INCOME FROMHOUSE PROPERTY

1. BON SECOURS COLLEGE FOR WOMEN
THANJAVUR
By
Dr.E.Ramapraba,
Assistant professor of Commerce,
Bon Secours College for Women,
Thanjavur.

2. INCOME FROM HOUSE PROPERTY
SYNOPSIS :
1. INTRODUCTION
2. BASIS OF CHARGE
3. DETERMINATION OF ANNUALVALUE
* GROSS ANNUALVALUE
* NET ANNUALVALUE
4. DEDUCTION U/S 24
5. INTEREST ON BORROWED CAPITAL
6. INCOME FROM HOUSE PROPERTY

3. INCOME FROM HOUSE PROPERTY
DEFINITION :
 Section 22 of the Income TaxAct 1961, deals with house property income.
 Income from ;
Houses
Buildings
Bungalows
Godowns
are taxed under the head.
MEANING :
Income from house property is the one of the five heads of income under
which income arising from a house property is liable to tax under the Income
TaxAct 1961.
A house property consists of any building or land attachment there to,
which is owned by the tax payer.

4. BASIS OF CHARGE(SECTION 22) :
The house property should consists of any building or land
appurtenant there to;
The tax payer should be the owner of the property.
The house property should not be used for the purpose of
business or profession carried on by the tax payer.

5. DETERMINATION OF ANNUAL VALUE :
MEANING OF ANNUAL VALUE :
The annual value of house property is defined as,
”The sum for which the property might reasonably be expected
to be let from year to year”.
DETERMINATION OF ANNUAL VALUE:
Section 23 deals with calculations of annual value
It is calculated by taking into consideration of various aspects like
Municipal valuation(MRV)
Fair rental value(FRV)
Standard Rent(SR)
Actual Rent(AR)
Period of vacancy(V)
Unrealised Rent(URR)

6. MUNICIPAL RENTAL VALUE(MRV) :
 It refers to the value fixed by the municipal or local authority.
 In order to levy local taxes, the municipal corporation/
committee, conducts a periodical survey of the house properties
in their local limits.
 Thus, the rental values so fixed is called Municipal Rental Value
(MRV).

7. FAIR RENTAL VALUE(FRV) :
Fair rental value refers to the rent to which a similar
property which fetch at a same.
It is based on the presumption that rent prevailing in same
locality for similar properties is almost the same which is
called Fair Rental Value(FRV).

8. STANDARD RENT(SR) :
o It refers to the rent fixed by Rent ControlAct.
o The rent fixed under the Rent Control Act, where so ever
applicable, is called Standard Rent(SR).
o It is a maximum rent an owner on client from his tenant.

9. ACTUAL RENT(AR) :
Actual Rent is refers to the rent for which a property
has been actually let out by the owner.
SPECIMEN FOR ORIGINAL ACTUAL RENT :
PARTICULARS AMOUNT AMOUNT
Given AR xxx
Less:
vacancy
Unrealized Rent
xxx
xxx xxx
Original Actual Rent xxx

10. PERIOD OF VACANCY :
Vacancy refers to the period for which the property is not
occupied by anyone.
Vacancy should be deducted from actual rent while
calculating Gross Annual value(GAV).
UNREALIZED RENT(URR) :
It refers to the rent, which has not been realised by the owner
from the tenant.
Unrealised rent should be deducted from actual rent while
calculating Gross Annual Value(GAV).

11. GROSS ANNUAL VALUE :
 Gross Annual Value is the income that can be earned from the
property whether it is let out or not on a yearly basis.
 It refers to the value which is calculated after considering the following;
Expected Rent(ER)
Actual Rent(AR).
CALCULATION OF GROSS ANNUAL VALUE :
GROSS ANNUAL VALUE
If noAR If we haveAR

12. GROSS ANNUAL VALUE :
1.IF NO AR (ACTUAL RENT) :
Municipal Rental Value
Fair Rental Value
xxx
xxx
Whichever is higher
Standard Rent xxx
Whichever is lower
Therefore,
EXPECTED RENT xxx
Expected Rent xxx
GAV = ER

13. 2.WHEN THERE IS AR (IF AR GIVEN) :
We must follow two conditions,
 When AR>ER
 WhenAR<ER
1. If vacancy is given, ER-V
AR-V
2.If vacancy and URR is given
3.If URR is given
GAV =AR
Whichever is higher =GAV
ER – V = GAV
ER = GAV

14. NET ANNUAL VALUE (NAV) :
MEANING :
It is the amount after deducting municipal tax or local tax paid
by the owner from the Gross AnnualValue.
SPECIMEN FOR NET ANNUAL VALUE :
PARTICULARS AMOUNT AMOUNT
Gross Annual Value
Less :
Municipal tax paid by owner
Net Annual Value
xxx
xxx
xxx

15. COMPUTATION OF INCOME FROM HOUSE
PROPERTY :
SELF OCCUPIED HOUSE :
 Self occupied house refers to the house, which has been
occupied by the owner himself.
 He can occupy more than one house.
LET OUT HOUSE :
 This means the property which has been let out by an assessee
for monetary consideration that is , rent.
 The rent received shall be treated as ‘Income from
house property’.
DEEMED TO BE LET OUT HOUSE:
 All vacant properties are treated as ‘ Deemed to
be let out house’.

16. STANDARD DEDUCTION :
U/S 24 (a) 30% of Net Annual Value is deductible
as a statutory deduction .
INTEREST ON BORROWED CAPITAL :
Interest on borrowed capital for acquisition, construction, repairs,
renewals or reconstruction is allowed .
PRE-CONSTRUCTION :
Interest paid in pre-construction period is deductible in five equal
installments from the year of completion of construction or acquisition
of property.

17. NOTES FOR INTEREST ON BORROWED CAPITAL :
 For Let out houses and Deemed to be Let out houses,
1. Calculate interest as per the details given in the problems
2. There is no limitation for such deduction.
 For Self occupied houses
1. Calculate interest as per the details given in the problems.
2. There is limitation for this type of houses.
3. It is allowed to a maximum of Rs.30,000.
4. Actual Interest or Rs.30,000, whichever is less, as the case
may be is allowed as deduction.

18. PARTICULARS AMOUNT
Current previous year interest
(2018-2019)
Add :
1/5th of pre-completion interest
Total interest to be considered
xxx
xxx
xxx
CALCULATION OF PRE-COMPLETION INTEREST :

19.  While calculating pre-completion interest the following concepts should be considered
1.Date of Loan(DOL)
2.Date of Repayment(DOR)
3.Date of Completion(DOC)
Always consider Date of Loan and take Date of Repayment or Date of Completion
Whichever is earlier to calculate interest.
 DOL DOR
or
DOC Whichever is earlier xxx
 When DOR is considered, the actual date of repayment should be taken.
 When DOC is considered, the 31st March immediately preceding the date of
completion should be taken.
STEPS FOR PRE-COMPLETION INTEREST :

20. OVERALL CHART FOR CALCULATION OF INCOME FROM HOUSE
PROPERTY :
PARTICULARS AMOUNT
Gross Annual Value
Less :
Municipal Tax or Local
tax paid by owner
Net Annual Value
Deduction U/S 24;
1.Standard Deduction-
30% of Net Annual Value
2.Interest on borrowed
capital-paid or due
Income from House
property
xxx
xxx
xxx
xxx
xxx
xxx
xxx
AMOUNT