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INCOME FROM HOUSE 
PROPERTY 
LECTURE 10
INCOME FROM HOUSE PROPERTY ( SEC 
22 TO 27 ) 
• Sec 22 & 23 – Income taxable under the head and 
how it is calculated. 
• Section 24 – Deductions Allowed 
• Section 25 – Deductions which are not allowed and 
taxable 
• Section 26 – Special treatment in case of co – 
owners of the house. 
• Section 27 – Various Terms for this head of income.
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 etc. The appurtenant lands in respect of 
a residential building may be in the form of 
approach roads to and from public streets.
• However, if a house property, or any portion 
thereof, is occupied by the assessee, for the 
purpose of any business or profession, carried on by 
him, the profits of which are chargeable to income-tax, 
the value of such property is not chargeable to 
tax under this head.
• Rental income from a vacant plot of land (not 
appurtenant to a building) is not chargeable to tax 
under the head ‘Income from house property’, but 
is taxable either under the head ‘Profits and gains 
of business or profession’ or under the head 
‘Income from other sources’, as the case may be. 
• However, if there is land appurtenant to a house 
property, and it is let out along with the house 
property, the income arising from it is taxable under 
this head.
CONDITIONS FOR INCOME FROM 
HOUSE PROPERTY 
Three conditions are to be satisfied for property 
income to be taxable under this head. 
1.The property should consist of buildings or lands 
appurtenant thereto. 
2. The assessee should be the owner of the property. 
3. The property should not be used by the owner for 
the purpose of any business or profession carried on 
by him, the profits of which are chargeable to 
income-tax.
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 
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.
1. If an individual transfers a house property to his or 
her spouse (except in connection with an 
agreement to live apart) or to a minor child (except 
a married daughter) without adequate 
consideration, he is deemed as the owner of the 
property for tax purposes. However, if an individual 
transfers cash to his or her spouse or 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. The holder of an Impartible Estate is deemed to be the owner 
of all the properties comprised in the estate. 
3. 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. 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. 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 INCOME EXEMPTED FROM 
TAX 
Income from a farm house [section 2(1A) (c) and 
section 10(1)]. 
2. Annual value of one palace in the occupation of 
an ex-ruler [section 10(19A)]. 
3. Property income of a local authority [section 
10(20)]. 
4. Property income of an approved scientific 
research association [section 10(21)]. 
5. Property income of an educational institution and 
hospital [section 10(23C)].
6. Property income of a registered trade union 
[section 10(24)]. 
7. Income from property held for charitable purposes 
[section 11]. 
8. Property income of a political party [section 13A]. 
9. Income from property used for own business or 
profession [section 22]. 
10. Annual value of one self occupied property 
[section 23(2)].
DETERMINATION OF ANNUAL VALUE 
• The annual value of house property has 
been defined as 'the amount for which the 
property may reasonably be expected to 
be let out for a year'. 
• However, if your property is let out for the 
whole or a part of the financial year, the 
gross annual value will be the amount 
received during the year as a result of the 
letting out of the house property. 
• This shall also exclude the rent that the 
taxpayer is unable to realize in the financial 
year.
The following four factors have to be taken into 
consideration while determining the Gross Annual 
Value of the property: 
1. Rent payable by the tenant (actual rent) 76 
2. Municipal valuation of the property. 
3. Fair rental value (market value of a similar property 
in the same area). 
4. Standard rent payable under the Rent Control Act.
Actual Rent: It is the most important factor in 
determining the annual value of a let out house 
property. It does not include rent for the period 
during which the property remains vacant. 
Municipal Valuation: Municipal or local authorities 
charge house tax on properties situated in the 
urban areas.
• Fair Rental Value: It is the rent normally charged for 
similar house properties in the same locality. 
Standard Rent: Standard Rent is the maximum rent 
which a person can legally recover from his tenant 
under a Rent Control Act.
IMPORTANT TO NOTE 
• The Gross Annual Value is the municipal value, the 
actual rent (whether received or receivable) or the 
fair rental value, whichever is highest. If, however, 
the Rent Control Act applies to the property, the 
gross annual value cannot exceed the standard 
rent under the Rent Control Act, or the actual rent, 
whichever is higher.
• If the property is let out but remains vacant during 
any part or whole of the year and due to such 
vacancy, the rent received is less than the 
reasonable expected rent, such lesser amount shall 
be the Annual value. 
• For the purpose of determining the Annual value, 
the actual rent shall not include the rent which 
cannot be realized by the owner.
DEDUCTIONS U/S SEC 24 
• Standard Deduction 
 30 % of the adjusted annual value is deductible 
irrespective of expenses incurred by the taxpayer
• Interest on Borrowed Capital 
 Interest on Borrowed capital is allowed as 
deduction if capital is borrowed for the purpose of 
purchase, construction, repair, renewal or 
reconstruction of the property 
 It is deductible on accrual basis. It can be 
deductible as yearly, it is deductible even if it is not 
actually paid during the previous year 
 No deduction for any brokerage or any expenses 
for arranging the loan is allowed 
 interest of a fresh loan taken for the repayment of 
the earlier loan is allowed as deduction
DEDUCTIONS WHICH ARE TAXABLE 
( U/S 25 ) 
• Any interest chargeable under the Act, payable out 
of India on which tax has not been paid or 
deducted at source, and in respect of which there 
is no person in India who may be treated as an 
agent, is not deductible, by virtue of Section 25, in 
computing income chargeable under the head 
“Income from house property”.
• Thus, the interest payable outside India, will not be 
allowable as deductions if 
 No tax is paid thereon or 
 No tax is deducted at source therefrom or 
 There is no person in India who is liable to pay tax 
thereon as agent
PROPERTY OWNED BY CO – OWNER 
( SEC 26 ) 
• When it is applicable 
 a house property is owned by two or more persons 
( co – owners ) 
 Their share in the property and its income is definite 
and ascertainable as per the agreement between 
them
• Procedure in case of co – owners 
 Determine the income of the whole house property 
 Divide the income between the co-owners 
according to the shares 
 Include the share of each co-owner in other 
incomes of each of them to find his total income. 
 Tax the co-owner accordingly.
Thank You

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Lecture 10 income from house property

  • 1. INCOME FROM HOUSE PROPERTY LECTURE 10
  • 2. INCOME FROM HOUSE PROPERTY ( SEC 22 TO 27 ) • Sec 22 & 23 – Income taxable under the head and how it is calculated. • Section 24 – Deductions Allowed • Section 25 – Deductions which are not allowed and taxable • Section 26 – Special treatment in case of co – owners of the house. • Section 27 – Various Terms for this head of income.
  • 3. 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’.
  • 4. Buildings or lands appurtenant thereto The term ‘building’ includes residential houses, bungalows, office buildings, warehouses, docks, factory buildings, music halls, lecture halls, auditorium etc. The appurtenant lands in respect of a residential building may be in the form of approach roads to and from public streets.
  • 5. • However, if a house property, or any portion thereof, is occupied by the assessee, for the purpose of any business or profession, carried on by him, the profits of which are chargeable to income-tax, the value of such property is not chargeable to tax under this head.
  • 6. • Rental income from a vacant plot of land (not appurtenant to a building) is not chargeable to tax under the head ‘Income from house property’, but is taxable either under the head ‘Profits and gains of business or profession’ or under the head ‘Income from other sources’, as the case may be. • However, if there is land appurtenant to a house property, and it is let out along with the house property, the income arising from it is taxable under this head.
  • 7. CONDITIONS FOR INCOME FROM HOUSE PROPERTY Three conditions are to be satisfied for property income to be taxable under this head. 1.The property should consist of buildings or lands appurtenant thereto. 2. The assessee should be the owner of the property. 3. The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to income-tax.
  • 8. 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.
  • 9. DEEMED OWNER 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.
  • 10. 1. If an individual transfers a house property to his or her spouse (except in connection with an agreement to live apart) or to a minor child (except a married daughter) without adequate consideration, he is deemed as the owner of the property for tax purposes. However, if an individual transfers cash to his or her spouse or 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.
  • 11. 2. The holder of an Impartible Estate is deemed to be the owner of all the properties comprised in the estate. 3. 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. 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. 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.
  • 12. PROPERTY INCOME EXEMPTED FROM TAX Income from a farm house [section 2(1A) (c) and section 10(1)]. 2. Annual value of one palace in the occupation of an ex-ruler [section 10(19A)]. 3. Property income of a local authority [section 10(20)]. 4. Property income of an approved scientific research association [section 10(21)]. 5. Property income of an educational institution and hospital [section 10(23C)].
  • 13. 6. Property income of a registered trade union [section 10(24)]. 7. Income from property held for charitable purposes [section 11]. 8. Property income of a political party [section 13A]. 9. Income from property used for own business or profession [section 22]. 10. Annual value of one self occupied property [section 23(2)].
  • 14. DETERMINATION OF ANNUAL VALUE • The annual value of house property has been defined as 'the amount for which the property may reasonably be expected to be let out for a year'. • However, if your property is let out for the whole or a part of the financial year, the gross annual value will be the amount received during the year as a result of the letting out of the house property. • This shall also exclude the rent that the taxpayer is unable to realize in the financial year.
  • 15. The following four factors have to be taken into consideration while determining the Gross Annual Value of the property: 1. Rent payable by the tenant (actual rent) 76 2. Municipal valuation of the property. 3. Fair rental value (market value of a similar property in the same area). 4. Standard rent payable under the Rent Control Act.
  • 16. Actual Rent: It is the most important factor in determining the annual value of a let out house property. It does not include rent for the period during which the property remains vacant. Municipal Valuation: Municipal or local authorities charge house tax on properties situated in the urban areas.
  • 17. • Fair Rental Value: It is the rent normally charged for similar house properties in the same locality. Standard Rent: Standard Rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act.
  • 18. IMPORTANT TO NOTE • The Gross Annual Value is the municipal value, the actual rent (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross annual value cannot exceed the standard rent under the Rent Control Act, or the actual rent, whichever is higher.
  • 19. • If the property is let out but remains vacant during any part or whole of the year and due to such vacancy, the rent received is less than the reasonable expected rent, such lesser amount shall be the Annual value. • For the purpose of determining the Annual value, the actual rent shall not include the rent which cannot be realized by the owner.
  • 20. DEDUCTIONS U/S SEC 24 • Standard Deduction  30 % of the adjusted annual value is deductible irrespective of expenses incurred by the taxpayer
  • 21. • Interest on Borrowed Capital  Interest on Borrowed capital is allowed as deduction if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property  It is deductible on accrual basis. It can be deductible as yearly, it is deductible even if it is not actually paid during the previous year  No deduction for any brokerage or any expenses for arranging the loan is allowed  interest of a fresh loan taken for the repayment of the earlier loan is allowed as deduction
  • 22. DEDUCTIONS WHICH ARE TAXABLE ( U/S 25 ) • Any interest chargeable under the Act, payable out of India on which tax has not been paid or deducted at source, and in respect of which there is no person in India who may be treated as an agent, is not deductible, by virtue of Section 25, in computing income chargeable under the head “Income from house property”.
  • 23. • Thus, the interest payable outside India, will not be allowable as deductions if  No tax is paid thereon or  No tax is deducted at source therefrom or  There is no person in India who is liable to pay tax thereon as agent
  • 24. PROPERTY OWNED BY CO – OWNER ( SEC 26 ) • When it is applicable  a house property is owned by two or more persons ( co – owners )  Their share in the property and its income is definite and ascertainable as per the agreement between them
  • 25. • Procedure in case of co – owners  Determine the income of the whole house property  Divide the income between the co-owners according to the shares  Include the share of each co-owner in other incomes of each of them to find his total income.  Tax the co-owner accordingly.