2. Basic Concept
This the only head under Income Tax which
is charged on “Notional Basis”.
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3. Basis of Charge
Income from House Property as per
section 22 of the act.
There should be Property. The
Property must consist of Building
and Land attached thereto.
The Assessee must be the Owner/ Deemed owner of
the Property.
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4. Deemed Owner
Take that
house son, I
have to Save
Tax.
Transfer to Spouse /Minor Child.
Holder of impartible estate.
Member of Co-operative society.
Person is possession of property through attorney.
Person having right in property for not less than 12
years.
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5. Basis of Charge (continued)
The Income should be from Letting out of the Property.
Use of let out House Property is immaterial.
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6. Basis of Charge (continued)
Exception to USE of House Property
The owner should not use the property or any
portion of such property for any business or
profession carried on by him, profit of which is
chargeable to tax.
Where the letting of house property is inseparable
from letting of other assets.
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7. Property Income which are Exempt
Farm House
Palace of Ex-Ruler.
Self occupied House Property.
Property used for Charitable Purpose.
House Property used for own Business of Profession.
House Property of registered Trade Union/Local Authority.
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8. Composite Rent
Situation 1
Where Composite Rent include rent of building and
charges for supplementary services .
E.g. Gas, electricity, water, lift services, etc.
Then the value of such services should be determined and
the Building Rent should be taxed under House Property
and services will be taxed under Other Sources or Business
Income.
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9. Composite Rent
Situation 2
Where Composite Rent include rent of building and other
assets.
E.g. Furniture , Equipment, etc.
The other assets are inseparable.
The total rent including for assets is taxed under Other
Sources or Business Income.
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10. Composite Rent
Situation 3
Where Composite Rent include rent of building and other
assets.
E.g. Furniture , Equipment, etc.
The other assets are separable.
The total rent attributable to building is taxed as House
Property Income and rent for assets is taxed under Other
Sources or Business Income.
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11. How Computation is made ?
Particular Amount (Rs)
Gross Annual Value (G.A.V) xxxx
Less: Municipal Taxes xxxx
Net Annual Value (N.A.V) xxxx
Less: Deduction under section 24 :
(a) Standard Deduction xxxx
(b) Interest on Borrowed Capital xxxx
Income from House Property xxxx
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12. Gross Annual Value
Annual Value of the property shall be the sum for which the
property might reasonably be expected to let out form year
to year.
It will be HIGHER of components:
Actual Rent received or receivable and
Reasonable Expected Rent
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13. Reasonably Expected Rent
The reasonable expected rent is equals to the HIGHER of
Fair Rental Value or Municipal Valuation
But
It is limited to Standard Rent fixed by Rent Control Act.
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14. Reasonably Expected Rent
Fair Rental Value
Fair Rent is the rent which a similar property can fetch in the
same or similar locality, if it is let for a year.
Municipal Valuation
Municipal value is the value as determined by municipal
authority for levying municipal taxes on house property.
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15. Reasonably Expected Rent
Standard Rent
Standard rent is the rent that is fixed by the Rent Control Act.
Rent Control Act dose not apply to every property.
The reasonable expected rent cannot be more than Standard
Rent.
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16. Categories of House Property
House Property let out throughout the previous year.
House property let out but was vacant for whole or part of
year.
House property which is part of year let and part of year self
occupied.
House property which is self occupied or could not be self
occupied due to employment.
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17. Categories of House Property
Type 1
House property let out throughout the previous year.
G.A.V will be Higher of:
Actual Rent received
Or
Reasonably Expected Rent
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18. Categories of House Property
Type 2
House property let out but was vacant for whole or part of year.
Owing to Vacancy, Actual rent is LOWER than
Reasonably Expected Rent(RER)
Yes No
G.A.V will be Actual Rent G.A.V will be HIGHER of
RER or Actual Rent
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19. Categories of House Property
Type 3
House property which is part of year let and part of year self
occupied.
G.A.V will be Higher of:
Actual Rent received
Or
Reasonably Expected Rent
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20. Categories of House Property
Type 4
House property which is self occupied or could not be self
occupied due to employment.
The G.A.V of the property will be NIL.
This limit is applicable House Property wise.
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22. More than one House Property
Where Assessee has more than one house property, which
are in occupation for his own residential purpose then he
may exercise an option to treat anyone as self occupied.
G.A.V of self occupied will be NIL.
G.A.V of other will be HIGHER of Actual rent or
Reasonable expected rent.
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23. Municipal Taxes
Municipal Taxes are levied by Local Authority on House
Property.
They are allowed on PAYMENT basis.
They are allowed only if paid by Owner and not by Tenant
in any case.
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24. Treatment of Unrealized Rent
The amount of rent which the Owner cannot realize from the
tenant is known as Unrealized Rent.
There are two ways of treating unrealized rent:
It should be deducted from the actual rent receivable, or
As per income tax return forms it should be deducted from
Gross Annual Value.
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25. Deductions from House Property
Deductions from House Property are given under section 24.
There are two deductions:
Standard Deduction
From the Net Annual Value a deduction equals to 30% will be
allowed to the Assessee.
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26. Deductions from House Property
Interest on Borrowed Capital
Where the property has been acquired, constructed or
repaired with borrowed capital, the amount of interest
payable is allowed as deduction.
Interest paid/payable for the period prior to the previous year
in which property is acquired is allowed as deduction.
Interest on Interest is not allowed as deduction.
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27. Self occupied House Property
Deduction
Only deduction of Interest will be allowed i.e. standard
deduction u/s 24 will not be allowed.
Case I
Where amount is borrowed for the purpose of repairs and
renewal of House Property.
Deduction will be Actual Interest subject to maximum of
Rs.30000
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28. Self occupied House Property
Deduction
Case II
Where the property is acquired or constructed with
borrowed capital and
The amount is borrowed on or after 1/4/1999 and
The acquisition or construction is completed within 3 years
of the end of FY in which amount was borrowed.
Deduction will be actual interest subject to maximum of
Rs.150000
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30. Arrears of Rent
Where Assessee is the owner of property and receives any
Amount by way of Arrears of Rent
Then
The amount so received, after deducting a Standard
Deduction of 30% will be Deemed to be Income of House
Property.
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31. Unrealized Rent received Subsequently
Where the Assessee could not realize rent from a property
and the same was allowed as deduction and subsequently
the Assessee has realized the amount
Then
The Amount so Realized will be Deemed to be Income
chargeable under the Head Income from House Property
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32. Property Owned by Co-owner
Where the property is self occupied by each co-owner
Then
the annual value of the property for each co-owner will be
NIL and each of the Co-owner will be allowed deduction of
Rs.30000/150000.
Where the entire property is let out
Then
The income under house property will be computed in
normal way and then it will be apportioned among each
Co-owner.
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