HEADS OF INCOME
INCOME FROM HOUSE PROPERTY
Dr. Sugandh Rawal, DSPSR
INCOME FROM HOUSE
PROPERTY
Charging Section S. 22
Annual Value of any property consisting of any
building or land appurtenant (belonging)
thereto of which, the assessee is the owner is
chargeable to tax under the head “Income from
House Property”
Dr. Sugandh Rawal, DSPSR
INCOME FROM HOUSE
PROPERTY
following three conditions:
property consists of buildings or lands
appurtenant thereto (belonging to)
the assessee should be the owner of the property
the property should not be used by th owner for
his own business
Dr. Sugandh Rawal, DSPSR
Owner includes legal as well as deemed owner
Deemed owner as per section 27 includes
Owner (transferor) would be deemed owner:
Transfer to a spouse or child without consideration:
Transfer to spouse without an agreement to live apart or to a minor, not
a married daughter
Holder of an impartible estate
Property held by a member of a co-operative society / company / AOP
A person who has acquired a property under power of attorney
Section 53A – Given a scenario where, under a contract for transfer of immovable
property, the buyer has made the required payments, and has taken possession of the
property even though the transfer deed or conveyance hasn’t been registered.
Person acquired a right on a property under lease less than 12 years
Dr. Sugandh Rawal, DSPSR
Exempted property
income from farm house (u/s 2(1A) (10(1))
annual value of any one palace of an ex-ruler Se.
10(19A)
property income of a local authority (10( 20)
property income of an approved scientific research
association (10(21)
property income of an educational institution
(10(20C)
Dr. Sugandh Rawal, DSPSR
INCOME FROM HOUSE
PROPERTY
Exempted property
property income of a trade union (10(24)
house property held for charitable purpose (11)
property income of a political party (13A)
property used for own business or profession (22)
one self-occupied property Sec 23(2)
Dr. Sugandh Rawal, DSPSR
Composite Rent
In certain cases, the owner charges rent from
the tenant not only on account of rent for the
house property but also on account of service
charges for various facilities provided with the
house. Such rent is known as composite rent.
The said composite rent can fall under 2
categories:
(a) Composite rent on account of rent for the
property and service charges for various
facilities provided along with the house like
lift, gas, water, electricity, watch and ward, air
conditioning etc. In this case such composite
rent should be split
Dr. Sugandh Rawal, DSPSR
Composite Rent
up and the portion of rent attributable to
the letting of the premises shall be
assessable as “Income from house
property”. The other portion of the
composite rent received for rendering
services shall be assessable as “Income from
other sources”.
Dr. Sugandh Rawal, DSPSR
Composite Rent
(b) Composite rent on account of rent for the
property and the hire charges of machinery,
plant or furniture belonging to the owner. In
this case if the letting of the property is
separable from the letting of the other assets,
then the portion of the rent attributable to the
letting of the premises shall be assessable as “
Income from house property” and the other
portion of the composite rent for letting other
assets shall be assessable either as “business
income” or as “other sources”.
On the other hand, if the letting of the property
is inseparable from the letting of other assets
like machinery, furniture, the entire income
would be taxable as “business income” or as
“other sources”.
Dr. Sugandh Rawal, DSPSR
Computation of Annual Value
computation of income from house
property depends on the type of
property
let out House property
self -occupied property
let out property remain vacant
partly let out and partly self occupied
deemed to be let out
property owned by co-owners
Dr. Sugandh Rawal, DSPSR
Determination of Income from
House Property
Gross Annual Value *******
Less: Municipal Taxes *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rent (sec 25B) (unrealised rent recovered)
less: 30% of arrears
*******
Income from House Property *********
Dr. Sugandh Rawal, DSPSR
Computation of Annual Value of Let –out
Annual value is the
estimated value of Income
expected if the property is
rented.
Annual value is the
reasonable letting Value / Expected rent ( ER )or
Actual Rent (AR) of the property which ever is higher.
ER is the Municipal value or Fair rent which ever is
higher restricted to Standard rent a per Rent Control Act
Dr. Sugandh Rawal, DSPSR
Computation of Annual Value of
Let
–out
reasonable letting value / ERis:
reasonable letting value / ERis:
Municipal value MV or
Fair rent FR
Which ever greater restricted to Standard rent SR
Municipal Valuation is the ratable value fixed by the municipality for charging municipal tax .
Fair rent is the rent fetched by a similar accommodation in the same or similar locality
Standard rent is the maximum rent which a person can legally recover from his tenant under the Rent
Control Act.
Dr. Sugandh Rawal, DSPSR
COMPUTATION OF ACTUAL RENT
ACTUAL RENT AR
Actual rent is applicable only to let out
houses. Actual rent is rent received or
receivable. Actual rent is the rent of the previous
year for which the property was available for
letting out. The unrealized rent, if it fulfills the
conditions, is allowed to deduct from actual rent
receivable
Actual Rent = Actual rent received or receivable
– allowable unrealised rent/loss due to vacancy
Dr. Sugandh Rawal, DSPSR
Loss The
due to vacancy
property remained vacant for some time
period, it will be deducted from the annual
rent and the figure come to be the actual
rent receivable.
Unrealized rent
The rent which has not been recover from the
tenant. It is also deducted from GAV.
The following conditions must satisfied:
He tenancy is bonafide
The steps has been taken to recover the rent
Steps has been taken to compel him to
vacate the property
Dr. Sugandh Rawal, DSPSR
Deduct Municipal Taxes
From the annual Value
deduct Municipal Taxes levied
by any local authority in
respect of the house property.
This tax is deductible only if it
is actually paid by the owner
and only to the extent it is
paid during the year
Dr. Sugandh Rawal, DSPSR
Deduction u/s 24
Standard deduction
Interest on borrowed
Dr. Sugandh Rawal, DSPSR
Deduction u/s 24
Standard deduction
Interest on borrowed
Dr. Sugandh Rawal, DSPSR
Standard deduction
No deduction can be claimed by an
assessee other than mentioned in
section 24. Standard deduction is
allowed irrespective of expenses
incurred by the assessee
30 % of the adjusted annual
value is deductible irrespective of
expenses incurred by the taxpayer
Dr. Sugandh Rawal, DSPSR
Interest on Borrowed Capital
Interest on Borrowed capital is allowed as
deduction if capital is borrowed for the purpose of
purchase, construction, repair, renewal or
reconstruction of the property
It is deductible on accrual basis. It can be
deductible as yearly, it is deductible even if it is
not actually paid during the previous year
No deduction for any brokerage or any expenses
for arranging the loan is allowed
interest of a fresh loan taken for the repayment of
the earlier loan is allowed as deduction
Dr. Sugandh Rawal, DSPSR
Interest Payable for pre-
construction period
If interest on Borrowed capital is paid prior to
the acquisition or completion of construction,
the interest paid during that period is allowed
as deduction in five equal instalments . But if
such amount is allowed as deduction under
any other provision earlier the amt. so
deducted is not allowed as deduction under
this provision
Dr. Sugandh Rawal, DSPSR
(a) Where the property is acquired or
constructed with capital borrowed on or
after 01/04/1999 and such acquisition or
construction is completed within 5 years of
the end of the financial year in which the
capital was borrowed: Actual interest
payable subject to maximum of Rs
Interest
2,00,000 Deduction in respect
if relevant certificate is
obtained*
of one self-occupied house
where annual value is Nil
Dr. Sugandh Rawal, DSPSR
(b) In any other case, i.e. borrowed for
repairs or renewal or conditions mentioned
in clause (a) are not satisfied: Actual
interest payable subject to a maximum
of Rs 30,000
Interest Deduction in respect
of one self-occupied house
where annual value is Nil
Dr. Sugandh Rawal, DSPSR
Sec 25AA : Recovery of Arrears of Rent or
Unrealised Rent
(1) The amount of arrears of rent received from a
tenant or unrealized rent realised subsequently
from a tenant,by an assessee shall be deemed to
be the income from house property in respect of
the financial year in which such rent is received or
realised, and shall be included in the total income
of the assessee under the head “Income from
house property”, whether the assessee is the
owner of the property or not in that financial year.
(2) A sum equal to 30% of the arrears of rent or
Dr. Sugandh Rawal, DSPSR
the unrealised rent referred to in sub-section (1)
Determination of Income from
House Property
Gross Annual Value *******
Less: Municipal Taxes *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rentsec 25B (unrealised rent recovered)
less: 30% of arrears
*******
Income from House Property *********
Dr. Sugandh Rawal, DSPSR
Illustration 1
R owns a property in Delhi. From the particulars given
below compute the income from house property for the
assessment year 2019-20. (in Rs.)
Muncipal Value: 240000
Fair rent: 292000
Standard rent: 280000
Actual rent : 28000 p.m
Municipal taxes :20% of municipal value
Municipal taxes paid during the year: 50% of tax levied
Expenses on repairs: 40000
Insurance premium: 10000
R borrowed a sum of Rs. 12,00,000@10% p.a. on 1.7.
2016 and the construction of property was completed
on 28.2. 2018.
Dr. Sugandh Rawal, DSPSR
Illustration 2
Three brothers A,B,C having equal share are co-
owners of a house property consisting of six
identical units. Each of them occupies one for his
residence and the other three are let out at Rs.5000
p.m per unit
M.V: Rs. 300000
Municipal taxes: 40% of Municipal value, paid during
the year
Interest payable on construction: 120000
this property was constructed on 31.5.1997. each of
them occupies one unit .
Calculate total income of three brothers for AY 2018-
19
Dr. Sugandh Rawal, DSPSR
Dr. Sugandh Rawal, DSPSR
