Income from House property Tax

1. INCOME FROM HOUSE PROPERTY
CHARGING SECTION ( SEC 22)

2. CONDITIONS OF TAXING UNDER THE HEAD
“HOUSE PROPERTY”
1)The property should consist of any building or land appurtenant
thereto.
2)The Assessee should be the owner of the property including
deemed owner.
3)The property should not be used by the owner for the purpose of
his own Business/Profession.

3. • Rent from vacant land is not income from house property
• Land appurtenant there to refers to land forming part of building or surrounded by
building like the compound area, garage, portico, etc.
• Letting out of residential house, shop, showroom, or commercial building is chargeable
under this head.
• Income from sub-letting is not house property income
• Property may be situated in India or abroad.

4. Deemed Owner (Sec 27)
• In case of transfer of property to spouse or minor child without adequate
consideration, Transferor is the deemed owner.
• Holder of impartible estate
• Member of a Company or Co- operative Society to whom building is allotted
under house building scheme
• Leasehold property
• Part Performance Contract
• Disputed ownership

5. Determination of Income from House property
• Let Out Property (LOP) - Sec 23(1)
• Self-occupied Property (SOP) – Sec 23(2)
• Deemed Let Out Property (DLOP) – Sec 23(4)
• Partly Let Out And Partly Self-occupied
(a)Based On Portion/Part – Sec 23(1) And Sec 23(2)
(b)Based On Period – Sec 23(1) And Sec 23(3)
• Co-ownership -Sec 26

6. Let Out Property - Sec. 23(1)
• PARTICULARS • AMOUNT • AMOUNT
Gross annual value (GAV)
Less: Municipal tax paid
Net annual value (NAV)
Less: deduction u/s 24
24(a) 30% of NAV
24(b) Interest on housing
loan
Income from house property
Xxx
Xxx
Xxx
Xxx
Xxx
Xxx
xxx

7. HOW TO FIND OUT GROSS ANNUAL VALUE
(GAV)
Particulars Amount
Fair Value (FR) xx
Market Value (MV) xx
FR or MV whichever is higher xx
Standard Rent (SR) xx
Whichever is lower is Expected Rent xx
Actual Rent (AR) xx
Whichever is higher is the GAV xx
Note: - When details of FR are not given then we shall assume that FR is deemed to be same as AR

8. Example:1- Mr. X owns 2 houses, determine GAV from the following details:
Particulars House Property 1 House Property 2
AR (Actual Rent) Rs.12,000 Rs.12,000
FR (Fair Rent) Rs.14,000 Rs.14,000
MV ( Market Value) Rs.10,000 Rs.10,000
SR (Standard Rent) Rs.13,000 _

9. Solution-
Particulars House property 1 House property 2
Fair value (FR) 14000 14000
Market value (MV) 10000 10000
FR or MV whichever is higher 14000 14000
Standard rent (SR) 13000 _
Whichever is lower is expected rent 13000 14000
Actual rent (AR) 12000 12000
Whichever is higher is the GAV 13000 14000

10. EXCEPTIONAL RULES IN DETERMINING GAV:
1. In case of unrealised rent (UR):UR is similar to bad debts in relation to business.
Actual rent (AR) = annual rent receivable − Unrealized rent.
2. Where there is no unrealised rent but the property was vacant for a few months.
3. Where the property has both unrealized rent as well as vacancy.

11. Example 2: Mr. Chetan has 2 house properties, the details are as under, determine GAV
Particulars H1 H2
AR receivable for
the year
Rs.72,000 Rs.1,20,000
Municipal Value Rs.60,000 Rs.1,12,000
Fair Rent Rs.68,000 Rs.1,17,000
Standard Rent Rs.70,000 Rs.1,15,000
Unrealised Rent Rs.5,000 Rs.50,000

12. Particulars House property 1 House property 2
Fair value (FR) 68000 117000
Market value (MV) 60000 112000
FR or MV whichever is higher 68000 117000
Standard rent (SR) 70000 115000
Whichever is lower is expected rent 70000 115000
Actual rent (AR)
Annual rent receivable-Unrealized rent
67000
(72000-5000)
70000
(120000-50000)
Whichever is higher is the GAV 70000 1150000
Solutions: In case of unrealized rent

13. MUNICIPAL TAXES :
• It is deducted from GAV to arrive at NAV.
• Deduction is allowed only on payment basis.
• Actual amount paid during the year is deductible irrespective of the year to
which such property tax relates to. It must be paid by assessee.
• Municipal taxes includes water tax, property tax, fire tax, conservancy tax,
sewage tax, education cess, sanitation surcharge, etc. In the form of taxes
levied by local authorities in respect of the property.

14. DEDUCTIONS UNDER SECTION 24
• 24(a) standard deduction –
30% of NAV is automatically deducted without any conditions
• 24(b) interest on housing loan –
Loan must be borrowed for construction, acquisition, repairs, renovations etc.
Towards the property
Interest is deductible on accrual basis.

15. Housing loan can be obtained from any source.
Current Year Interest: interest relating to the year of completion of construction can be
fully claimed in that year irrespective of actual date of completion in that year. Similarly, the
interest of current year on the outstanding balance of loan can be fully claimed.
Pre-construction Interest :- interest accruing during the previous periods prior to the year
of completion can be accumulated and claimed as deduction for 5 years @ 1/5th every year
commencing from the year of completion.
If a fresh loan is taken to repay the original loan which was taken for the property, then
interest on fresh loan is deductible since it replaces the original loan. The nature of loan does
not change, only the name of money lender changes.

16. • EXAMPLE 3 :
Mr. ‘X’ takes a loan of Rs. 40,000 @ 15% p.a for construction of a house
on June 1, 2011. Construction was completed on October 12th 2014.The date
of repayment of loan is 31/03/2015. Find out the interest deductible u/s 24
for FY 2014-15.

17. Solutions :
• Current year interest (FY 2014-15) = Rs40000*15% Rs. 6000
• Pre construction interest (FY 2011-12{01/06/11 –
31/03/12} (40000*15%*10/12 = 5000)
(FY 2012-2014)
=Rs.40000*15%*2 years  Rs.12000
Pci should be apportioned for five years
i.e., 17000/5 years Rs. 3400
Total Interest Rs. 9400

18. Example 4:
Mr. Unwanted furnishes the following details
• SR – Rs.4,70,000
• MV – Rs.4,91,000
• FR – Rs.5,00,000
• AR – Rs.4,80,000
• Municipal taxes paid during the year Rs.60,000 and balance outstanding relating to current year is
Rs.4,000
• Fire insurance paid towards property is Rs.14,000 but payable was Rs.15,000
• Ground rent for lease hold property Rs.40,000
• Interest on housing loan Rs.70,000 of which Rs.55,000 was actually paid
• Rent collection charges – Rs.8,000
• Repairs and maintenance of property Rs.35,000
Determine income from house property

19. • Solution :
Determination of GAV
Fair value (FR) =500000
Market value (MV) =491000
FR or MV (Higher) = 500000
Standard rent (SR) = 470000
Whichever is lower = 470000
Actual rent (AR) = 480000
Higher is the GAV = 480000

20. Cont.….
Particulars Amount
Gross annual value (GAV) 4,80,000
Less: municipal tax paid 60,000
Net annual value (NAV) 4,20,000
Less: deduction u/s 24
24(a) 30% of NAV
24(b) interest on housing loan
(126000)
(70000)
Income from house property 2,24,000
Calculation of Income from house Property

21. • COMPUTATION OF INCOME FROM HOUSE PROPERTY
Particulars Amount
Annual Value NIL
Less: Interest on Borrowing loan u/s 24(b) xxx
Loss from House Property xxx

22. Self property
* If Loan was taken prior to 01/04/99, it is limited to Rs. 30,000/-
Municipal tax is
not deductible
Interest on housing
loan:2,00,000*

24. • Mr. ‘A’ is the owner of two houses, one at Bangalore and the other at Mysore.
The particulars regarding both the properties are as follows:
Find out the income from SOP.
Particulars Bangalore Mysore
MV 36000 60000
FR 50000 72000
SR 42000 ___
Interest on housing
Loan
20000 36000
Insurance Premium 2000 Not Insured
Property Tax Paid 6000 9000

25. • Solution : Income from SOP
Particulars Bangalore Mysore
Annual Value NIL NIL
Less: Interest on
Borrowing loan
u/s 24(b)
20000 36000 but limited
to 30000
Loss from House
Property
(20000) (30000)

26. Comparison between LOP and SOP
Particulars LOP SOP
Section 23(1) 23(2)
Annual Value YES NO
Municipal Tax
Deduction
YES NO
Interest Limit NO limit Rs.30,000/2,00,000

27. DEEMED LET OUT PROPERTY (DLOP) – SEC 23(4)
• If the assesse owns more than one house property for self-occupation
then, the income from any one such property shall be computed as
SOP and the others as DLOP, at the option of the assesse.
• The option can be changed year after year in a manner beneficial to
assessee.

28. PARTLY LET OUT ANDPARTLY SELF OCCUPIED
This can be further Classified as:-
• Based On Portion/Part - A Part Of The House May Be Self-occupied &
Another Part Let Out
• Based On Period - For Some Period It Was Let Out And Remaining
Months Self-occupied.

29. for
agricultural
purposes
by
registered
trade union
by
charitable
trust
by local
authority
for own
business or
profession

30. • If two or more persons jointly own a property
• Each co-owner can treat his share as SOP and claim interest benefit
of Rs30,000 or Rs200,000/- as the case may be.
• Where the house property owned by co-owners is let-out, the income
from such property shall be computed as if the property is owned by
one owner and thereafter the income so computed shall be
apportioned amongst each co-owner as per their specific share.