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’.
B u i l d i n g s (or) lands appurtenant thereto-
• Theterm‘building’includesresidentialbungalows,office
buildings, warehouses,docks,factory buildings,musichalls,
lecturehalls, auditorium,cinematheatresetc.
• Theappurtenantlandsinrespect ofaresidentialbuildingmay
bein theformofapproachroadstoand frompublicstreets.
3. 1)Let out:Apropertyisconsideredto be let out
when the owner passeson the right of its
occupancy or usage to another person against a
consideration(rent).
2) Self Occupied:A house property will be
termed 'self-occupied' when the owner or
his/her family members useit for residential
purpose.
4. 3.Deemedto be let out:All vacant propertiesare
treated as'Deemed to belet out'.
Prior to FY2019-20, if more than one self-occupied house
property is owned by the taxpayer, only one is considered
and treated asaself-occupied property and the remaining
areassumedto be let out.
Forthe FY2019-20and onwards now, the taxpayer can
claim his 2 properties asself-occupied and remaining
houseaslet out for Income tax purposes.
4.Property used for own business orprofession
The choice of which property to choose as self-
occupied is up to the taxpayer.
5. DIFFERENT CATEGORIES OF PROPERTIES
The annual value has to be determined fordifferent
categories of properties. These are:
A. House property which is let out throughoutthe
previous year
B. House property which is let out and was vacantduring
whole or any part of previousyear.
C. House property which is part of the year letand part
of the year self occupied.
D. House property which is self –occupied for residential
purposes or could not actually be self occupied owing to
employment in any otherplace.
6. Legal as well as beneficial owner are treated as
owner.
Owner of the house need not be owner of the land.
Even when owner can not transfer the property
without consent of 3rd party, still he is the owner.
OWNERSHIP
Sec.27- DEEMED OWNERSHIP : 5
Situations
1. Individual who transfers his house property
otherwise than for adequate consideration to –
(a)His or her spouse (not being a transfer in connection with an
agreement to live apart) or
b) Minor child
7. 2. The holder of impartible estate of an HUF.
3. Member of a co-operative society, company or an Association
of Persons to whom a house is allotted against membership.
4. Person in Possession of a property under the provisions of sec
53A of Transfer of Property Act.
5. Person having right by way of lease, in a property for a period
not less than 12 years.
Exceptions :
The above provisions excludes any rights by way of renewal of a
lease from month to month or for a period not exceeding one
year.
Sec.27- DEEMED OWNERSHIP : 5
Situations
8. Municipal value – It is the valuation by the Municipal
authorities for charging taxeson houseproperty.
Fairrent– It isthe rent, asimilar property in the same
or similar locality canfetch.
Standard rent – It is fixed under the Rent Control Act where a
higher rent than the standard rent cannot be expected by the
owner.
Actual rent– It isthe actual rent received/receivable
by the owner by renting out the property.
Expected rent – Higher value between municipal value and
fair rent subjected to a maximum of Standard rent is
expected rent.
Unrealised rent - The actual rent received or receivable
shall not include the amount of rent which the owner
9. XXXX
XXX
XXXX
Gross Annual Value (GAV)
Less : Municipal Taxes paid by owner
Net Annual Value (NAV)
Less : Deduction u/s 24
i) Standard
Deduction ( 30
% of NAV)
ii) Interest on borrowed capital
XXX
XXX XXX
Income from House Property XXXX
Computation of Income from House
Property
LetOut & Deemed to beLetOut House
Property
10. Gross Annual Value of a property is
the value at which the property might
reasonably be expectedto be let from year
to year.
In India, the GAVis the current value,
the actual rent (whether received or
receivable) or the fair rental value,
whichever is highest
11. Step 1: Compute ER (Expected Rent) -
Higher of MV and FR, but restricted to SR
Step 2 : Compute AR (Actual Rent received/ receivable
less unrealized rent as per rule 4)
It is Annual Rent – Unrealized Rent
Step 3 : Compute ER andAR
Step 4 : GAV is the higher of ER and AR
NOTE: When there is no Actual Rent ER = GAV
12. Municipal Value is Rs. 1,00,000.
Fair Rent is Rs. 1,50,000.
Standard Rent is Rs. 1,20,000.
Annual Rent Is Rs. 2,40,000.
Vacancy is 2 months.
Ground rent is Rs. 30,000.
Insurance is Rs. 25,000.
13. Step 1: Compare Municipal Value and Fair Rent
i.e Rs 1,00,000 and Rs. 1,50,000
( Take Higher Value)
Step 2: Compare higher value with standard rent
i.e Rs 1,50,000 higher from Step 1 and Rs.
1,20,000 (Take lower of the two)
Step 3: Compare Lower of Step 2 i.e Rs. 1,20,000
with Annual rent- Vacancy-Unrealized Rent
i.e Rs.2,40,000 – Rs. 40,000 which comes to
Rs. 2,00,000.
(Take higher of the two)
Here GAV will be Rs. 2,00,000
14. EXAMPLE
Fair Rent
(Rs.80,000pm )
Municipal Value
9,60,000
(Rs.70,000pm) 8,40,000
Standard Rent
(Rs,60,000pm) 7,20,000
Actual Rent 9,00,000
(Rs 90,000 * 10 and vacant for 2
month)
SOLUTION
a) Fair Rent
b) Municipal Value
c) Higher of
a and b
d) Standard Rent
e) Expected Rent
9,60,000
8,40,000
9,60,000
7,20,000
(Lower of c and d) 7,20,000
f) Actual Rent 9,00,000
Gross Annual Value–
Section 23(1)(b) 9,00,000
Note: Section 23(1)(b) is applicable as actual rent
received is Rs 9,00,000 per moth whereas
expected rent is Rs 8,40,000 per month.
15. a. Standard Deduction – Standard Deduction is
30%of the NetAnnualValue calculated above.
This 30% deduction is allowed even when your
actual expenditure on the property is higher or
lower.
Therefore, this deduction is irrespective of the
actual expenditure you may have incurred on
insurance,repairs, electricity, water supplyetc.
b. On rented out property, the entire interest on the
home loan isallowed asadeduction.
16. a. Standard Deduction :For a self occupied house property, since the
Annual Value is Nil, the standard deduction is also zero on such a
property.
b. Deduction of Interest on Home Loan for the property :
Homeowners can claim a deduction of up to Rs.2 lakhs on their
home loan interest, if the owner or his family reside in the house
property.
Same treatment applies when the house is vacant.
Deduction on interest is limited to Rs.30,000 if you fail to meet any
of the conditions given below for the Rs.2 lakhs rebate.-
i. The home loan must be for purchase and construction of a property;
ii. The loan must be taken on or after 1 April 1999;
iii.The purchase or construction must be completed within 5 years
from the end of the financial year in which the loan was taken
