This document provides an overview of the key sections related to computing income from house property under the Indian Income Tax Act. It discusses sections 22-27 which relate to the chargeability and basis of taxing income from house property. It describes how to calculate the annual value of a property whether it is let out for the full year, partially let out and vacant, or self-occupied. It also covers deductions allowed for interest paid on loans for house property and treatment of unrealized rent. The document summarizes rules for co-owned properties and deemed ownership under section 27.

1. INCOME FROM HOUSE
PROPERTY
CA. BALA YADAV

2. SECTION 22-27
• SEC. 22 – Chargeability & basis of charge
• SEC. 23(1) (a),(b) &(c) – Annual Value
• Explanation to Sec 23(1) – Treatment Unrealized Rent
• SEC 23(2),(3)&(4) – house property income in case of
property is self occupied or use for
own employment
• SEC. 24 – Deductions
• SEC. 25 – Interest not allowed as deduction
• SEC. 25AA – Treatment on subsequent received of
unrealized rent
• SEC. 25B – Arrear of rent received
• SEC. 26 – Co-ownership of property
• SEC. 27 – Deemed Ownership

3. COMPUTATION “INCOME FROM HOUSE PROPERTY”
1. Gross Annual Value XXX
2. Less: (a) Municipal Taxes Paid XXX
(b) Unrealized Rent XXX
(XXX)
NAV(Net annual Value) XXX
3. Deduction u/s 24
(a) Standard Deduction
@ 30% of NAV XXX
(b) Interest on Borrowed Capital XXX
(XXX)
INCOME FROM HOUSE PROPERTY (Annual Value)
XXX

4. SECTION 22
Chargeability & Basis of charge
Essentialsfor Charging tax under thishead:
1.Theproperty must beconsisting of building & land appurtenant thereto.
2.Theassesseemust betheowner of thehouseproperty.
Ownership includesboth free-hold & leasehold rightsand
includesdeemed ownership.
3. Theproperty must beusefor any purposeexcept for business
& profession whoseincomeischargeableto tax.
Basis of charge: The basis of calculating income from
house property is the annual value.

5. SECTION 27 DEEMED OWNERSHIP
The following persons though not the legal owners of a property are deemed to
owners for the purpose of Sec. 22-27.
Section 27(i) – Transfer To Spouse or Minor Child for Inadequate
Consideration . Transferor in that case is deemed to be the owner of the property
so transferred.
But if property is transferred to minor married daughter, transferor shall not be
deemed to be the owner.
Section 27(ii) – Holder of Impartible Estate – Property not legally divisible.
Individual owner of all property is the deemed to be the owner of such estate.
Section 27(iii) – Member of Co-operative society- Company
or
AOP to whom such building or part of property is allotted or
leased under o House building society Scheme of a
Society/company/association, shall be deemed to be the owner.

6. SECTION 27 DEEMED OWNERSHIP
The following persons though not the legal owners of a property are deemed to
owners for the purpose of Sec. 22-27.
Section 27(iiia) – Person in a possession of a property – Property transferred in a
contract of the nature referred to in sec. 53A of the Transfer of Property Act .
A person who is allowed to take or retain the possession shall be deemed to be the
owner of that house property.
Section 27(iiib) – Person having right in a property for a period not less than 12 years –
a person who acquires such right shall be deemed to be the owner of that building or
part thereof.

7. MUNICIPAL
TAXES
Municipal Taxes are levied by local authority.
These taxes are to be deducted from the gross
annual value if the following two conditions are
satisfied:
(a)Borne by the owner
AND
(b) Taxes actually paid during the
relevant previous year.

8. C O M PO SI T E R E N T
R E N T = R E N T F O R H O U SE + R E N T F O R F AC I L I T I E S
PR O V I D E D W I T H T H E H O U SE
In case-2, if rent is inseparable, entire
amount shall be taxable as ‘PGBP’ or

9. WHERE INCOME OF HOUSE PROPERTY
IS NOT CHARGEABLE TO TAX
• Farm house
• Houseproperty of registered tradeunion/
local authority
• Property held for charitablepurposes
• Houseproperty used for own businessor
profession
• Self occupied house
• Palaceof ex-rulers.

10. Determination of
annual Value
as per sec 23(1)(a) the annual
Value of any property
shall be the sum for which
the property might
reasonably be expecteD to
be let from year to year.

11. Computation of house property
Annual Value
Let through out
the year
Let & vacant for
any part or whole
of the year
Let part of the year
& Self occupied
part year
Self occupied
or used for
own business

12. Case-1 let through out the year
Gross annual value
Higher of
Expected Rent higher of (It cannot
exceed Standard Rent)
Actual Rent Received or
Receivable
Municipal Rent Fair Rent

13. CASE-2 LET & VACANT
WHOLE OR ANY PART OF THE YEAR
Actual Rent Received/
Receivable > Expected Rent
• GAV- Higher of:
1. Actual R/R
2.Expected Rent
Actual Rent Received/
Receivable < Expected Rent
• GAV- Actual R/R
• Reason- Actual rent
R/R islessdueto
vacancy.

14. CASE-3 PART YEAR SELF OCCUPIED &
PART YEAR LET
ACTUAL RENT R/R
SHALL BE TAKEN
ONLY FOR THE
PERIOD OF LET
OUT.
• PERI OD OF
OCCUPATI ON FOR SELF
RESI DENCE SHALL BE
I RRELEVANT
• ANNUAL VALUE SHALL
BE DETERMI NED AS I F
I T I S LET OUT
DURI NG THE YEAR

15. CASE-4 SELFOCCUPIEDORUSEDFOR
OWN BUSINESS
Whereasseseehasmorethan onehouseproperty for self
occupation:
•Hehasoption to chooseany onehouseto beself occupied.
–Theother houseshall bedeemed to belet
out & annual valueof such houseshall be
determinesasper sec.23(1)(a).
» Thisbenefit isavailableto individual/Huf only.
ANNUAL VALUE- NIL

16. Interest deduction in respect of self
occupied property
• For any Other
Purpose i.e.
Repair or
Renewal.
• Actual Interest
payable subject to
the maximum of
Rs.30,000.
Loan taken on or after
01/04/1999 for:
• Acquisition
• Construction- Construction
is completed within 3 years
of the end of financial year
in which capital was
borrowed.
• Actual interest payable
subject to maximum of
Rs.2,00,000.
For claiming deduction certificate of loan taken is
required.

17. Interest deduction for Case-1,2 &3
I NTEREST
Interest attributable to the
period prior to completion
of construction
Interest for the year in which
such construction is completed
& subsequent periods/years.
Calculation of Interest: From the date of
loan taken to the financial year prior to the
previous year in which construction of the
house is completed.
Interest shall be allowed in 5 equal
installments , starting from the year of
completion.
Total Interest Allowed as
Deduction:
1)Current assessment year
interest
2)Prior period interest (1st
Installment)

18. POINTS TO BE NOTED
CASE-1,2 & 3
1. Loan may be taken for acquisition, construction,
repair, renewal or reconstruction.
2. Fresh Loan- interest on loan taken to repay
original loan shall also be allowed as deduction.
3. Shew Kissen Bhatter Vs. CIT (1973)- Interest on
outstanding amount of interest shall not be
allowed as deduction.

19. Treatment of unrealized rent
• Unrealized rent will bededucted from theactual rent
R/R.
• Rulesare:
• Thetenancy isbonafide.
• The defaulting tenant has vacated, or steps have been taken to compel him to
vacatetheproperty.
• Thedefaulting tenant isnot in occupation of any other property of theassessee.
• Reasonable steps has been instituted by assessee and legal proceedings for
recovery hasbeen done.

20. COMPUTATION OF INCOME OF HOUSE PROPERTY
WHICH ISPARTLY LET AND PARTLY SELF
OCCUPIED
• PARTLY LET OUT- CASE-1,2 &3.
Only proportionate values will be taken for
computation.
• PARTLY SELF OCCUPIED- CASE-4

21. SECTION 25-INTEREST PAYABLE OUTSIDE INDIA WILL
NOT BE ALLOWED AS DEDUCTION UNLESS TAX ON SUCH
INTEREST HAS BEEN PAID OR TAX HAS BEEN
DEDUCTED(TDS) ON THE SAME.
SECTION 25AA-UNREALIZED RENT RECEIVED
SUBSEQUENTLY.
SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER
THE HEAD ”INCOME FROM HOUSE PROPERTY” IN THAT
PREVIOUS YEAR IN WHICH IT IS RECEIVED.
WHETHER OR NOT ASSESEE IS THE OWNER OF THAT
PROPERTY IN THE YEAR OF RECEIPT.
SECTION 25B- ARREARS OFRENTRECEIVED
ONLY STANDARDDEDUCTION OF30% WILLBE
ALLOWEDANDRESTOFTHEAMOUNTWILLBE
CHARGEABLETO INCOMETAX.

22. SECTION-26-CO-OWNERSHIP
• WHERE PROPERTY IS OWNED BY
TWO OR MORE PERSONS.
• SHARE OF EACH SUCH PERSON IS
THE INCOME FROM THE PROPERTY
AS COMPUTED IN ACCORDANCE WITH
THE SECTION 22-25.

23. CASE-A
HOUSE PROPERTY IS SELF
OCCUPIED BY EACH CO-OWNER
• ANNUAL VALUE- NIL
• EACH CO-OWNER SHALL BE ENTITLED
TO THE MAXIMUM DEDUCTION OF
Rs.2,00,000/30,000 u/s 24(b) ON
ACCOUNT OF INTEREST ON
BORROWED CAPITAL.

24. CASE-B
ENTIRE OR PART PROPERTY IS LET
• STEP-1 CONSIDER ENTIRE PROPERTY
AS OWNED BY ONE OWNER.
• STEP-2 COMPUTE INCOME FROM
HOUSE PROPERTY AS SINGLE UNIT.
(CASE-1)
• STEP-3 APPORTIONED THE ABOVE
CALCULATED INCOME AMONGST
EACH CO-OWNER AS PER DEFENITE
SHARE.

25. THANK YOU