INCOME FROM HOUSE PROPERTY Module – Paper Tax Laws Prakash Udeshi B.com, Grad CWA, ACS, FCA, CFE, Dip IFRS
INCOME FROM HOUSE PROPERTY – S. 22 Annual Value Of any Property Consisting of any Building or Lands Appurtenant thereto Of which Assessee is a Owner And is NOT Used by the Assessee for the purpose of Business or Profession carried on by him
DEEMED OWNERSHIP – SEC 27 Transfer to a Spouse otherwise than for inadequate consideration Exception of Agreement to Live Apart Transfer to a Child Exception of Married Daughter Holder of Impartible Estate Member of a Co-Op Society, Company, AOP Person in Possession of the Property In part performance of contract U/s 53A of TPA 1882 Acquisition of Rights by Lease for a period not less than 12 years Rights acquired on month on month basis or for period not exceeding 1 year not to be considered
GROSS ANNUAL VALUE – STEP 1 Step Y: Step Z: Step X: Known as Expected Known as Actual Rent (ER) or Market Rent (AR)Municipal Value or Fair Value (MV) Rent Whichever is Value in Step Y or Higher Value in Step X or Actual Rent Received Standard Rent or Receivable Whichever is Less Whichever is More
GROSS ANNUAL VALUELet Out Let Out AND Part of the Year Self OccupiedThroughout was VACANT Let Out and for Resithe Previous during whole Part of the year Purposes orYear or part of PY Self Occupied could not be occupiedHigher of If AR >= ER Higher of Annual Value for-ER or then AR -ER or such house will-AR If AR < ER, -AR be NIL but if the Convert ER into same is actually ER Revised let out during (ERR) then the whole/part If AR > ERR – of the year GAV = AR or treatment as per If AR < ERR – A, B or C. GAV = ER Remember when calculating ERR in B, SO period is Let Out Period
DEDUCTIONS FROM HOUSE PROPERTY Deductions Allowed for Unrealized Rent from AR From Gross Annual Value deduct Municipal Taxes if borne and paid by the owner, this will give ANNUAL VALUE Sum equal to 30% of the Annual Value Interest on Borrowed Capital for acquisition, construction, repairs, renewal or reconstruction Post Construction Period: Allowed in the PY itself Pre Construction Period: Allowed over a period of 5 years beginning from the year in which construction is completed. Pre Construction Period means from Date of Borrowing till 31st Mar of year immediately preceding the year in which construction is completed. In case of SO – Max Rs.150000/- for Acq. Or Const. – Max Rs. 30000/- for Rep. Or Renewals
PRACTICE SUMS X is owner of house which consists of two identical units each of which has been given on rent of Rs.2000/- pm The Municipal Value of the house is Rs.36000/- while the fair rental value is Rs.42000/-. One of the units was vacated by the tenant on 31.12.2011 and from 1.1.2012 to 31.3.2012, this unit was occupied by the owner for his own residence. The municipal taxes paid Rs.8000/-. Compute Income from House Property for the Asst. Year 2012 – 13.
PRACTICAL SUMS Municipal Valuation of a house is Rs.120000, Fair Rent Rs.180000 and Standard Rent Rs.150000. The house property was let for Rs.14000 pm. However the tenant vacated the property on 30.10.2011. For the months of Nov. 2011 to Jan 2012 the property remained vacant. It was let out for Rs.18000/- pm w.e.f. 1.2.2012. Municipal Taxes paid were 15% of Municipal Valuation. Compute the Annual Value of House Property.