Lecture 5
Income from house property `
Income from house property (sec 24)
Annual value in relation to a property shall be deemed to be(i)
the sum for which property might reasonably be expected to
let from year to year; or
(ii)
where the annual rent in respect thereof is in excess of the
sum referred to in paragraph (i), the amount of the annual rent;
Income from House Property
The following incomes are to be considered under the head Income
from House Property:
Annual value of any property, whether used for commercial or
residential purposes, consisting of any building, furniture, fittings,
etc. or lands appurtenant thereto, of which the assessee is the
owner. However, such portion of the property as the assesseeowner may occupy for the purpose of his business or profession, the
profits of which are chargeable to annual value of such property is
not assessable under this head.
If the property is owned by two or more persons and if their
respective shares are definite and ascertainable, then only
proportionate income from such a property will be considered as
income from house property of the assessee.
Where an assessee-owner of a house property receives any
advance from the tenant which is not adjustable against the rent
payable, the amount so received shall be deemed to be the income
of the assessee for the income year in which it is received and be
classified under the head Income from House Property.
Provided that at the option of the assessee such amount may be
allocated, for the assessment purpose in equal proportion to the
year of receipt and four years next following.
Moreover, if such amount or part thereof is refunded by the assessee in
a subsequent income year, the refunded amount shall be deducted
in computing the income of the assessee in respect of that income
year.
Admissible Expenses of House Property
Following expenses are allowed to be deducted from the annual
value of the house property to calculate income from this
head:
1. Land development tax or rent: Any sum payable to
government as land development tax or rent on account of the
land comprised in the property.
2. Insurance premium: The amount of any premium paid to
insure the property against risk of damage or destruction.
3. Interest on mortgage loan: Where the property is subject to
mortgage or other capital charge for the purpose of extension or
reconstruction or improvement, the amount of any interest payable
on such mortgage or charge.
3. Annual tax: Where the property is subject to an annual charge
(including any tax leviable in respect of property or income from
property, by local authority or government) not being a capital
charge.
4. Ground rent: When the assessee is the lessee of the land on which
the building is erected, he/she may need to pay ground rent in
respect of the land. The amount of such rent is an admissible
expense.
6. Interest on borrowed capital: Where the property has been
acquired, constructed, repaired, renewed or reconstructed with
borrowed capital from bank or financial institution, the amount of
any interest payable on such capital is an admissible expense.
7. Interest on borrowing during construction: Where the property has
been constructed with borrowed capital from bank or financial
institution, and no income under section 24 was earned from that
property during the period of such construction, the interest
payable during that period on such capital can be adjusted against
income generated from the property after construction, in three
equal proportionate installments for subsequent first three years.
8. Vacancy allowance: When the property was vacant during a
part of that year, a sum equal to such portion of the annual
value of the property is admissible as vacancy allowance.
9. Uncollectible rent: When the owner fails to collect rent from
any tenants even after taking necessary action, he/she is
supposed to adjust suc amount of uncollectible rent with the
annual value of the property, provided that he/she has to
provide supporting documents in relation to such uncollectible
rent.
10. Repaid and maintenance: Expenditure for repairs, collection
or rent, water, sewerage and electricity, salary of darwan,
security guard, pump man, lift-man and caretaker and all
other expenditure related to maintenance and provision of
basic services, admissible limit is as follows:
(i) an amount equal to one-fourth (25%) of the annual value
of the property if the property is let out for residential purpose
(ii) an amount equal to thirty per cent (30%) of the annual
value of the property where the property is let out for
commercial purpose
If the actual repair and maintenance amount is less than the allowable
amount, the unspent amount would have to be shown as income
under the same head.
