.X<br />Gross Annual Value Nil<br />Less : Municipal Taxes Nil<br /> Net Annual Value Nil<br />Less: Deduction u/s 24<br />Standard deduction Nil<br />Interest on borrowed capital (1,36,000)<br /> Income from one self occupied property (1,36,000)<br />Income from Business 7,10,000<br /> Total Net Income 5,74,000<br />
  28. 28. WHEN A PROPERTY IS SELF OCCUPIED AND A PART IS LET OUT<br />Mr. X owns a house property. It has two equal residential units – Unit 1 and Unit 2 <br />Unit 1 is self occupied by Mr.X for residential purpose, <br /> Unit-2 is let out( Rent = Rs.6000 per month, rent of 2 months could not be recovered)<br />M.V = Rs.1,30,000 , F.R= Rs.1,40,000<br />S.R = Rs.1,25,000<br />Municipal tax is imposed @ 12% which is paid by Mr.X. <br /> Other expenses for the previous year 2010 – 11 : Repairs = Rs.2500, Insurance = Rs.6000, Int. on borrowed capital for constructing the property = Rs.63000 ( borrowed during the year 1998)<br />Income from other sources of Mr.X = Rs.500000<br />Find the income of Mr.X for AY 2011 - 12<br />
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