1. ( S o m e p r o v i s i o n s i n Q u e s t i o n & A n s we r f o rm a t )
Shankar Bose,
Inspector of Income-tax
cum
Faculty Member,
Ministerial Staff Training Unit,
Puri
Q.. 01 : Is Income Tax just levied on a house property ?
Ans. : No. It is levied on annual value of the house property.
Q.. 02 : What is the basis of calculating income from house property
?
Ans. : The basis of calculating income from house property is the annual
value.
Q.. 03 : What is annual value ?
Ans. : Annual value means the inherent capacity or potential of a house
property to earn or generate income. In other words, the annual
value is the amount for which the property might reasonably be
expected to let from year to year. Income from house property is
perhaps the only income that is charged to tax on a notional
basis.
Q.. 04 : How many conditions are to be satisfied if the income is to
be
taxed under the head “Income from house property”, and
what are
those ?
Ans. : Three. They are as follows:

2.  The property should consist of any buildings or lands
appurtenant thereto.
 The assessee should be owner of the property.
 The property should not be used by the owner for the
purpose of any business or profession carried on by him,
whose profits are chargeable to income-tax.
Q.. 05 : Are all these conditions required to be satisfied
simultaneously or
individually ?
Ans. : Simultaneously.
Q.. 06 : What kind of property or what are the properties referred to
u/s. 22 ?
Ans. : Only property consisting of any buildings or lands appurtenant
thereto is referred to u/s. 22.
Q.. 07 : Under the head “Income from house property” how is a
building
defined ?
Ans. : The term building has neither been defined by the I. T. Act, 1961
nor by the I. T. Rules, 1962. As such, dependence upon its
ordinary natural meaning will be reasonable. The New
International Webster’s Student Dictionary of the English
Language defines building as “a structure, usually having walls
and roof, as a house, a place of work, etc.”
Q.. 08 : Can a building erected for a merely temporary purpose be
called a
building ?
Ans. : Yes.
Q.. 09 : Give some examples of “lands appurtenant thereto” in
respect of a
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3. residential building.
Ans. : They are as follows:
 Approach roads to and from public streets,
 Compounds,
 Courtyards,
 Backyards,
 Playgrounds,
 Kitchen gardens,
 Motor garages,
 Stables,
 Cattle-sheds, etc.
Q.. 10 : If an occupied house property is utilised by the assessee for
his business or profession, on whose profits income-tax is
chargeable , will the annual value of that property
chargeable to
tax under the head “Income from house property” ?
Ans. : No. In that case, the profits will be chargeable to income-tax
either under the head “Profits and gains of business or
profession” or “Income from other sources”.
Q.. 11 : Whether depreciation allowance is allowable in respect of
house
property owned by the assessee and used by him for his
own
business or profession ?
Ans. : Yes, depreciation allowance u/s. 32 is allowable under this
condition.
Q.. 12 : What is actually taxed under this head ?
Ans. : The inherent capacity of a building or land appurtenant thereto, is
charged to tax under this head.
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4. Q.. 13 : Can Annual Value (Net Annual Value) be negative, and if so,
when ?
Ans. : Yes. The Annual Value (NAV) can be negative only when
the municipal taxes paid by the owner are more than the gross
annual value.
Q.. 14 : Who is taxed under this head ?
Ans. : The owner of the property is charged to tax under this head.
Q.. 15 : Who is an owner ?
Ans. : Owner means the legal owner of the property, i.e., a person
Having a proper title over the property through a registered
deed of conveyance or through inheritance, etc. A Trustee,
Executor, Registered owner, Official assignee, Mortgagor,
Beneficiaries, etc., are all examples of ownership. An owner may
be an Individual, Firm, Company, Co-operative Society, or
Association of Persons.
Q.. 16 : If a partnership firm owns a house property, who is
assessable to
tax – the firm or its partners ?
Ans. : It is the firm which is assessable to tax u/s. 22 and not the
individual partners u/s. 26.
Q.. 17 : What are the deductions admissible u/s. 24 of the Income
Tax Act,
1961, under the head “Income from house property” ?
Ans. : The deductions admissible from income from house property are
as follows:
 Statutory deduction : From the net annual value computed, the
assessee is allowed a statutory deduction of a sum equal to
30% of the net annual value. This deduction is like standard
deduction which was allowed from gross salary.
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5.  Interest on borrowed capital : Where the property has been
acquired, constructed, repaired, renewed or reconstructed
with borrowed capital, the amount of any interest payable on
such capital is allowed as a deduction. The amount of interest
payable yearly should be calculated separately and claimed as
a deduction every year. It is immaterial whether the interest
has been actually paid or not paid during the year.
Q.. 18 : Is income from sub-letting taxable under the head “Income
from
house property” ?
Ans. : No. It is taxable either under the head “Profits and gains of
business or profession” or “Income from other sources”.
Q.. 19 : If the title of ownership of a house property is under
dispute in
a Court of law, can the Income Tax Department decide as
to who
is the owner ?
Ans. : If the title of the ownership of the property is under dispute in a
Court of law, the decision who will be the owner and chargeable
to income-tax u/s. 22 will be of the Income-tax Department till
the Court gives its decision to the suit filed in respect of such
property.
Q.. 20 : What is Standard rent ?
Ans. : Standard rent is the maximum rent which a person can legally
recover from his tenant under a Rent Control Act.
Q.. 21 : What is the treatment of unrealised rent received
subsequently?
Ans. : Under Section 25AA (w.e.f. 01.04.2002) unrealised rent received
subsequently is taxed in the year of receipt whether the owner
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6. remains owner at that time or not.
Q.. 22 : Are all owners of house property chargeable to tax under
this head?
Ans. : No. The following properties are expressly exempt from tax in
respect of their income:
 Income from farm house – Sec. 2(1A)(c) read with Sec. 10(1),
 Annual value of any one palace of an ex-ruler – Sec.
10(19A),
 Property income of a local authority – Sec. 10(20),
 Property income of an approved scientific research
association – Sec. 10(21),
 Property income of an institution for the development of
Khadi and Village Industries - Sec.10(23B),
 Property income of any Khadi and Village Industries Boards –
Sec. 10(23BB),
 Property income of a university or other educational
institutions – Sec. 10(23C),
 Property income of a hospital or other medical institution –
Sec. 10(23C),
 Property income of any registered trade union – Sec. 10(24),
 House property held for charitable purposes – Sec. 11,
 Property income of a political party – Sec. 13A,
 Property used for own business or profession – Sec. 22,
 One self-occupied property – Sec. 23(2), and
 Rental income of a co-operative society – Sec. 80P (2)(e).
Q.. 23 : When is unrealised rent to be excluded from rent received/
receivable ?
Ans. : Unrealised rent (which the owner could not realise) shall be
excluded from rent received/receivable only if the following
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7. conditions are satisfied:
 The tenancy is bona fide,
 The defaulting tenant has vacated, or steps have been taken
to compel him to vacate the property,
 The defaulting tenant is not in occupation of any other
property of the assessee,
 The assessee has taken all reasonable steps to institute legal
proceedings for the recovery of the unpaid rent or satisfies
the A. O. that legal proceedings would be useless.
Q.. 24 : Can the loss suffered by an assessee under the head
“Income from
house property” (both SOP & let out) be set off or/and
carried
forward ?
Ans. : Yes. The loss can be set off against any other income under the
same head of income or any other head of income for the same
year. If the said loss cannot be set off against any other income of
that year, it can, then, be carried forward and set off only against
income arising under the head “Income from house property” in
the eight subsequent years.
Q.. 25 : The provision of deduction of municipal taxes from the gross
annual value is provided for under which Section of the I.
T. Act,
1961 ?
Ans. :The provision of deduction of municipal taxes (including service
taxes) levied by any local authority in respect of the house
property is provided for in the proviso to sub-section 1 of
Section 23 of the I. T. Act, 1961.
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8. Q.. 26 : What are the conditions under which municipal taxes are
deductible from the gross annual value ?
Ans. : There are two conditions under which municipal taxes are
deductible from the gross annual value, and those are as follows.
 These taxes are borne by the owner, and
 These are actually paid by the owner during the previous
year (i.e., these are allowed as deduction only on payment
basis and not on accrual basis).
Q.. 27 : What is the condition for allowability of Standard/Statutory
deduction, u/s. 24(a) ?
Ans. : There is no condition as such. The Standard/Statutory deduction,
u/s. 24(a) is allowable as a deduction irrespective of the fact
whether any expenditure has been actually incurred by the
assessee or not.
Q.. 28 : State wholesomely the provisions for allowability of
deduction of
interest on borrowed capital, u/s. 24(b), in the case of a
self
occupied property (SOP) ?
Ans. : The different provisions for allowability of deduction of interest
on borrowed capital, u/s. 24(b), in the case of a self occupied
property (SOP) are enumerated below.
 If the capital is borrowed before April 01, 1999 for the
purchase, construction, reconstruction, repairs or renewals of
a house property, Rs. 30,000/- is the maximum limit up to
which deduction is allowable.
 If the capital is borrowed on or after April 01, 1999 for
reconstruction, repairs or renewals of a house property, Rs.
30,000/- is the maximum limit up to which deduction can be
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9. availed of.
 If the capital is borrowed on or after April 01, 1999 for the
acquisition or construction of a house property but is not
completed within 3 years from the end of the year in which
capital is borrowed, Rs. 30,000/- is the maximum limit up to
which deduction is allowable.
 If the capital is borrowed on or after April 01, 1999 for the
acquisition or construction of a house property and such
acquisition or construction is completed within 3 years from
the end of financial year in which the capital is borrowed, Rs
1,50,000/- is the maximum limit up to which deduction is
available.
 The assessee, in the above case, has to furnish a certificate
from the person extending the loan that such interest is
payable in respect of the amount advanced for acquisition or
construction of the house.
Q.. 29 : Interest on borrowed capital, u/s. 24(b) is deductible on what
basis ?
Ans. : Interest on borrowed capital, u/s. 24(b) is deductible on accrual
basis.
Q.. 30 : Which Circular of the Central Board of Direct Taxes (CBDT),
New
Delhi, contains the provision that interest on a fresh loan,
taken to
repay the original loan raised for the purpose of purchase,
construction, reconstruction, repairs and renewals of a
house
property, is allowable as a deduction, u/s. 24(b) ?
Ans. : Circular No. 28, dated August 20, 1969.
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10. Q.. 31 : Is interest paid on unpaid interest deductible u/s. 24(b) ?
Ans. : No.
Friend, do you know that all homes are houses but
not all houses are homes ?
We can Endeavour to make our houses our homes.
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