This document discusses the taxation of income from house property under the Indian Income Tax Act. It provides definitions and explanations of key terms like annual value, gross annual value, municipal value, fair rent, standard rent, and adjusted annual value. It explains how to determine the income from house property for let out properties and self-occupied properties. This includes calculating gross annual value, allowable deductions, and the treatment of losses. An example problem is provided to illustrate how to compute the total income from house property for multiple properties, some let out and some self-occupied.

1. Prof Bose Christ College Pune

2. Sec : 22
Any income from houses, buildings, bungalows, godown etc.
are to be assessed under the head “ INCOME FROM HOUSE
PROPERTY”.
INCOME FROM HOUSE PROPERTY = ANNUAL VALUE OF THE
PROPERTY – DEDUCTIONS U/S 24.
Prof Bose Christ College Pune

3. HOUSE PROPERTY [Sec: 23]
LET OUT TO
TENANT
[May be used as
Residence or
Business ]
OCCUPIED
FOR OWN
RESIDENCE
USED FOR
OWN
BUSINESS OR
PROFESSION
USED BY THE
ASSESSEE AS
STOCK – IN - TRADE
COMES AND ASSESSED
UNDER THE HEAD
“INCOME FROM HOUSE
PROERTY”
COMES AND ASSESSED
UNDER THE HEAD
“PROFITS AND GAINS OF
BUSINESS OR PROFESSION”
Prof Bose Christ College Pune

4. DIFFERENT VALUATION OF A PROPERTY :
1. MUNICIPAL VALUE : Valuation of a property made by the local
municipality.
2. FAIR RENTAL VALUE : Valuation of a property made on the basis
of the valuation of a same type of property (size, specification
etc.) in the same locality.
3. STANDARD RENT : It is the valuation of a property made on the
basis of the rent determined by the Rent Control Act of the
concerned State.
4. ACTUAL RENT RECEIVED / RECEIVABLE : It is the valuation of a
property made on the basis of the rent received / receivable
from the tenant. Prof Bose Christ College Pune

5. HOW TO DETERMINE OF ADJUSTED ANNUAL VALUE U/S : 23(1) ?
I. FOR LET-OUT PROPERTY :
Rs.
GROSS ANNUAL VALUE OF THE PROPERTY ×××
LESS : MUNICIPAL TAX PAID BY THE OWNER ×××
ADJUSTED ANNUAL VALUE : ×××
WHAT IS ANNUAL VALUE [SEC 23] ?
It is the value for which a property can be let-out from year to
year
Prof Bose Christ College Pune

6. HOW TO DETERMINE INCOME FROM HOUSE PROPERTY
Rs.
Gross annual value of the property ×××
Less : municipal tax paid by the owner ×××
Adjusted annual value :
Less: Deductions u/s 24
Standard deduction u/s 24(a) xxxx
Interest on Borrowed Capital u/s 24(b) xxxx
Income From House Property (let-out)
×××
xxx
_____
xxx
FOR LET OUT PROPERTY
Prof Bose Christ College Pune

7. HOW TO DETERMINE INCOME FROM HOUSE PROPERTY
Rs.
Adjusted annual value of the property u/s 23(2)(a)
or 23(2)(b)
NIL
xxx
_____
xxx
Less: Deductions u/s 24
Interest on Borrowed Capital u/s 24(b)
Loss From House Property (Self occupied)
FOR SELF OCCUPIED PROPERTY
Prof Bose Christ College Pune

8. DETERMINETION OF GROSS ANNUAL VALUE OF A
PROPERTY :
STEP 1 :
Determine ‘’Reasonable Expected Rent’’ U/S : 23(1)(a) :
How To ?
Take The Highest Between :
1. MUNICIPAL VALUE
2. FAIR RENT
But Subject To Max. of (i.e. it should not exceed) - Standard
Rent
RESULT FIGURE IS THE ‘’REASONABLE EXPECTED RENT’’
U/S 23(1)(a) Prof Bose Christ College Pune

9. STEP 2 :
DETERMINE ‘GROSS ANNUAL VALUE’’
HOW TO ?
CONDITION 1 :
a. When there is no unrealised rent and vacancy period and the Property
is actually let out:
GROSS ANNUAL VALUE IS THE HIGHEST ONE BETWEEN :
1. REASONABLE EXPECTED RENT
2. ACTUAL RENT RECEIVED / RECEIVABLE
b. Property is actually let out + vacancy period + but actual rent
received / receivable is more than RER : sec 23(1)(b)
Gross annual value = rent received / receivable
Prof Bose Christ College Pune

10. CONDITION 2 : Property is actually let out + actual rent received /
receivable is less than RER because of vacancy: sec 23(1)(c)
Explanation:
1. [(Annual Rent – Rent pertaining to vacancy) < Reasonable
Expected Rent]
2. [(Annual Rent – Unrealised Rent) > Reasonable Expected Rent]
BUT
[(Annual Rent – Unrealised Rent - Rent pertaining to vacancy) <
Reasonable Expected Rent]
GAV = Actual Rent Received / Receivable
Prof Bose Christ College Pune

11. CONDITION 3: Property is actually let out + no vacancy period +
actual rent received / receivable is less than RER because of
any other factor (unrealised rent) :
EXPLANATION:
[(Annual Rent – Unrealised Rent) < Reasonable Expected
Rent]
GAV = Reasonable Expected Rent
Prof Bose Christ College Pune

12. CONDITION 4: Property is actually let out + actual rent
received / receivable is less than RER partly because of
vacancy and partly because of other factors:
EXPLANATION:
[(Annual Rent – Unrealised Rent) < Reasonable Expected Rent ,
even if loss of rent due to vacancy is ignored]
GAV = Reasonable Expected Rent – loss of rent due to vacancy
Prof Bose Christ College Pune

13. WHEN UNREALISED RENT IS DEDUCTABLE?
RULE 4 :
If the following conditions are fulfilled :-
1. The tenancy is bonafide
2. The defaulting tenant has vacated or steps have been taken to vacate the
house
3. The defaulting tenant is not in occupation of any other property of the
assessee.
4. The assessee has taken all legal steps to recover the unpaid rent.
Prof Bose Christ College Pune

14. DEDUCTIONS U/S 24
FOR THE ASSESSMENT YEAR 2019-20
Prof Bose Christ College Pune
DEDUCTIONS LET OUT PROPERTY
SELF OCCUPIED
PROPERTY
STANDARD
DEDUCTIONS
[SEC 24(a)]
30 % OF ADJUSTED
ANNUAL VALUE
N.A
INTEREST ON
BORROWED
CAPITAL
[SEC 24(b)]
NO LIMIT
1. IF THE LOAN IS TAKEN ON
OR AFTER 01.04.1999 AND
ALL OTHER CONDITIONS *
ARE SATISFIED:
Rs. 2,00,000
2. IN ANY OTHER CASE :
Rs. 30,000

15. CONDITIONS TO BE SATISFIED :
1. Loan used for construction or acquisition of house property on or after
01.04.1999
2. Construction and acquisition is completed within 5 years from the date
of such loan taken
3. A certificate should be obtained from the lender in respect of the
utilisation of the loan (construction, / purchase / refinance of the
previous outstanding loan (principal amount)
Prof Bose Christ College Pune

16. ADDITIONAL POINTS TO BE REMEMBERED
[A/Y : 2019-20]
If an assessee owns more than one self occupied house for
residence , then one house will be treated as self occupied for whom
the adjusted annual value will be taken as nil and the other will be
treated as deemed to be let-out.
Prof Bose Christ College Pune

17. Problem on Income From House Property
Mr Sudhakar owns three houses , particulars of which are as follows.
Find out the income from House Property for the A.Y. 2020-21.
Prof Bose Christ College Pune
House A
[Let Out] Rs.
House B
[SOH] Rs.
House C
[SOH] Rs.
I. Municipal Valuation 3,60,000 4,80,000 6,00,000
II. Fair Rent 3,70,000 4,70,000 6,20,000
III. Standard Rent 3,80,000 4,65,000 6,30,000
IV. Annual Rent 3,78,000 4,50,000 6,25,000
V. Unrealised Rent of PY(2018-19) 15,700 N.A. N.A.

18. Problem on Income from House Property
House A
[Let Out] Rs.
House B
[SOH] Rs.
House C
[SOH] Rs.
VI. Period of
vacancy
One month N.A. N.A.
VII. Municipal Tax
at 10% of M.V.
Paid by tenant Not paid up to
31/03/2020
Paid by Sudhakar
VIII. Construction
completed on
10/04/2010 10/10/2014 10/05/2013
IX. Loan taken for
construction on
16/11/2008 15/07/2012 02/11/2012
X. Interest paid on
Loan
1,70,000 1,53,000 2,55,000
Prof Bose Christ College Pune

19. Computation of Income from House Property for
A.Y.2020-21
Assessee has occupied two houses for his own residence. As per
Sec.23(4) Two house ( big houses according to his choice) will be
treated as Deemed Let Out (w.e.f. A.Y. 2020-21)
Assuming an assessee has exercised his option to treat his
houses B and C as self occupied property the computation of
income from house property would be as follows:
Prof Bose Christ College Pune

20. Computation of Income from House Property for
A.Y.2020-21
House A
[Let Out] Rs.
House B
[SOH] Rs.
House C
[SOH] Rs.
I. Municipal
Valuation
3,60,000 Nil Nil
II. Fair Rent 3,70,000 Nil N.A.
Municipal valuation
or Fair Rent
whichever is
higher(a)
3,70,000
Standard Rent (b) 3,80,000
(a) Or (b) whichever
is lower is
Reasonable
Expected
Rent(RER)(1)
3,70,000
Nil ………
Prof Bose Christ College Pune

21. Computation of Income from House Property for
A.Y.2020-21
House A
[Let Out] Rs.
House B
[SOH] Rs.
House C
[SOH] Rs.
Before adjusting
the LDV (AR-UR) (2)
3,62,300 000 ……….
(3) Higher between
(1) and (2)
3,70,000 N.A. N.A.
(4) Loss due to
vacancy (one
month)
(3,78,000/12*1)
(31,500) N.A. N.A.
Gross Annual
Value(3-4)
3,38,500 NIL NIL
Prof Bose Christ College Pune

22. Computation of Income from House Property for
A.Y.2020-21
House A
[Let Out] Rs.
House B
[SOH] Rs.
House C
[SOH] Rs.
Gross Annual Value 3,38,500 NIL NIL
Less: Municipal Tax @ 10% N.A. paid by
tenant
N.A. N.A.
Net Annual Value (A) 3,38,500 NIL NIL
Less : Ded. u/s 24
1.Standard Deduction @30%
of NAV
1,01,550
2.Interest on Loan 1,70,000 (2,00,000)
(B) 2,71,550 (2,00,000)
Income/Loss from H.P. (A-B) 66,950 (2,00,000)
Total Income from H.P. = 66,950-2,00,000 = Rs.1,33,050
Prof Bose Christ College Pune