1. Exempt Assets
1. Property held under Trust. S.5(i)-
Any property held under a trust for public purpose of
charitable or religious nature exempt from tax.
Business Assets-
1.Not taxable, if business of printing and publication of
books is for public religious purposes.

2. • 2. Not taxable, if business is wholly for
charitable purposes and the work is mainly
carried on by beneficiaries.
• 3. Not taxable, if business carried on by an
institution referred to in S.10(23B) or
10(23C).

3. • 2. Coparcenary interest in a H.U.F. S.5(ii)
• Such interest of a member totally exempt.
• 3. Residential Building of a former ruler.
S.5(iii)
• The value of one building used for residence by
former ruler of a princely state totally exempt.
• Some Decisions
• Where some buildings in the palace let out by
the former ruler, value of buildings occupied for
self residence only exempt.
• Mohd. Ali Khan v. CWT 224 ITR 672 (S.C.)

4. • An ex ruler who has opted for exemption
of one house u/s. 5(iii) cannot claim
exemption u/s. 5(vi).
• Gaj Singh v. Settlement Commission 113
Taxman 32 (S.C.)

5. • 4.Former Ruler’s Jewellery. S.5(iv).
• Jewellery in possession of a former ruler
of a princely state recognised by the Govt.
as heirloom before 1st
April, 1957 or by the
C.B.D.T. thereafter totally exempt from
tax.

6. • Conditions to be satisfied,if jewellery recognised by the
Govt. before 1st
Apr.,1957.
• 1. Jewellery shall not be removed out of India except for
a period and purpose approved by the Board.
• 2. Jewellery to be kept substantially in the same shape.
• 3. Reasonable facilities to be provided to officer of the
Govt. or authorised by the Board to inspect the jewellery
when necessary.
• Conditions do not apply if jewellery is recognised by the
Board on or after 1st
Apr., 1957.

7. • If any of the above conditions not fulfilled,
recognition can be withdrawn by the Board
for reason to be recorded in writing by the
Board with retrospective effect from 9th
September, 1972.
• Wealth tax payable by the former ruler for
all A.Y.s falling after 9th
Sept. 1972 subject
to the following.

8. • 1. F. M. V. on the date of withdrawal of
recognition deemed to be the F. M. V. of
the jewellery on each Valuation Date
relevant for the above referred A. Y.s.
• 2. Total Wealth tax payable not to exceed
50% of its F. M. V. on Valuation Date
relevant to A. Y. in which recognition is
withdrawn.

9. • 5.Assets belonging to Indian ex-patriates.
S.5(v).
• Conditions
• 1. Exemption is available to a citizen of India or
a person of Indian origin.
• 2. Such person was ordinarily residing in foreign
country.
• 3. Such person has returned to India with the
intension of permanently residing in India.

10. • The following not taxable for 7 A. Y.s from the A.
Y. following the date of his return to India.
• 1. Money brought to India.
• 2. Value of assets brought to India.
• 3. Money in N. R. E. A/C in any bank in India on
the date of his return.
• 4. Assets acquired out of (1) & (3) above within
one year before the date of his return or at any
time thereafter.

11. • 6. One House or a part of a house. S.5(vi).
• The following exempt in case of an individual
and H. U. F..
• a. A house or a part of a house, or
• b. A plot of land not exceeding 500 Sq. mtrs. in
area.
• Exemption available for both S. O. & let out
house.
• In case of co-ownership, each co-owner entitled
to exemption.

12. • A house means a dwelling place. If a
person owns a part of a house, exemption
allowed to a part of the house.
• If there are more than one dwelling unit in
the house, each unit is not a separate
house. The entire house entitled to
exemption.
• Shiv Narayan Chaudhary v. CWT 108 ITR
104 (All).

13. Debts Owed S. 2(m)
• Debt means liability to pay presently or in future. Debt
means an existing liability to pay and not a contingent
liability.
• Judgements.
• 1. An ascertained liability constitutes deductible debt.
• CWT v Associated Cement Co. Ltd. 128 ITR 626(Bom.)
• 2. Existing liability quantifiable on future date deductible.
• V. Chandramani Pattamaha Devi v. CWT 64 ITR 147
(AP)
• 3. Liability acrued but not quantified also a deductible
debt. Devi Raj Chawla v. CWT TLR 1444 (All).

14. • Wealth tax liability is not deductible.-
• Circular No. 663 dated 28th
September,1993 as it is not debt incurred
in relation to an asset taxable under the
Wealth tax Act.

15. Valuation of Assets.
• 1. Valuation of Building. Part B of
Schedule III
• Building or land appurtenant thereto.
• Step 1-
• Find out Gross Maintainable Rent
• a. Annual rent received or receivable or
annual value assessed by local authority
whichever is higher, if property is let out or

16. • b. Annual rent assessed by local authority
or annual rent reasonably expected by the
owner, if property is outside the jurisdiction
of a local authority.
• If property was vacant for a part of the
year, actual rent should be grossed up to
arrive at Annual Rent.

17. • Adjustments in actual rent-
• 1. If property is let out, municipal taxes borne by the
tenant, if any, shall be added to actual rent paid/payable
by the tenant.
• 2. If property is let out and repair expenses are borne by
the tenant, 1/9th
of actual rent shall be added to actual
rent.
• 3. If owner has accepted any deposit other than advance
rent for three months or less, actual rent shall be
increased by 15% p.a. on deposit from month to month
excluding part of a month. If interest is payable by the
owner, addition to be made to be limited to interest
calculated above less interest actually paid.

18. • 4. If owner has received premium for
leasing or renewing the lease, the
premium divided by the no. of years lease
shall be added to the actual rent.
• 5. If the owner derives any benefit or
perquisite as consideration for leasing the
property or modifying terms of lease, the
value of such benefit or perquisite shall be
added to actual rent.

19. • If tenant has made default in payment of
rent, gross maintainable rent to be
determined on the basis of rent as per
agreement.
• CIT v. Bhagwati Ammal 262 ITR 622
(Mad.)

20. • Step 2-
• Find Net Maintainable Rent
• Deduct the following from G. M. R.-
• a. Taxes levied by local authority on the
property on accrual basis whether or not
borne by the tenant.
• b. 15% of G. M. R.

21. • Step 3-
• Capitalise N. M. R.-
• Multiply N. M. R.
• A. by 12.5, if building is on Freehold Land.
• B. by 10, if building is on Leasehold Land and
unexpired period of lease is 50 years or more on
the Valuation Date.
• C. by 8, if building is on Leasehold Land and
unexpired period of lease is less than 50 years
on the Valuation Date.

22. • Property acquired/constructed after 31st
March,1974-
• The following Rule will apply.
• The higher of the capitalised value as
above or the original cost of
acquisition/construction plus cost of
improvement shall be taken.

23. • Exception-
• If the following conditions are fulfilled, cost
of acquisition/construction shall not be
taken in case of any one house property.
• A. The property acquired/constructed after
31st
March,1974 is used by the assessee
exclusively for his residence throughout 12
months preceding the Valuation Date.

24. • B. The cost of acquisition/construction
does not exceed Rs.50 lakhs, if house
situated in Mumbai, Calcutta, Delhi or
Chennai (Rs. 25 lakhs, if house situated
anywhere else.)
• Step 4-
• Add premium, if unbuilt area of the land
exceeds the specified area.

25. • Aggregate Area- Total area of land.
• Unbuilt Area- Area of land on which no building
is constructed.
• Specified Area-
• Property situated at Mumbai, Calcutta, Delhi or
Chennai- 60% of Aggregate Area.
• Property situated at Agra, Ahmedabad,
Allahabad, Amritsar, Bangalore, Bhopal, Cochin,
Hyderabad, Indore, Jabalpur, Jamshedpur,
Kanpur, Lucknow, Ludhiana, Madurai, Nagpur,

26. • Patna, Pune, Salem, Sholapur, Srinagar,
Surat, Tiruchirapalli, Trivendram,
Vadodara or Varanasi- 65% of the
Aggregate Area.
• Property situated at any other place- 70%
of the Aggregate Area.

27. • Premium to be added to capitalised value-
• If excess of unbuilt area over specified area is
• a. Not >5% of Aggregate Area- NIL
• b. 5%>/=10% of Aggregate Area- 20% of
capitalised value.
• c. 10%>/=15% of Aggregate Area- 30% of
capitalised value.
• d. 15%>/=20% of Aggregate Area- 40% of
capitalised value.
• e. 20%> of Aggregate Area- Part-B, Schedule III
not applicable.

28. • Step-5-
• Deduct Unearned Increment-
• If property is built on leasehold land and any part
of unearned increase is payable to Govt. or any
authority at the time of transfer, value
determined at step 4 above shall be reduced by
the amount liable to be paid, if the property is
transferred on the Valuation Date or 50% of the
value in step 4 whichever is less.

29. • When Schedule III, Part B does not apply-
• 1. If A. O. with the prior approval of D. C. I. T. is
of the opinion that it is not practicable to apply
Part B, Schedule III in any case.
• 2. Where unbuilt area exceeds the specified
area by more than 20% of Aggregate Area.
• 3. Where property is built on leasehold land and
unexpired period of lease on Valuation Date is
not more than 15 years and lessee does not
have option to renew lease.