For Review and Reference for CS Executive and CS Professinal / Final Course Students as Study Notes

1. INCOME FROM HOUSE PROPERTY
Module – Paper
Tax Laws
Prakash Udeshi
B.com, Grad CWA, ACS, FCA, CFE, Dip IFRS

2. 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

3. 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

4. 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

5. GROSS ANNUAL VALUE
Let Out Let Out AND Part of the Year Self Occupied
Throughout was VACANT Let Out and for Resi
the Previous during whole Part of the year Purposes or
Year or part of PY Self Occupied could not be
occupied
Higher 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

6. 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

7. 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.

8. 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.