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Income from House Property
Dr. P. Ravichandran
M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.D.,
D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R.,
S.B.K. College, Aruppukottai – 626101.
 9443424090 & 9080030090
 e-mail id.- prcapk@gmail.com
What is Income From House
Property?
The annual value of a property, consisting of
any buildings (or) lands appurtenant
thereto, of which the assessee is the
owner, is chargeable to tax under the head
‘Income from house property’.
Buildings (or) lands appurtenant thereto…
 The term ‘building’ includes residential
houses, bungalows, office buildings,
warehouses, docks, factory
buildings, music halls, lecture halls,
auditorium, cinema theatres etc.
 The appurtenant lands in respect of a
residential building may be in the
form of approach roads to and
from public streets.
What consist of House Property?
Property must be consist of any building (or)
land appurtenant thereto.
4

Computation of
Income from House Property
Gross Annual Value (GAV) XXXX
Less : Municipal Taxes paid by owner XXX
Net Annual Value (NAV) XXXX
Less : Deduction u/s 24
i) Standard Deduction
( 30 % of NAV) XXX
ii) Interest on Loan XXX XXX
Income from House Property XXXX
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.
Computation Expected Rent
Municipal Value
Fair Rental Value
WEH = ER
When there is no Standard Rent
Municipal Value
Fair Rental Value
WEH
Standard Rent
WEL = ER
When there is Standard Rent
Computation of GAV
When there is no Actual Rent ER = GAV
Actual Rent
Expected Rent
WEH − Vacancy = GAV
When there is Actual Rent
 Actual Rent = Annual Rent − Unrealised Rent
Deductions from Net Annual Value
Deductions u/s 24
Standard deduction u/s 24(i) Interest on Loan u/s 24(ii)
L/O House S/O House L/O House S/O House
30% of NAV NAV is Nil Actual
Interest paid
Loan
borrowed
Before 1-4-1999 On (or) After 1-4-1999
₹ 30,000 ₹ 2,00,000
Note: If loan is borrowed
for house repairs,
renovation, renewal (or)
reconstruction ₹ 30,000.
Deductions from Net Annual Value
Deductions u/s 24
Standard
deduction
u/s 24(i)
Interest on
Loan
u/s 24(ii)
STANDARD DEDUCTION [Sec.24(i)]
Let-out House Self-occupied House
NAV is Nil30% of NAV
Self-Occupied House – S/O/H
Any one House Property occupied by the
assessee for the purpose of his residence
is taken as S/O/H.
Annual value of S/O/H is Nil.
There is no Standard deduction for S/O/H
u/s 24 except interest on Housing Loan.
INTEREST ON LOAN [Sec.24(ii)]
Let-out House Self-occupied House
Loan borrowed
Before 1-4-1999 On (or) After 1-4-1999
` 30,000 ` 2,00,000
Actual Interest
Paid
Note: If loan is borrowed for house repairs,
renovation, renewal (or) reconstruction ` 30,000.
Pre-construction period interest
(PCPI)
Sum of interest paid prior to house construction
is called PCPI.
PCPI is deducted in five (5) equal installments
(1/5) in addition to the interest of the current
PY.
PCPI = Interest from the date of borrowing – to till
the end of the previous year prior to the
previous year in which the house is completed.
Interest of the previous year in which construction
was completed will be deducted as normal
interest.
Computation of PCP
 Date of loan (DoL);
 Date of repayment (DoR);
 Date of completion (DoC).
DoL
DoR
DoC
whichever is
earlier
(OR)PCP =
Case DoL DoR DoC PCP
A 1-8-2010 15-7-2015 Nov’2015 1-8-2010 to 15-7-2015
B 1-8-2010 21-6-2016 Dec’2015 1-8-2010 to 31-3-2015
C 1-8-2010 20-6-2016 Feb’2015 1-8-2010 to 31-3-2014
 When DoR is earlier PCP =DoL DoR
 When DoC is earlier PCP = DoL
31st Marchimmediately preceding the DoC
Ownership of House Property
 It is only the owner (or deemed owner) of house
property who is liable to tax on income under this
head.
 Owner may be an individual, firm, company,
cooperative society or association of persons.
 The property may be let out to a third party either
for residential purposes (or) for business purposes.
 Annual value of property is assessed to tax in the
hands of the owner even if he is not in receipt of the
income.
Deemed owner – Sec.27
Section 27 of the Income Tax Act provides that, in
certain circumstances, persons who are not legal
owners are to be treated as deemed owners of house
property for the purpose of tax liability under this
head.
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) – 1. If an individual transfers a house
property to spouse (or) to a minor child (except a
married daughter) without any adequate
consideration, he is deemed as the owner of the
property for tax purposes.
 But if property is transferred to minor married daughter,
transferor shall not be deemed to be the owner.
 However, if an individual transfers cash to spouse (or)
to a minor child, and the transferee acquires a house
property out of the gifted amount, the transferor
shall not be treated as the deemed owner of the
house property.
2. 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.
3. Section 27(iii) – A member of a co-operative
society, company (or) association of persons,
to whom a property [(or) a part thereof] is
allotted (or) leased under a house building
scheme of the society, company (or)
association, is deemed to be the owner of
such property.
4. Section 27(iiia) – A person who has acquired a
property under a power of attorney transaction, by
satisfying the conditions of section 53A of the
Transfer of Property Act, that is under a written
agreement.
5. Section 27(iiib) – A person who has acquired a right
in a building (under clause (f) of section 269UA), by
way of a lease for a term of not less than 12 years
(whether fixed originally (or) extended through a
provision in the agreement), is the deemed owner of
the property.
Property used for own business
(or) profession
 The owner of a house property is not liable to tax
under this head if the property is used by him
for his own business (or) profession.
 But the business (or) profession should be such
whose income is chargeable to tax.
Chargeability to tax does not mean that the
income is actually taxed. It is possible that in a
particular year the profits are not sufficient
enough to attract tax liability. What it means is
that the income from such business (or)
profession is not exempt from tax.
RENT
CASE-1 CASE-2
(If Rent is
separable)
Rent for
property
Rent for
services like
water, gas etc.
Income from
House
Property
Income from
Other Sources
Rent for
property
Hire charges of
machines etc.
belongs to the
owner
Income from
House
Property
Income from
Other Sources/
PGBP
RENT= Rent for the house + Rent for the facilities
provided with the house
In case-2, if rent is inseparable, entire amount shall be
taxable as ‘PGBP’ (or) ‘Income from other sources’.
COMPOSITE RENT
Exempted incomes from House property
 Farm house
 House property used for own business (or)
profession
 Self occupied house
 Palace of ex-rulers.
 Income from property owned by –
 local authority,
 scientific research association,
 registered trade unions,
 charitable trusts,
 political parties,
 universities (or) other educational institutions,
 hospitals (or) medical institutions and games
associations.
Determination of Annual Value
 Computation of taxable income from
house property is based on the annual
value of building.
 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.
Factors determining Annual Value
Expected rent (ER) / Notional rent – reasonable rent
for which the property can be let-out.
Fair Rental Value (FRV) – the rent which a
similar property will fetch at the same locality.
Standard rent (SR) – the rent fixed by the Rent
Control Act. It is the maximum rent a owner
can claim from his tenant as rent.
Actual rent (AR) – the rent for which a property has
been actually realized (or) collected by the
owner from the tenant for the let-out period.
Unrealized rent (URR) – the rent which has not been
realized (or) collected by the owner from the
tenant for the let-out period.
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
Exempted incomes from House property
 Farm house
 House property used for own business (or) profession
 Self occupied house
 Palace of ex-rulers.
 Income from property owned by –
 local authority,
 scientific research association,
 registered trade unions,
 charitable trusts,
 political parties,
 universities (or) other educational institutions,
 hospitals (or) medical institutions and
games associations.
Net Annual Value [NAV]
Gross Annual Value XXXX
Less : Municipal Taxes paid by owner XXX
Net Annual Value XXXX
Less : Deduction u/s 24
i) Standard Deduction
( 30 % of NAV) XXX
ii) Interest on Loan XXX XXX
Income from House Property XXXX
Self Occupied Property – SOP
Any one House Property occupied by the
assessee for the purpose of his residence
is taken as SOP.
Annual value of SOP is Nil.
There is no Standard deduction for SOP
u/s 24 except interest on Housing Loan.

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Income from house property

  • 1. Income from House Property Dr. P. Ravichandran M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.D., D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R., S.B.K. College, Aruppukottai – 626101.  9443424090 & 9080030090  e-mail id.- prcapk@gmail.com
  • 2. What is Income From House Property? The annual value of a property, consisting of any buildings (or) lands appurtenant thereto, of which the assessee is the owner, is chargeable to tax under the head ‘Income from house property’.
  • 3. Buildings (or) lands appurtenant thereto…  The term ‘building’ includes residential houses, bungalows, office buildings, warehouses, docks, factory buildings, music halls, lecture halls, auditorium, cinema theatres etc.  The appurtenant lands in respect of a residential building may be in the form of approach roads to and from public streets.
  • 4. What consist of House Property? Property must be consist of any building (or) land appurtenant thereto. 4 
  • 5. Computation of Income from House Property Gross Annual Value (GAV) XXXX Less : Municipal Taxes paid by owner XXX Net Annual Value (NAV) XXXX Less : Deduction u/s 24 i) Standard Deduction ( 30 % of NAV) XXX ii) Interest on Loan XXX XXX Income from House Property XXXX
  • 6. 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.
  • 7. Computation Expected Rent Municipal Value Fair Rental Value WEH = ER When there is no Standard Rent Municipal Value Fair Rental Value WEH Standard Rent WEL = ER When there is Standard Rent
  • 8. Computation of GAV When there is no Actual Rent ER = GAV Actual Rent Expected Rent WEH − Vacancy = GAV When there is Actual Rent  Actual Rent = Annual Rent − Unrealised Rent
  • 9. Deductions from Net Annual Value Deductions u/s 24 Standard deduction u/s 24(i) Interest on Loan u/s 24(ii) L/O House S/O House L/O House S/O House 30% of NAV NAV is Nil Actual Interest paid Loan borrowed Before 1-4-1999 On (or) After 1-4-1999 ₹ 30,000 ₹ 2,00,000 Note: If loan is borrowed for house repairs, renovation, renewal (or) reconstruction ₹ 30,000.
  • 10. Deductions from Net Annual Value Deductions u/s 24 Standard deduction u/s 24(i) Interest on Loan u/s 24(ii)
  • 11. STANDARD DEDUCTION [Sec.24(i)] Let-out House Self-occupied House NAV is Nil30% of NAV
  • 12. Self-Occupied House – S/O/H Any one House Property occupied by the assessee for the purpose of his residence is taken as S/O/H. Annual value of S/O/H is Nil. There is no Standard deduction for S/O/H u/s 24 except interest on Housing Loan.
  • 13. INTEREST ON LOAN [Sec.24(ii)] Let-out House Self-occupied House Loan borrowed Before 1-4-1999 On (or) After 1-4-1999 ` 30,000 ` 2,00,000 Actual Interest Paid Note: If loan is borrowed for house repairs, renovation, renewal (or) reconstruction ` 30,000.
  • 14. Pre-construction period interest (PCPI) Sum of interest paid prior to house construction is called PCPI. PCPI is deducted in five (5) equal installments (1/5) in addition to the interest of the current PY. PCPI = Interest from the date of borrowing – to till the end of the previous year prior to the previous year in which the house is completed. Interest of the previous year in which construction was completed will be deducted as normal interest.
  • 15. Computation of PCP  Date of loan (DoL);  Date of repayment (DoR);  Date of completion (DoC). DoL DoR DoC whichever is earlier (OR)PCP =
  • 16. Case DoL DoR DoC PCP A 1-8-2010 15-7-2015 Nov’2015 1-8-2010 to 15-7-2015 B 1-8-2010 21-6-2016 Dec’2015 1-8-2010 to 31-3-2015 C 1-8-2010 20-6-2016 Feb’2015 1-8-2010 to 31-3-2014  When DoR is earlier PCP =DoL DoR  When DoC is earlier PCP = DoL 31st Marchimmediately preceding the DoC
  • 17. Ownership of House Property  It is only the owner (or deemed owner) of house property who is liable to tax on income under this head.  Owner may be an individual, firm, company, cooperative society or association of persons.  The property may be let out to a third party either for residential purposes (or) for business purposes.  Annual value of property is assessed to tax in the hands of the owner even if he is not in receipt of the income.
  • 18. Deemed owner – Sec.27 Section 27 of the Income Tax Act provides that, in certain circumstances, persons who are not legal owners are to be treated as deemed owners of house property for the purpose of tax liability under this head. The following persons though not the legal owners of a property are deemed to owners for the purpose of Sec. 22-27.
  • 19.  Section 27(i) – 1. If an individual transfers a house property to spouse (or) to a minor child (except a married daughter) without any adequate consideration, he is deemed as the owner of the property for tax purposes.  But if property is transferred to minor married daughter, transferor shall not be deemed to be the owner.  However, if an individual transfers cash to spouse (or) to a minor child, and the transferee acquires a house property out of the gifted amount, the transferor shall not be treated as the deemed owner of the house property.
  • 20. 2. 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. 3. Section 27(iii) – A member of a co-operative society, company (or) association of persons, to whom a property [(or) a part thereof] is allotted (or) leased under a house building scheme of the society, company (or) association, is deemed to be the owner of such property.
  • 21. 4. Section 27(iiia) – A person who has acquired a property under a power of attorney transaction, by satisfying the conditions of section 53A of the Transfer of Property Act, that is under a written agreement. 5. Section 27(iiib) – A person who has acquired a right in a building (under clause (f) of section 269UA), by way of a lease for a term of not less than 12 years (whether fixed originally (or) extended through a provision in the agreement), is the deemed owner of the property.
  • 22. Property used for own business (or) profession  The owner of a house property is not liable to tax under this head if the property is used by him for his own business (or) profession.  But the business (or) profession should be such whose income is chargeable to tax. Chargeability to tax does not mean that the income is actually taxed. It is possible that in a particular year the profits are not sufficient enough to attract tax liability. What it means is that the income from such business (or) profession is not exempt from tax.
  • 23. RENT CASE-1 CASE-2 (If Rent is separable) Rent for property Rent for services like water, gas etc. Income from House Property Income from Other Sources Rent for property Hire charges of machines etc. belongs to the owner Income from House Property Income from Other Sources/ PGBP RENT= Rent for the house + Rent for the facilities provided with the house In case-2, if rent is inseparable, entire amount shall be taxable as ‘PGBP’ (or) ‘Income from other sources’. COMPOSITE RENT
  • 24. Exempted incomes from House property  Farm house  House property used for own business (or) profession  Self occupied house  Palace of ex-rulers.  Income from property owned by –  local authority,  scientific research association,  registered trade unions,  charitable trusts,  political parties,  universities (or) other educational institutions,  hospitals (or) medical institutions and games associations.
  • 25. Determination of Annual Value  Computation of taxable income from house property is based on the annual value of building.  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.
  • 26. Factors determining Annual Value Expected rent (ER) / Notional rent – reasonable rent for which the property can be let-out. Fair Rental Value (FRV) – the rent which a similar property will fetch at the same locality. Standard rent (SR) – the rent fixed by the Rent Control Act. It is the maximum rent a owner can claim from his tenant as rent. Actual rent (AR) – the rent for which a property has been actually realized (or) collected by the owner from the tenant for the let-out period. Unrealized rent (URR) – the rent which has not been realized (or) collected by the owner from the tenant for the let-out period.
  • 27. 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
  • 28. Exempted incomes from House property  Farm house  House property used for own business (or) profession  Self occupied house  Palace of ex-rulers.  Income from property owned by –  local authority,  scientific research association,  registered trade unions,  charitable trusts,  political parties,  universities (or) other educational institutions,  hospitals (or) medical institutions and games associations.
  • 29. Net Annual Value [NAV] Gross Annual Value XXXX Less : Municipal Taxes paid by owner XXX Net Annual Value XXXX Less : Deduction u/s 24 i) Standard Deduction ( 30 % of NAV) XXX ii) Interest on Loan XXX XXX Income from House Property XXXX
  • 30. Self Occupied Property – SOP Any one House Property occupied by the assessee for the purpose of his residence is taken as SOP. Annual value of SOP is Nil. There is no Standard deduction for SOP u/s 24 except interest on Housing Loan.