Income from House
Property
Points for Discussion:
• What is Income from House Property? – General understanding.
• What is contemplated under Income Tax Act about property income?
• Concept of annual value.
• Meaning of the term: House.
• Basic conditions to be satisfied for chargeability of income taxable
under this head.
• Types of House Properties contemplated under the act.
• Computation of income from house property for each type of HP.
• Deductions under this head of Income.
Basic conditions to be satisfied for chargeability
of income taxable under this head
1. There must exist a House Property. It should consist of any building
or lands appurtenant thereto.
2. The assesse must be owner of the House Property.
3. The Property should not be used by the owner for carrying out any
business or profession which is chargeable to Income Tax under the
head Profits and Gains of Business or Profession.
• House – Meaning thereof
• Owner – meaning thereof
• Business or Profession – meaning thereof
Types of House Properties contemplated
under the Act:
1. Self occupied House Property
2. Let out House Property
3. Deemed let out House Property
Computation of self occupied House Property:
• In terms of section 23 (2) (a), the annual value of one self occupied
House property is deemed to be Nil – provided the house property or
any part thereof is not actually let during the previous year and no
other direct or indirect benefit is received there from.
Gross Annual Value Nil
Less: Municipal Taxes paid by the owner xxx
Net Annual Value Nil
Less: Deductions u/s 24
Standard Deduction (30% of Net Annual Value) Nil
Interest on Borrowed Capital xxxxx
Income from House Property / Loss from House Property +ve / -ve
Computation of let out House Property:
Gross Annual Value (Note 1) xxxx
Less: Municipal Taxes paid by the owner xxx
Net Annual Value xxxx
Less: Deductions u/s 24
Standard Deduction (30% of Net Annual Value) xxxx
Interest on Borrowed Capital xxxxx
Income from House Property / Loss from House Property +ve / -ve
Note 1: a) Find out reasonable expected rent of the property. b) Find out the rent
actually received or receivable by the owner. Take higher of a) or b). From this, deduct
loss of rent due to vacancy.
The resultant amount is Gross Annual Value of the let out House Property.
Computation of Deemed let out House
Property:
Gross Annual Value higher of a) or b) subject to c) (Note 1) xxxx
Less: Municipal Taxes paid by the owner xxx
Net Annual Value xxxx
Less: Deductions u/s 24
Standard Deduction (30% of Net Annual Value) xxxx
Interest on Borrowed Capital xxxxx
Income from House Property / Loss from House Property +ve / -ve
Note 1: a) Find out reasonable expected rent of the property. b) Find out the rent actually
received or receivable by the owner. Take higher of a) or b). If the property is located in the
area where Rent Control Act is operative then find out c) Standard Rent under the said Act.
The Gross Annual Value in this case is higher of a) or b) subject to c).
Property Income Exempt from Tax:
a. Income from farm- house [Sec 2(1A)(c)read with Sec 10 (1)]
b. Annual value of any one palace of an ex-ruler [Sec 10 (19A)]
c. Property Income of a local authority [Sec 10 (20)]
d. Property Income of an approved scientific research institution [Sec 10 (21)]
e. Property Income of a University or other Educational Institutions [Sec
10(23C)]
f. Property Income of a hospital or other medical institution [Sec10(23C)]
g. Property Income of a Trade Union [Sec 10 (24)]
h. House Property held for charitable purposes [Sec 11]
i. Property Income of a Political Party [ Sec 13A]
j. Property used for own business or profession [Sec 22]
k. One self-occupied Property [Sec 23 (2)]
Applicability of Section 22:
• House property in a foreign country
• Disputed ownership
• Property held as stock-in-trade
• Splitting of a composite rent – when separable and not separable
• Property owned by co-owners
