This presentation is about the how the income under property is taxed under the Income Tax Act, of 1961.

1. INCOME FROM
PROPERTYTAX
BusinessTaxation & Practices Presentation

2. Contents
Introduction Keywords
IT Act’s
Sections
Exemptions
Deductions Case Study Tips Conclusion

3. “THE HARDESTTHING IN
THEWORLDTO
UNDERSTAND ISTHE
INCOMETAX.”
–Albert Einstein

4. Introduction
■ Income from house property is defined as the income earned from a property by the
assessee.
■ House property includes the building itself and any land attached to the building.
■ Property refers to any building and/or any land attached to the building
■ Taxability may not necessarily be on actual rent or income received.
■ Any residential or commercial property that is owned will be taxed as well. Even if your
piece of real estate is not let out, it will be considered earning rental income and you will
need to pay tax on it.
– Its taxed on the capacity of the real estate to earn income and not the actual rent.
– This is the only head of income, which taxes notional income.

5. ■ If you are letting vacant land, the rent received from such letting out of land is not
taxable under this head
■ Income from house property is taxable in the hands of owner/deemed owner of the
property.
– Owner is a person who is entitled to receive income from property.
– A deemed owner is an owner by implication, although he may not be the owner in
whose name property is registered.
■ Where property is owned by two or more persons and their respective shares are
definite and ascertainable share of each person in the income from the property shall
be included in each of their income.

6. Tax Rates for FY 2015-16(AY 2016-17)
Citizens under 60 years of age
IncomeTax Slab IncomeTax Rate
Income upto Rs.
2,50,000
Nil
Income between Rs.
2,50,001 - Rs. 500,000
10% of Income
exceeding Rs.
2,50,000
Income between Rs.
500,001 - Rs. 10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
10,00,000
30% of Income
exceeding Rs.
10,00,000
Citizens of 60 - 80 years of age
IncomeTax Slab IncomeTax Rate
Income upto Rs.
3,00,000
Nil
Income between Rs.
3,00,001 - Rs. 500,000
10% of Income
exceeding Rs.
3,00,000
Income between Rs.
500,001 - Rs. 10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
10,00,000
30% of Income
exceeding Rs.
10,00,000
Citizens above 80 years of age
IncomeTax Slab IncomeTax Rate
Income upto Rs.
5,00,000
Nil
Income between Rs.
500,001 - Rs. 10,00,000
20% of Income
exceeding Rs.
5,00,000
Income above Rs.
10,00,000
30% of Income
exceeding Rs.
10,00,000
Surcharge: 12% of income tax, where total income
exceeds Rs.1 crore.
Cess: 3% on total of income tax + surcharge.

7. Keywords
■ AnnualValue:This is the capacity of a property to earn income is its annual value.
■ MunicipalValue:This is the value of your property as evaluated by municipal
authorities on which they charge municipal tax.
– Municipal authorities have a host of factors that they consider before assigning a
municipal value.
■ Fair RentalValue:The rent which a similar property with similar features in the same
(or similar) area would fetch is the fair rental value.
■ Standard Rent: Under the Rent ControlAct, a standard rent is fixed and owners cannot
receive rent higher than that specified in the Rent ControlAct.

8. ■ Actual Rent received/receivable:This is the actual amount received by the owner
from the tenant as rent, depending on who pays the water, electricity and other utility
bills.
■ Rent Control Act: A price control that limits the amount a property owner can charge
for renting out a home, apartment or other real estate.
– Rent control acts as a price ceiling by preventing rents either from being charged
above a certain level or from increasing at a rate higher than a predetermined
percentage.

9. ■ Gross AnnualValue (GAV):This is the highest among:
– Rent received or receivable
– Fair MarketValue
– MunicipalValuation
■ If the Rent Control Act is applicable, the GAV is highest among:
– Standard Rent
– Rent Received

10. “YOU
DON’T PAYTAXES–
THEY TAKETAXES.”
–Chris Rock

11. ITAct’s Sections
■ Section – 22
– Income from house property
■ Section – 23
– Annual value how determined
■ Section – 24
– Deductions from income from house property
■ Section – 25
– Amounts not deductible from income from house property
■ Section - 25A
– Special provision for cases where unrealised rent allowed as deduction is realised
subsequently

12. ■ Section - 25AA
– Unrealised rent received subsequently to be charged to income-tax
■ Section - 25B
– Special provision for arrears of rent and unrealised rent received subsequently
■ Section – 26
– Property owned by co-owners
■ Section – 27
– " Owner of house property", "annual charge", etc., defined.

13. Exemptions
■ Income from farm house
– (sec.2(1a)(c) read with sec. 10(1)).
■ Annual value of any one palace of an ex-ruler
– (sec.10(19a)).
■ Property income of a local authority
– (sec.10(20)),
■ University/ educational institution
– (sec.10(23c)),

14. ■ Approved scientific research association
– (sec.10(21)),
■ Political party
– (sec.13a).
■ Property used for own business or profession
– (sec.22).
■ One self occupied property
– (sec.23(2)).
■ House property held for charitable purposes
– (sec.11).

15. "THERE IS NO SUCH
THING AS A GOOD
TAX."
Winston Churchill

16. Incomes not included in HP, but
elsewhere
■ Income from vacant land
– Income from Other Sources
■ Agricultural Income from house property
– Agricultural Income
■ Value of house property used for business purposes
– Income from Other Sources
■ Sale of property at profit
– Income under CapitalGains

17. Deductions
■ Two deductions are allowed, under Section 24 of the IncomeTaxAct :
– Statutory Deduction
– Interest on borrowed capital
■ Tax deduction under Section 80C of the IncomeTaxAct.
■ Section 80EE: IncomeTax Benefit on Interest on Home Loan (FirstTime Buyers) A new
section in the IncomeTaxAct from (FY 2013-14) which provides additional tax deduction of
Rs. 1,00,000 to first time home buyers.
■ If there is a Loss from House Property
■ Stamp duty and registration charges and other expenses related directly to the transfer
(under 80C, upto 150000)
■ Property taxes, if paid

18. Statutory Deduction
■ 30% of the NAV is allowed as a deduction towards repairs, rent collection, etc.
irrespective of the actual expenditure incurred.
■ Deductible on payable basis, i.e. on accrual basis. Hence, deduction under Section 24
should be claimed on yearly basis even if no payment has been made during the year
■ This deduction is not allowed if the AnnualValue is nil.

19. Interest on borrowed capital
■ Allowed as a deduction on accrual basis if the money was borrowed to buy/construct
the house.
■ Deduction is allowed on whichever is lesser between Rs.1,50,000 or the actual
interest amount (in case the construction was completed within 3 years of taking the
loan, on or after 1-April-1999.)
■ In other cases, it’s between Rs.30,000, and the actual interest, whichever is less.
■ No deduction shall be made under the provision unless the assessee furnishes a
certificate

20. Section 80C of the IncomeTaxAct.
■ Principal amount paid towards housing loan for purchase or construction of house
property is allowed
■ Maximum tax deduction allowed under section 80C Rs.1,00,000 only.
■ Includes amount invested in PPF account,Tax-Savings FDs, equity oriented mutual
funds etc.
■ Allows for deduction only on payment basis.
■ Tax benefit of home loan under this section for repayment of principal part of the
home loan is allowed only after the construction is complete and the completion
certificate has been awarded.

21. If there is a Loss from House Property,
■ The same can be set-off against income from any other head in the same assessment
year.
■ If the loss cannot be set-off against income from any other head in the same
assessment year, the loss is allowed to be carried forward and set-off in 8 subsequent
assessment years against income from house property only.

22. Case Study
■ Assume Mr.NU has a property, with a building on it and is charging Rs. 15,000 per
month as rent.
■ He has paid Rs. 10,000 in municipal taxes for that year
■ He also has accrued Rs.50,000 as interest on borrowed capital.
■ The construction was completed within 3 years of taking the loan (on 1-Jan-1999)

23. Income of House Property Amt (₹) Amount (₹)
Total annual rental income value 1,80,000
Less: MunicipalTaxes 10,000
Net AnnualValue (NAV) 1,70,000
Less:Deductions under Section 24
Standard deduction (30% of NAV) 51,000
Add:Interest on borrowed capital (if
applicable)
50,000
Total Deductions 1,01,000
Income from House Property 69,000

24. Tips
■ Joint Home Loan
– If you jointly own a property with someone and also apply for a joint home loan with your
partner, you will both be eligible for tax deductions on interest up to Rs. 1,50,000 each.
■ Planning a second home
– If you already have one self-occupied property registered to your name and wish to avoid
paying taxes on a second home, register the second property on your spouse/relatives
name to avoid excess taxation under your name.
■ Joint ownership
– Taxation on income from house property can be divided between co-owners, and hence
lessen the load.

25. ■ Ownership of more than one property
– If you own multiple properties, only one of these can be registered as your residence
and fall under self-occupied property (SOP).
– It is important to evaluate the tax liability on all your properties and choose the one
with the highest tax liability to call home, and let out the remaining.You can also
change the SOP every year.
■ Vacant lands
– It will still be taxed based on the fair rental value, so it’s advisable to let any and all
empty properties out, enabling income and no loss because of taxation.

26. Conclusion

27. “MAKE SUREYOU PAY
YOURTAXES; OTHERWISE
YOU CAN GET IN A LOT OF
TROUBLE
–Richard M. Nixon

28. THANKYOU
Akarsh, Saket, Poorna & Leroy

29. Bibliography
1. www.ClearTax.in
2. www.inc.com
3. www.goodreads.com
4. www.forbes.com
5. www.brainyquote.com
6. www.bankbazaar.com
7. www.incometaxindia.gov.in
8. www.indiafilings.com
9. www.moneycontrol.com
10. www.bemoneyaware.com