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Income from house_property_ppt
 

Income from house_property_ppt

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    Income from house_property_ppt Income from house_property_ppt Presentation Transcript

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