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Income from House property
Income Tax - Law & Practice
Dr. K. CHELLA PANDIAN
Assistant Professor of Commerce
Vivekananda College
Tax is the financial charge imposed by the
Government on Income, Commodity or Activity.
Tax is a price which each citizen pays to the
state to cover his share of the cost of the
general public services which he will consume.
Classification of Tax
Government Imposes two types of taxes namely Direct
Taxes and Indirect Taxes.
❖A direct tax is a form of tax is collected directly by the
government from the persons who bear the tax burden.
Examples of direct taxes are Income Tax
❖An indirect tax is a form of tax collected by mediators who
transfer the taxes to the government, and also perform functions
associated with filing tax returns. The customers bear the final
tax burden.
Examples of indirect taxes are GST (Goods and Services Tax)
and Customs Duty.
CHARACTERISTICS OF INCOME TAX
1. Direct Tax: Income is a Direct Tax. Direct Tax means
such tax which is paid by a person who bears tax burden.
2. Central Tax: Income Tax is imposed and recovered by
Central Government.
3. Tax on Total Income: Income Tax is calculated on total
income. Total income is also called taxable income.
Total income is calculated according to the provisions of
Income Tax Act.
4. Tax-Exempted Limit: If income exceeds prescribed limit of
income, then tax is imposed. Tax is not imposed upto the tax-
exempted limit of income. Tax-exempt limit of income for the
Assessment Year 2018-19, are as follows:
(A) Senor Citizen: Senior citizen (resident in India), who
is of the age of 60 years or more but less than 80 years
Rs. 3,00,000.
(B) Super Senior Citizen: Super senior citizen (resident in
India), who is of the age of 80 years or more Rs. 5,00,000.
(C) Others: Individuals, HUF, Association of persons.
Body of Individual, who is of the age of below 60 years Rs.
2,50,000.
(D) Firm, Company, Local Body: No Exemption.
5. Progressive Tax Rates:
Tax is not imposed at the same rate on the total
income of an individual HUF, AOP or BOI. Tax rates
increase with an increase in income. Minimum tax rate
is 5% and maximum tax rate is 30%. Firms' and
companies' incomes are taxed at the rate of 30%.
6. Surcharge: Surcharge is imposed on the amount of income
tax. Surcharge rates are as follows for the Assessment Year
2018-19.
(i) For individuals, HUF, AOP or BO! : @ 10% if total
income exceeds 50 lakh rupees but does not exceed 1 crore
rupees. @ 15% if total income exceeds 1 crore rupees.
(ii) For Firms: @ 12% if total income exceeds 1 crore
rupees.
(iii) For Domestic Company: @ 7% if total income
exceeds 1 crore rupees but does not exceed 10 crore rupees.
@ 12% if total income exceeds 10 crore rupees.
7. Education Cess and Secondary and Higher Education
Cess: All assessees are liable to pay education cess @ 2%
and secondary and higher education cess @ 1% on the
total amount of income tax including surcharge.
8. Tax Burden: Tax is imposed at progressive rate on the
income of individual and HUF therefore rich person bear
more tax burden.
9. Administration: Tax is imposed and recovered by income tax
department. Income Tax Department works under the control
of Central Board of Direct Taxes (CBDT).
10. Allocation of Amount of Income Tax: The total amount of
income tax recovered by government is allocated among Central
Government and State Government according to the
recommendation of Finance Commission. State Government will
not be given any share of income tax revenue from the following
amounts:
(i) Income tax amount recovered from companies.
(ii) Amount of surcharge.
(iii) Amount of education cess and SHEC.
Heads of Income
1.Salaries Sec 15 - 17
3.Business &
Profession Sec 28 - 44
2.House property
Sec 22 - 27
4.Capital Gains
Sec 45 - 55
5.Other Sources
Sec 56 - 59
Aggregate of all the 5 heads of income is
known as gross total income
COMPUTATION OF TOTAL INCOME
The total income is computed on the basis of the
residential status of the assessee. The income is classified
into the following five heads:
1. Income from Salaries Sec 15 to 17
2. Income from House Property Sec 22 to 27
3. Profits and Gains of Business or Profession Sec 28 to 44
4. Income from Capital Gains Sec 45 to 55
5. Income from Other Sources Sec 56 to 59
COMPUTATION OF GTI & TI
1. INCOME FROM SALARIES - Sec 15 to 17 XXXX
2. INCOME FROM HOUSE PROPERTY – Sec 22 to 27 XXXX
3. PROFITS AND GAINS OF BUSINESS OR PROFESSION- Sec 28 to 44 XXXX
4. INCOME FROM CAPITAL GAINS - Sec 45 to 55
(A) LONG TERM CAPITAL GAINS ****
(B) SHORT TERM CAPITAL GAIN **** XXXX
5. INCOME FROM OTHER SOURCES
(A) CASUAL INCOMES
(LOTTERY,CARD GAME, etc) **** - Sec 56 to 59
(B) OTHER INCOMES - CLUBBING**** - Sec 60 to 65 XXXX
XXXX
LESS: SET OFF AND CARRY FORWARD LOSSES – Sec 70 to 79 XXXX
GROSS TOTAL INCOME (GTI) XXXX
LESS: DEDUCTIONS U/S 80 C to 80 U XXX
TAXABLE INCOME (TI) XXXXX

Income from House property
Income from House property
Under the head 'Income from House Property'
the basis of charge is the annual value of property.
The property:
(i) consists of any buildings or lands appurtenant
thereto,
(ii) of which the assessee is the owner, and
(iii) which is not used for purposes of assessee's
business or profession. .
Under the head 'Income from House Property'
income is computed on buildings and land appurtenant
thereto.
Land which is not appurtenant to any building does
not come within the scope of this section. Income from
such land is taxable under the head 'Income from Other
Sources'.
The lands appurtenant to building include compound,
play-ground, kitchen-garden, courtyard, etc.
The following are the exceptions to the general rule
that income from house property is taxable under the
head 'Income from House Property'.
(a) Building or staff quarters let out to employees and
others.
(b) If a building is let out to authorities for locating bank,
post office, police station, etc.,
(c) Composite letting of building with other assets.
(d) Paying-guest accommodation. It is assessable as
business income.
It is only the owner of the house property, who is liable to pay
tax, under this head of income.
Where the assessee is the lessee of a building and he derives
an income from subletting or reletting, it will be taxable under the
head 'Income from Other Sources' and not under the head 'Income
from House Property'.
The person in whose name the property is registered.
The following are deemed to be the owners of the property:
(a) An individual who transfers any house property - without adequate
consideration to his or her spouse, or to not being a transfer in connection with
an agreement to live apart, or to a minor child not being a married daughter,
shall be deemed to be the owner of the house property so transferred.
(b) A member of a Co-operative Society, Company or an Association of persons
to whom a building or its part is allotted or leased under a house building
scheme of the society, company or association, shall be deemed to be the
owner of that property.
(c) A person who is allowed to retain possession of any building in part
performance of a contract (referred to in the Transfer of Property Act) shall
be deemed to be the owner of that building.
The following are deemed to be the owners of the property:
(d) A person having lease rights in the property under a lease
extending to 12 years or more in the aggregate including the term
for which the lease may be extended shall be deemed to be the
owner of the property.
(e) If a person takes a land on lease and constructs a house upon it,
he will be deemed to be its owner.
(f) Disputed Ownership. If the title of ownership is disputed in a
court of law, the recipient of rental income or the person who is in
possession of the property as owner is treated as the owner.
If the property, or a portion of it is occupied by
the assessee for the purpose of his Own business
or profession and the profits of such business or
profession are assessable to tax, the annual value
in respect of such property or portion of it is not
taxable as income from house property .
Also nothing will be deductible as
expenditure on rent of this premises in computing
the profits of business or profession.
(1) Income from farm house
(2) Annual Value of one palace of ex-Indian Ruler.
(3) Income from property used for assessee's Own
business or profession.
(4) Income from one self-occupied house.
(5) Income from house meant for self-residence but
could not be occupied throughout the previous year on
account of his service business or profession at any
other place.
(6) Income from property owned by :
(i) Local Authority;
(ii) Scientific Research Association;
(iii) Trade Union;
(iv) Charitable Trust;
(v) Political Party
(vi) University or other educational institution existing for
educational purposes and not for purposes of profit;
(vii) Hospital or medical institution existing for philanthropic
purposes and not for purposes of profits.
(1) Income from house property situated abroad.
 Taxable only in case of residents.
(2) Property owned by co-owners.
Share of each person from the property shall be included in his
respective total income.
Occupied by him for his own residence, that portion will be treated
as self-occupied house and its annual value will be Nil, i.e., it will be
exempt from tax.
(3) Composite Rent. If a building is let out to a person along with other
facilities (e.g., electricity, cooler, lift, water pump, water tax, etc.)
If the rent of the building only will be taxed under the head
'House Property'
Other facilities incomes will be taxed under the head 'Other
Sources'.
If the composite rent cannot be split up it will be taxed under the
head 'Other Sources'.
Income from house property does not mean rental
income; but it means the sum for which the building might
reasonably be expected to be let from year to year.
An assessee's income from house property is computed
on the basis of its annual value. Hence, it is very important to
understand .
Properly the method of determining the annual value of
the house property. If the annual value is not determined
correctly, the taxable income from house property will be
wrong.
(i) Municipal value: Determined by the local authority
for charging house tax,
(ii) Fair Rent: Rent of similar properties in the same
locality.
(iii) Standard Rent : fixed under Rent Control Act of a
State.
(iv) Actual rent : Rent actually received by the owner of
the house property from the tenant.
Particulars Amount
Municipal Value (a) xxxx
Fair rental value (b) xxxx
Step I (a) or (b) whichever is higher (c) xxxx
Standard rent (d) xxxx
Step II (c) or (d) whichever is lower (e)
(Excepted Rent) xxxx
Actual rent received/receivable-un realized (f) xxxx
Step III (e) or (f) whichever is higher (e)
Gross Annual Value xxxx
I. If rent received is higher- rent received is annual
value
II. If rent received is lower –
(A) lower is because of vacancy rent received is
annual value
(B) lower is because of any other reason RER is the
annual value
Determination of Expected Rent [Sec. 23(1)(a)]
(a) Where standard rent has not been fixed. One of the
following (whichever is greater) shall be the expected rent of
the building :
(i) Municipal value determined by the local authority for
charging house tax, etc.; or
(ii) Fair Rent-Rent of similar properties in the same locality.
(b) Where standard rent has been fixed. One of the following
(whichever is less) shall be the expected rent of the building:
(i) The value as determined under (a); or
(ii) The standard rent fixed under the Rent Control Act of a
State.
Determination of Actual Rent [Sec. 23(1)(b)]
Sometimes the owner takes upon himself under an agreement
the burden of providing certain facilities to the tenant, e.g., lift, water
pump, electricity, vehicle parking, gardener, etc. In such a case, the
actual rent received/receivable minus the cost of providing such
facilities will be the actual rent.
If the tenant has undertaken the obligations of the landlord,
e.g., the tenant will pay electricity bills of the portion occupied by the
landlord, the amount so paid will be added in rent received/receivable to
arrive at the actual rent.
Determination of Actual Rent [Sec. 23(1)(b)]
However, no adjustment will be made in the
determination of actual rent regarding the following:
(i) Tax paid by the tenant to the local authority
regarding the building occupied by him.
(ii) Repairs charges borne by the tenant.
(iii) Notional interest on deposit taken from the
tenant.
Computation of Annual Value of a house under different
situations
(1) Computation of Annual Value in case of let-out house,
which neither remains vacant during any part of the
previous year nor is there any unrealised rent.
The gross annual value shall be the expected rent or
actual rent, whichever is greater. From the gross annual
value, the municipal tax paid by the owner during the
previous -. shall be deducted and the balance shall be the
annual value of the property let-out.
Computation of Annual Value of a house under different
situations
(2) Computation of Annual Value in case of let-out house which remains
vacant or any part of the previous year.
(A) House remains vacant for full year : In such a case the gross annual
value will be n.,
(B) House remains vacant for a part of the previous year:
(i) If the actual rent received/receivable for let-out period is more
than the expected rent, the actual rent received/receivable will be the
gross annual value.
(ii) If the actual rent received/receivable for let-out period is less than
the expected rent owing to such vacancy the actual rent
received/receivable will be the gross annual value
Computation of Annual Value of a house under different situations
(3) Computation of Annual Value in case of let-out house, which does
not remain vacant during any part of the previous year but there is
unrealised rent.
The gross annual value of such a house will be determined as
discussed in (1). From the gross annual value the following deductions
will be allowed and the balance will be the annual value:
(a) Taxes actually paid by the owner to the local authority;
(b) Unrealised rent (If conditions of Rule 4 are satisfied).
Computation of Annual Value of a house under different situations
(4) Computation of Annual Value in case of let-out house,
which remains vacant during a part of the previous year and there is
unrealised rent.
The gross annual value of such a house will be determined as
discussed in (2). From the gross annual value the following deductions
will be allowed and the balance will be the annual value:
(i) Taxes actually paid by the owner to the local authority;
(ii) Unrealised rent. (If conditions of Rule 4 are satisfied.)
1. Municipal tax
a) It should be borne by the assessee
b) It should be actually paid during the previous year.
2. Unrealized rent
If any amount of rent is not capable of being realized,
deduct from gross annual value.
Particulars Amount
Gross Annual Value xxxx
Less:
1. Local Tax paid by the owner during the P.Y xxxx
2. Unrealized Rent xxxx
Annual Value xxxx
The income chargeable under the head 'Income
from House Property' (in case of let-out house) shall
be computed after making the following deductions
from its annual value:
(1) A sum equal to 30% of annual value as standard deduction
for expenses (except interest).
(2) Interest on loan taken in respect of house property.
a. Previous Year Interest.
b. Interest for pre-acquisition or pre-construction
period interest .
The income chargeable under the head 'Income from House
Property' (in case of let-out house) shall be computed after making the
following deductions from its annual value:
(1) A sum equal to 30% of annual value as standard deduction for expenses
(except interest).
Points to note :
(i) Standard deduction @ 30% of annual value shall be deducted whether
any expenditure is incurred or not. .
(ii) If owner of the house occupies more than one house for his residential
purposes, except one house all other self occupied houses are deemed as
let-out. In such a case standard deduction @ 30% of annual value shall
be allowed.
(iii) In respect of one house which is treated as self-occupied house,
standard deduction is not allowed.
(2) Interest on loan taken in respect of house property.
a. Previous Year Interest
Interest on loan taken for the purpose of purchasing,
constructing, reconstructing or repairing the house
property is allowable as a deduction on accrual basis.
Points to note :
(i) Interest on unpaid interest is not deductible.
(ii) Interest on a fresh loan raised merely to repay the
original loan taken for the above purposes is allowable as a
deduction under this section.
(iii) Any brokerage or commission paid for raising the loan is
not deductible.
(2) Interest on loan taken in respect of house property.
b. Interest for pre-acquisition or pre-construction
period.
The interest for the previous years prior
to the current year, which is to be deducted in
five equal annual installments.
Particulars Amount
Gross Annual Value xxxx
Less:
1. Local Tax paid by the owner during the P.Y xxxx
2. Unrealized Rent xxxx
Net Annual Value xxxx
Less: Deductions under Sec 24
1. Standard deduction ( 30% of NAV) xxxx
2. Interest on borrowed capital
a. Interest on loan taken for purchase, construction
or repair of the house, relating to the P.Y. xxxx
b. Interest on loan for the period prior to the P.Y
in which the house is completed is also allowable
in five equal annual instalments. xxxx
Income from House Property xxxx
(B) BUILDINGS SELF-OCCUPIED FOR RESIDENTIAL PURPOSES
[Sec. 23(2)]
The buildings self-occupied by the owner (an individual
or HUF) for residential purposes can be divided as under:
(1) (a) House or part of a house occupied by the owner for the
full previous year for the purposes of his own residence,
or[Sec. 23(2)(a)]
(b) Unoccupied house. [Sec. 23(2)(b)]
(2) House self-occupied for part of the previous year and let-
out for part of the previous year. [Sec. 23(3)]
(3) More than one house in the occupation of the owner. [Sec.
23(4)]
Deductible Interest
(i) Where the property is acquired, constructed, repaired, renewed or
reconstructed with borrowed Capital on or before 1-4-1999.
Actual amount of interest payable or Rs. 30,000 (Maximum) whichever is less
(ii) Where the property is acquired or constructed with capital borrowed on or
after 1-4-1999, but acquisition or construction is completed within 3 years of the
end of the previous year in which capital was borrowed.
Actual amount of interest payable (Or) Rs. 2,00,000 (Maximum)
Whichever is less.
(iii) In any other case i.e., money is borrowed on or after 1-4-99 for repairs,
renewals, or renovation or reconstruction.
Actual Interest payable subject to a maximum of Rs. 30,000.
Particulars Amount
Gross Annual Value Nil
Less:
1. Local Tax paid by the owner during the P.Y Not Deductable
2. Unrealized Rent Nil
Net Annual Value Nil
Less: Deductions under Sec 24
1. Standard deduction ( 30% of NAV) Nil
2. Interest on borrowed capital – Deduction upto
Rs. 30,000 or Rs. 2,00,000 as the case may be
xxxx
Loss from Self-occupied House xxxx
Income from House property
Income from House property
Income from House property

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Income from House property

  • 2. Income Tax - Law & Practice
  • 3. Dr. K. CHELLA PANDIAN Assistant Professor of Commerce Vivekananda College
  • 4. Tax is the financial charge imposed by the Government on Income, Commodity or Activity. Tax is a price which each citizen pays to the state to cover his share of the cost of the general public services which he will consume.
  • 5. Classification of Tax Government Imposes two types of taxes namely Direct Taxes and Indirect Taxes. ❖A direct tax is a form of tax is collected directly by the government from the persons who bear the tax burden. Examples of direct taxes are Income Tax ❖An indirect tax is a form of tax collected by mediators who transfer the taxes to the government, and also perform functions associated with filing tax returns. The customers bear the final tax burden. Examples of indirect taxes are GST (Goods and Services Tax) and Customs Duty.
  • 6. CHARACTERISTICS OF INCOME TAX 1. Direct Tax: Income is a Direct Tax. Direct Tax means such tax which is paid by a person who bears tax burden. 2. Central Tax: Income Tax is imposed and recovered by Central Government. 3. Tax on Total Income: Income Tax is calculated on total income. Total income is also called taxable income. Total income is calculated according to the provisions of Income Tax Act.
  • 7. 4. Tax-Exempted Limit: If income exceeds prescribed limit of income, then tax is imposed. Tax is not imposed upto the tax- exempted limit of income. Tax-exempt limit of income for the Assessment Year 2018-19, are as follows: (A) Senor Citizen: Senior citizen (resident in India), who is of the age of 60 years or more but less than 80 years Rs. 3,00,000. (B) Super Senior Citizen: Super senior citizen (resident in India), who is of the age of 80 years or more Rs. 5,00,000. (C) Others: Individuals, HUF, Association of persons. Body of Individual, who is of the age of below 60 years Rs. 2,50,000. (D) Firm, Company, Local Body: No Exemption.
  • 8. 5. Progressive Tax Rates: Tax is not imposed at the same rate on the total income of an individual HUF, AOP or BOI. Tax rates increase with an increase in income. Minimum tax rate is 5% and maximum tax rate is 30%. Firms' and companies' incomes are taxed at the rate of 30%.
  • 9. 6. Surcharge: Surcharge is imposed on the amount of income tax. Surcharge rates are as follows for the Assessment Year 2018-19. (i) For individuals, HUF, AOP or BO! : @ 10% if total income exceeds 50 lakh rupees but does not exceed 1 crore rupees. @ 15% if total income exceeds 1 crore rupees. (ii) For Firms: @ 12% if total income exceeds 1 crore rupees. (iii) For Domestic Company: @ 7% if total income exceeds 1 crore rupees but does not exceed 10 crore rupees. @ 12% if total income exceeds 10 crore rupees.
  • 10. 7. Education Cess and Secondary and Higher Education Cess: All assessees are liable to pay education cess @ 2% and secondary and higher education cess @ 1% on the total amount of income tax including surcharge. 8. Tax Burden: Tax is imposed at progressive rate on the income of individual and HUF therefore rich person bear more tax burden.
  • 11. 9. Administration: Tax is imposed and recovered by income tax department. Income Tax Department works under the control of Central Board of Direct Taxes (CBDT). 10. Allocation of Amount of Income Tax: The total amount of income tax recovered by government is allocated among Central Government and State Government according to the recommendation of Finance Commission. State Government will not be given any share of income tax revenue from the following amounts: (i) Income tax amount recovered from companies. (ii) Amount of surcharge. (iii) Amount of education cess and SHEC.
  • 12. Heads of Income 1.Salaries Sec 15 - 17 3.Business & Profession Sec 28 - 44 2.House property Sec 22 - 27 4.Capital Gains Sec 45 - 55 5.Other Sources Sec 56 - 59 Aggregate of all the 5 heads of income is known as gross total income
  • 13. COMPUTATION OF TOTAL INCOME The total income is computed on the basis of the residential status of the assessee. The income is classified into the following five heads: 1. Income from Salaries Sec 15 to 17 2. Income from House Property Sec 22 to 27 3. Profits and Gains of Business or Profession Sec 28 to 44 4. Income from Capital Gains Sec 45 to 55 5. Income from Other Sources Sec 56 to 59
  • 14. COMPUTATION OF GTI & TI 1. INCOME FROM SALARIES - Sec 15 to 17 XXXX 2. INCOME FROM HOUSE PROPERTY – Sec 22 to 27 XXXX 3. PROFITS AND GAINS OF BUSINESS OR PROFESSION- Sec 28 to 44 XXXX 4. INCOME FROM CAPITAL GAINS - Sec 45 to 55 (A) LONG TERM CAPITAL GAINS **** (B) SHORT TERM CAPITAL GAIN **** XXXX 5. INCOME FROM OTHER SOURCES (A) CASUAL INCOMES (LOTTERY,CARD GAME, etc) **** - Sec 56 to 59 (B) OTHER INCOMES - CLUBBING**** - Sec 60 to 65 XXXX XXXX LESS: SET OFF AND CARRY FORWARD LOSSES – Sec 70 to 79 XXXX GROSS TOTAL INCOME (GTI) XXXX LESS: DEDUCTIONS U/S 80 C to 80 U XXX TAXABLE INCOME (TI) XXXXX 
  • 17. Under the head 'Income from House Property' the basis of charge is the annual value of property. The property: (i) consists of any buildings or lands appurtenant thereto, (ii) of which the assessee is the owner, and (iii) which is not used for purposes of assessee's business or profession. .
  • 18. Under the head 'Income from House Property' income is computed on buildings and land appurtenant thereto. Land which is not appurtenant to any building does not come within the scope of this section. Income from such land is taxable under the head 'Income from Other Sources'. The lands appurtenant to building include compound, play-ground, kitchen-garden, courtyard, etc.
  • 19. The following are the exceptions to the general rule that income from house property is taxable under the head 'Income from House Property'. (a) Building or staff quarters let out to employees and others. (b) If a building is let out to authorities for locating bank, post office, police station, etc., (c) Composite letting of building with other assets. (d) Paying-guest accommodation. It is assessable as business income.
  • 20. It is only the owner of the house property, who is liable to pay tax, under this head of income. Where the assessee is the lessee of a building and he derives an income from subletting or reletting, it will be taxable under the head 'Income from Other Sources' and not under the head 'Income from House Property'. The person in whose name the property is registered.
  • 21. The following are deemed to be the owners of the property: (a) An individual who transfers any house property - without adequate consideration to his or her spouse, or to not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred. (b) A member of a Co-operative Society, Company or an Association of persons to whom a building or its part is allotted or leased under a house building scheme of the society, company or association, shall be deemed to be the owner of that property. (c) A person who is allowed to retain possession of any building in part performance of a contract (referred to in the Transfer of Property Act) shall be deemed to be the owner of that building.
  • 22. The following are deemed to be the owners of the property: (d) A person having lease rights in the property under a lease extending to 12 years or more in the aggregate including the term for which the lease may be extended shall be deemed to be the owner of the property. (e) If a person takes a land on lease and constructs a house upon it, he will be deemed to be its owner. (f) Disputed Ownership. If the title of ownership is disputed in a court of law, the recipient of rental income or the person who is in possession of the property as owner is treated as the owner.
  • 23. If the property, or a portion of it is occupied by the assessee for the purpose of his Own business or profession and the profits of such business or profession are assessable to tax, the annual value in respect of such property or portion of it is not taxable as income from house property . Also nothing will be deductible as expenditure on rent of this premises in computing the profits of business or profession.
  • 24. (1) Income from farm house (2) Annual Value of one palace of ex-Indian Ruler. (3) Income from property used for assessee's Own business or profession. (4) Income from one self-occupied house. (5) Income from house meant for self-residence but could not be occupied throughout the previous year on account of his service business or profession at any other place.
  • 25. (6) Income from property owned by : (i) Local Authority; (ii) Scientific Research Association; (iii) Trade Union; (iv) Charitable Trust; (v) Political Party (vi) University or other educational institution existing for educational purposes and not for purposes of profit; (vii) Hospital or medical institution existing for philanthropic purposes and not for purposes of profits.
  • 26. (1) Income from house property situated abroad.  Taxable only in case of residents. (2) Property owned by co-owners. Share of each person from the property shall be included in his respective total income. Occupied by him for his own residence, that portion will be treated as self-occupied house and its annual value will be Nil, i.e., it will be exempt from tax. (3) Composite Rent. If a building is let out to a person along with other facilities (e.g., electricity, cooler, lift, water pump, water tax, etc.) If the rent of the building only will be taxed under the head 'House Property' Other facilities incomes will be taxed under the head 'Other Sources'. If the composite rent cannot be split up it will be taxed under the head 'Other Sources'.
  • 27. Income from house property does not mean rental income; but it means the sum for which the building might reasonably be expected to be let from year to year. An assessee's income from house property is computed on the basis of its annual value. Hence, it is very important to understand . Properly the method of determining the annual value of the house property. If the annual value is not determined correctly, the taxable income from house property will be wrong.
  • 28. (i) Municipal value: Determined by the local authority for charging house tax, (ii) Fair Rent: Rent of similar properties in the same locality. (iii) Standard Rent : fixed under Rent Control Act of a State. (iv) Actual rent : Rent actually received by the owner of the house property from the tenant.
  • 29. Particulars Amount Municipal Value (a) xxxx Fair rental value (b) xxxx Step I (a) or (b) whichever is higher (c) xxxx Standard rent (d) xxxx Step II (c) or (d) whichever is lower (e) (Excepted Rent) xxxx Actual rent received/receivable-un realized (f) xxxx Step III (e) or (f) whichever is higher (e) Gross Annual Value xxxx
  • 30. I. If rent received is higher- rent received is annual value II. If rent received is lower – (A) lower is because of vacancy rent received is annual value (B) lower is because of any other reason RER is the annual value
  • 31. Determination of Expected Rent [Sec. 23(1)(a)] (a) Where standard rent has not been fixed. One of the following (whichever is greater) shall be the expected rent of the building : (i) Municipal value determined by the local authority for charging house tax, etc.; or (ii) Fair Rent-Rent of similar properties in the same locality. (b) Where standard rent has been fixed. One of the following (whichever is less) shall be the expected rent of the building: (i) The value as determined under (a); or (ii) The standard rent fixed under the Rent Control Act of a State.
  • 32. Determination of Actual Rent [Sec. 23(1)(b)] Sometimes the owner takes upon himself under an agreement the burden of providing certain facilities to the tenant, e.g., lift, water pump, electricity, vehicle parking, gardener, etc. In such a case, the actual rent received/receivable minus the cost of providing such facilities will be the actual rent. If the tenant has undertaken the obligations of the landlord, e.g., the tenant will pay electricity bills of the portion occupied by the landlord, the amount so paid will be added in rent received/receivable to arrive at the actual rent.
  • 33. Determination of Actual Rent [Sec. 23(1)(b)] However, no adjustment will be made in the determination of actual rent regarding the following: (i) Tax paid by the tenant to the local authority regarding the building occupied by him. (ii) Repairs charges borne by the tenant. (iii) Notional interest on deposit taken from the tenant.
  • 34. Computation of Annual Value of a house under different situations (1) Computation of Annual Value in case of let-out house, which neither remains vacant during any part of the previous year nor is there any unrealised rent. The gross annual value shall be the expected rent or actual rent, whichever is greater. From the gross annual value, the municipal tax paid by the owner during the previous -. shall be deducted and the balance shall be the annual value of the property let-out.
  • 35. Computation of Annual Value of a house under different situations (2) Computation of Annual Value in case of let-out house which remains vacant or any part of the previous year. (A) House remains vacant for full year : In such a case the gross annual value will be n., (B) House remains vacant for a part of the previous year: (i) If the actual rent received/receivable for let-out period is more than the expected rent, the actual rent received/receivable will be the gross annual value. (ii) If the actual rent received/receivable for let-out period is less than the expected rent owing to such vacancy the actual rent received/receivable will be the gross annual value
  • 36. Computation of Annual Value of a house under different situations (3) Computation of Annual Value in case of let-out house, which does not remain vacant during any part of the previous year but there is unrealised rent. The gross annual value of such a house will be determined as discussed in (1). From the gross annual value the following deductions will be allowed and the balance will be the annual value: (a) Taxes actually paid by the owner to the local authority; (b) Unrealised rent (If conditions of Rule 4 are satisfied).
  • 37. Computation of Annual Value of a house under different situations (4) Computation of Annual Value in case of let-out house, which remains vacant during a part of the previous year and there is unrealised rent. The gross annual value of such a house will be determined as discussed in (2). From the gross annual value the following deductions will be allowed and the balance will be the annual value: (i) Taxes actually paid by the owner to the local authority; (ii) Unrealised rent. (If conditions of Rule 4 are satisfied.)
  • 38. 1. Municipal tax a) It should be borne by the assessee b) It should be actually paid during the previous year. 2. Unrealized rent If any amount of rent is not capable of being realized, deduct from gross annual value. Particulars Amount Gross Annual Value xxxx Less: 1. Local Tax paid by the owner during the P.Y xxxx 2. Unrealized Rent xxxx Annual Value xxxx
  • 39. The income chargeable under the head 'Income from House Property' (in case of let-out house) shall be computed after making the following deductions from its annual value: (1) A sum equal to 30% of annual value as standard deduction for expenses (except interest). (2) Interest on loan taken in respect of house property. a. Previous Year Interest. b. Interest for pre-acquisition or pre-construction period interest .
  • 40. The income chargeable under the head 'Income from House Property' (in case of let-out house) shall be computed after making the following deductions from its annual value: (1) A sum equal to 30% of annual value as standard deduction for expenses (except interest). Points to note : (i) Standard deduction @ 30% of annual value shall be deducted whether any expenditure is incurred or not. . (ii) If owner of the house occupies more than one house for his residential purposes, except one house all other self occupied houses are deemed as let-out. In such a case standard deduction @ 30% of annual value shall be allowed. (iii) In respect of one house which is treated as self-occupied house, standard deduction is not allowed.
  • 41. (2) Interest on loan taken in respect of house property. a. Previous Year Interest Interest on loan taken for the purpose of purchasing, constructing, reconstructing or repairing the house property is allowable as a deduction on accrual basis. Points to note : (i) Interest on unpaid interest is not deductible. (ii) Interest on a fresh loan raised merely to repay the original loan taken for the above purposes is allowable as a deduction under this section. (iii) Any brokerage or commission paid for raising the loan is not deductible.
  • 42. (2) Interest on loan taken in respect of house property. b. Interest for pre-acquisition or pre-construction period. The interest for the previous years prior to the current year, which is to be deducted in five equal annual installments.
  • 43. Particulars Amount Gross Annual Value xxxx Less: 1. Local Tax paid by the owner during the P.Y xxxx 2. Unrealized Rent xxxx Net Annual Value xxxx Less: Deductions under Sec 24 1. Standard deduction ( 30% of NAV) xxxx 2. Interest on borrowed capital a. Interest on loan taken for purchase, construction or repair of the house, relating to the P.Y. xxxx b. Interest on loan for the period prior to the P.Y in which the house is completed is also allowable in five equal annual instalments. xxxx Income from House Property xxxx
  • 44. (B) BUILDINGS SELF-OCCUPIED FOR RESIDENTIAL PURPOSES [Sec. 23(2)] The buildings self-occupied by the owner (an individual or HUF) for residential purposes can be divided as under: (1) (a) House or part of a house occupied by the owner for the full previous year for the purposes of his own residence, or[Sec. 23(2)(a)] (b) Unoccupied house. [Sec. 23(2)(b)] (2) House self-occupied for part of the previous year and let- out for part of the previous year. [Sec. 23(3)] (3) More than one house in the occupation of the owner. [Sec. 23(4)]
  • 45. Deductible Interest (i) Where the property is acquired, constructed, repaired, renewed or reconstructed with borrowed Capital on or before 1-4-1999. Actual amount of interest payable or Rs. 30,000 (Maximum) whichever is less (ii) Where the property is acquired or constructed with capital borrowed on or after 1-4-1999, but acquisition or construction is completed within 3 years of the end of the previous year in which capital was borrowed. Actual amount of interest payable (Or) Rs. 2,00,000 (Maximum) Whichever is less. (iii) In any other case i.e., money is borrowed on or after 1-4-99 for repairs, renewals, or renovation or reconstruction. Actual Interest payable subject to a maximum of Rs. 30,000.
  • 46. Particulars Amount Gross Annual Value Nil Less: 1. Local Tax paid by the owner during the P.Y Not Deductable 2. Unrealized Rent Nil Net Annual Value Nil Less: Deductions under Sec 24 1. Standard deduction ( 30% of NAV) Nil 2. Interest on borrowed capital – Deduction upto Rs. 30,000 or Rs. 2,00,000 as the case may be xxxx Loss from Self-occupied House xxxx