Income from House property explained in detail. One of these heads is “Income from House property”. The income earned by the ownership of a property is said to be Income from House property. If a taxpayer owns a house property and rents it, the rent received from that property is taxable. Your house, building, office, or shop can be termed as house property All types of properties are taxed under the head 'income from house property' in the income tax return.

5. Points to be noted:
 Buildings may be of any type.
 Income from temporary hutments are
taxable under income from other
sources.
 Building may be in India or Abroad.
 Rental income from staff quarters let
out to own employees is taxable
under the head income from
business.

6. Continuation...
 If building is let out* ...then income
from such letting out is taxable under
the head income from business and
not under the head income from
house property.

7. Computation of income from house property
Gross annual value
Less: Deductions under section 23
i) Unrealized rent xxx
ii) Municipal taxes paid by the owner xxx
Annual value
Less: Deductions under section 24
i) 30% the annual value xxx
ii) Interest on capital borrowed xxx
(current year+1/5 of pre construction period)
Add: Unrealized rent recovered during the year xxx
Less: 30% standard deduction xx
Add: Arrears of rent received during the year xxx
Less: 30% standard deduction xx
Income from house property
xxxx
xxx
xxxx
xxx
xxxx
xx
xx
Xxxx
Computation Of Annual
Value Of Let Out Property

8. Components of Gross Annual
Value

9. Component 1: Municipal
Value:

10. Component 2: Fair Rental
Value:
It is the rent received or
receivable for the similar
property in similar locality.
Estimated to find out the
reasonable or expected rent of
a property

11. Component 3: Standard Rent:
This is the maximum rent which
can be charged from tenant under
Rent Control Act.
If the property is situated at a
place where standard rent is fixed
under rent control act , the
municipal valuation or fair rental
value must not be more than
standard rent

12. Component 4: Actual Rent
Actual rent or De facto rent
Actual amount of rent collected
from the tenant
Actual rent = actual rent- some
items
annual rent received or
receivable as per agreement

13. Municipal value Fair rental value
Whichever is higher
Expected rent Standard rent
Whichever is lowest
Reasonable rent Actual rent
Whichever is higher
Deduct loss on vacancy
Amount after deduction will be Gross annual value

16. Unrealised rent
Meaning of Unrealised Rent: The
amount of rent which a landlord is unable
to recover from tenant provided
I ) The tenancy is genuine or bonafide.
II) Landlord has taken reasonable steps to
get the property vacated and have taken
legal action for recovery of unrealized
rent.
III) Tenant has already vacated the
property.
iv) Such tenant is not occupying any other
property of landlord.

17.  Municipal authorities or local authorities
may impose tax on properties which is
called municipal taxes.
 Such taxes paid by the owner during the
previous year can be deducted from gross
annual value.

19. Illustration :1
Mr. Anil has houses let out for residential
purposes as follows:
Determine annual value in each case.
H1 H2 H3 H4 H5
Municipal valuation 105 105 105 105 105
Fair rental value 107 108 107 107 107
Standard rent N.A 88 88 135 135
Actual rent received 102 110 85 112 96
Municipal taxes paid 2 3 4 3 2

20. Deductionsfromannualvalue
1. Standard deduction
 A standard deduction of 30% can be
claimed from the annual value of the
property.
 It is allowed to cover the expenses in
connection with income.

21. 2. Interest on capital borrowed for
property
An assessee can claim deduction for
interest on capital borrowed for the
purchase, construction, reconstruction,
repairing, or renovation of the house
property.

22. Current year interest
 Deduction can be claimed for interest on
loan taken for the purchase, construction,
reconstruction, renovation and repairing of
the property from the annual value.
 The deduction is allowed on due or
accrual basis and hence the interest need
not be paid during the previous year to
claim the deduction.
 Interest on fresh loan taken to repay the
original loan is deductable .

23. Pre-construction period interest
 Along with the current year interest on
capital borrowed, an assessee can claim
deduction for preconstruction period
interest.
 Pre construction period starts from the
date of beginning of the construction of the
property (or last date of loan which ever is
applicable)and ends on 31st March
immediately prior to the completion of
construction.

24.  E.g.: If the construction started on
31.03.2009 and ended on 31.03.2015
pre construction period starts on
31.03.2009 and ends on 31.03.2014
 An assessee can claim ,..
One fifth of pre construction period interest,
for five subsequent years after completion

25.  If an assessee receives arrears of rent
which had not been charged to
income tax earlier, it is chargeable to
tax as the income from house property
of the previous year in which the
amount is received.
The assessee can claim 30%
standard deduction from arrears of
rent so received.

28.  Under which section Income from
house property is assessed?

29.  Income from temporary hutments
are taxable under which head?

30.  Income from letting out is taxable
under which head?

31.  Composite income is assessed
under the head...............

32.  Rent from house property held as
stock in trade is taxable
under...................

33.  Paying guest accommodation is
taxable under.......

34.  Rental income from staff quarters
let out to own employees is
taxable under............

35.  If land is not appurtenant to
building then such land is
assessed under the head
.................