Al Amendments w. ; ¢ Year 2020-21 (a pete ef seats) The benefit of Nil annual value shall be allowed for ty self-occupied houses instead of one. 5 However, the aggregate of amounts of interest deduction shall Be een z eens (B) Amendment of See. 24(6) : property held as stock in trade and i ool” Me ot tit the whole or any part of previous year, the annual value shall be taken as aaah mnstead o one year from the end of the financial year in which the certificate of completion of constructic, obtained, BASIS OF CHARGE Under the head ‘Income from House Property’ the basis of charge is the annual value of 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. (Sec. 22) The following are the important points in the above definition : > (1) Buildings or lands appurtenant thereto ult SP cele Under the head ‘Income from House Property’ irre is computed on buildings and land appurtenant thereto. A land which is not a) to any building does not come within the cope of this section. Income from suit land is taxable under the head ‘Income from Other ‘ces’. The lands appurtenant to the building includes compound, play-ground, kitchen-g2r- courtyard, etc. In the case of non-residential building, car parking spaces, drying grounds, grounds, connecting roads in the factory area shall be lands appurtenant to buildings. eptions : he following are the exceptions to the general rule that i i J under the head ‘Income from House Propert ‘at income from house property is ilding or staff quarters let out to employees and others : If the assessee lets out the uarters to the employees of business whose residence there is a necessity for siness, the rent collected from such employees is assessable ce tacome Fcient conduct of bus jusiness and not as income from house property, ce (CIT vs. Dethi.Cloth & General a building is let out to authorities for locating bank, post offrec fae ares wuilding will be assessable as income from business and Aor ce Station: et provided the dominant purpose of letting out the building ics Geena on his business more efficiently and smoothly, agit enablelite vs. National Newspaper ‘onal Newspaper and Paper Mills Led, (1978) 114 ITR 388) A « to carry‘61 INCOME HOM HOUSE PROPLHEE tet on hires i the sure, (o) Composite letting of building with ot tit ant or furniture bolonging to hie ont of the 1s waa predate y ur Ue st met oot tpt a ne pper! relay lor the head Wneome fre wor te Sa vers a onl rope gr Protein fl tigi wl on rm Oba Hara! une th, {u) Payingxueat accommodation : Ii rsstxsnble is business intone - “ Where in torms of a memorandum of axsoclation, the main object oth ie Has gas to nequiTo properties and earn income by letting i rt euna; auld thie wa ines income and not income from howe property. | : [Chennai Properties & Investment Ltd, vx, CIT (VG) ( (2) The assosseo should be the owner of the house property Itis only the owner of the house property, who in liable to pay tax, under Unie b of ince ny hore the assessed is the Tessie of a building, and he deriver, an inonne from auble wetting, it will be taxable under Use head ‘Income from Oth cus! and nis under the head Tneome from House Property’. Bt ‘The following are the owners of house property : {) The person in whose name the property in regintered. (ii) In case of a mortgage, it is the mortgagor and not the mortyagee. ‘Deemed Owners (Sec. 27) : The following are ¢ id to be the own (a) An individual who transfers any house property to his or he consideration or not being a transfer in connection with an agreement to live apart, or wot being a married daughter shall be deemed to be the owner of (b) Amember of a Co-operative Society, Company or an Assoc building or its part is allotted or leased under a house building, vl prassociation shalll be deemed to be the owner of that propert (o)Aperson who is allowed to retain possession of any building in part purformancs fia contract (refered to in the Transfer of Property Act) shall be deemed to be the owner of that building. (@)A person having lease rights in the property under a lease extending ¥) 12 46 in the aggregate including the term for which the lease may be extended shall be de the owner of the property. (e)If'a person takes land on it’s owner. () Disputed Ownership : If _ oftental income or the person w e owner. (3) It is not used for purposes of as: Where the see H islsc Dudebinaes four on exnnigtenitee F008 # cunt broil. toe twxnan Mh at Jease and constructs a house upon it, he will be ‘the title of ownership is disputed in a court of law, the re ho ia in possession of the property as the owner is treated as sessee’s business or profession If the property or a portion of it is occupied by the assess" for the purpose of his ness or profession and the profits of such business or profession are assessable to tax, the value in respect of such property or portion of it is not taxable as income from hou: ‘and also nothing will be deductible as expenditure on rent of these premis i the profits of business or profession. EXEMPTIONS REGARDING INCOME FROM HOUSE PROPERTY two kinds of exemptions regarding income from house property: (1) Inara Tm eros total income (., fully exempt), and (2) Income is included in assesse Paris the deduction is allowed from gross total income, pted Incomes om farm house Annual Value of one palace of e: (Gee details in chapter Agricultural Income). (See. 1A ¥c)] x-Indian Ruler. {Sec. 10(19)]I ~ ~_ INCOME TAX 7 (3) Income from property owned by : (i) Local Authority; / (ii) Scientific Research Association; (iii) Trade Union; (iv) Charitable Trust; (v) Political Party; Pe . Ww University or other educational institution existing for educational purposes any ‘at for purposes of profit; ; : (vii) Hospital ae medical institution existing for philanthropic purposes and not f,, purposes of profits. , (4) Income from property used for naseasee's 5 , ¢ self-occupied house. . (5) Income From tie ho pict for self-residence but could not be occupied throughox (6) Income from the house meant for self-residence b the‘previgus year on account of his service business or profession at any other place ~ Z2deduetible from Gross Total Income 11) Income of a co-operative society from the letting of godowns or warehouses for storage of commodi meant for sale. cease [Sec. 80P(2) (2) Income of a co-operative society from house property, provided its gross total income does not exceed 2 20,000 and the society is not a housing society, urban consumers co-operative society, transport society or society manufacturing goods with the aid of power. > Other Important Points regarding Income from House Property (1) Income from house property situated abroad : Income from House Property situated in a forcign country is taxable only in the case of residents. If a foreign property is taxed in India it will bo taxable under the head ‘Income from House Property’ and its annual value shall be computed as if the property is situated in India. (2) Property owned by co-owners : Where a property is owned by two or more persons joint|y and their respective shares are definite and ascertainable, income from such property shall not be assessed on such persons as an association of persons, but the share of each such person from the property shall be included in his respective total income. If any portion of the house belonging toa co-owner is occupied by him for his own residence, that portion will be treated as self-occupied house and its annual value will be Nil, ic., it will be exempt from tax. (Sec. 26) (3) Composite Rent : If a building is let out to a person along with other facilities (eg., electricity, cooler, lift, water pump, water tax, etc.) for a composite rent and if the rent of the building can be separated from the rent. of such facilities, the two rents will be separated and that belonging to the building only will be taxed under the head ‘House Property’ and that which longs to other facilities will be taxed under the head ‘Income from other Sources’. If the \posite rent cannot be split up it will be taxed under the head ‘Income from other Sources. ANNUAL VALUE (Sec. 23) : (A) BUILDINGS LET OUT {Sec. 2301] Income from house property does not mean rental income; but it means the sum for which the iz might reasonably be expected to be let from year to year. An assessee’s income from hous ty is computed on the basis of its annual value. Hence, it is very important to understat the method of determining the annual value of the house property. Ifthe annual vate is ined correctly, the taxable income from house property will be wrong. own business or profession. nual value of a house property let out shall be deemed to be : pm for which the property might reasonably be expected to be let from year” je property or an; by the owner is wr receivable; or yy Part of property is let and the actual rent received ‘xcess of the sum referred to in (a), the amount of rea—_—_ INCOME FROM HOUSE PROPERTY - 169 (¢) where the property or any py or any part of the previona ano Property inlet an was vnennt during the whole receivable by the owner in reap tit to such vaciney the netual rent received oF amount 80 received or receivable woe 4 Hess than the sum referred to in (a), the DETERMINATION OF GROSS ANNUAL VALUE ; EPS TO DETERMINE GROSS ANNUAL VALUE Step 1. Pair Rent or Municipal value = (whichever is higher) Step 2: Result of Step 1 or Standard Ront = whichover iy lowor (E Step 3. Expected Rent or Actual Rent sore eh ceria Actual Rent > Expected Rent Actual Rent < Expected Rent GAV = Actual Rent (Unrealised rent can be reduced from Actual Rent if conditions of Rule 4 are satisfied) Actual Rent < Expected Rent Actual Rent < Expected Rent because of vacancy because of any other factor GAV = Actual Rent \ GAV = Expected Rent ~_Ppduction of Municipal Taxes From the value determined under (a) or (b) or (c) the taxes (including service taxes) levied by any local authority and paid by the owner during the previous year (irrespective of the previous year to which such taxes relate) shall be deducted in determining the annual value of the property. Generally, service taxes include fire tax, water tax, conservancy tax, education cess, etc. ‘Explanation : For the purposes of clause (b) or clause (c) the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realise. Unrealised rent shall not form part of annual value if the following conditions are satisfied 4) : (i) the tenancy is bonafide; (ii) the defaulting tenant has vacated, or steps have been cen to compel him to vacate the property; (ii) the defaulting tenant is not in occupation of any property of the assessee; (iv) the assessee has taken all reasonable steps of instituting vevedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal gs would be useless. nation of Expected Rent 2 (See, 230001 Where standard rent has not been fixed : One of the following (whichever is greater) a .d rent of the buildin, fenicival value determined by the local authority for charging house tax, ete.; or ir Rent—Rent of similar properties in the same locality. o T endlard rent has been fixed : One of the following (whichever is less) shall be ted rent of the building : — Stise ae determined under (a)+6r tandard rent fixed under the Rent Control Act of a State. nnot be more than the standard rent but it can be less than. thostandardsent. [Balbir Singh vs. MCD (1985) 152 ITR 388 (SC))INCOME FROM HOUSE PROPERTY i peterffination of Actual Rent cates omaha 2 eet he brn of roving in » €8., lift, water pump, electrici 7 . a case, the actual rent received/recsivable mina vi i eae Pee, eee e actual rent. of providing such facil [Sec. 23(1)(b)] Jn such wall be th ear theperioneaen ie Siheationa of the landlord, eg., the tenant will pay secricitybill i pied by the landlord, id wii i ‘eeived/receivable to arrive at the actual rent. eae 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 regardin, ilding i him. Repairs charges borne by the tenant, my 7 Saeed (ii) Notional interest on deposit taken from the tenant, » Iluspation 1 the owner of three houses, which are all let out and are not governed by the Rent Control Act. From the following particulars find out the gross annual value in each Gross Annual Value (a) or (b), whichever is greater case: Particulars I T I 7 I id | z | z | z 1, Municipal Value | 30,000 | 20,000 | 35,000 2. Fair Rent | 36,000 | 24,000 | 32,000 3. Actual (De facto) Rent | 32,000 | 28,000 | 30,000 Solution | I | I | I z | z | z (2) Expected rent 1 or 2, whichever is greater 36,000 24,000 35,000 ©) Actual rent 32,000 28,000 | 30,000 | | Mustration 2 Mr. Xis the owner of four houses, which are all let out and are covered by the Rent Control From the following particulars find out the gross annual value in each case, giving reasons 1 | I HI ] Vv z “8 z | z 30,000 26,000 35,000 | 30,000 36,000 28,000 30,000 | 36,000 30,000. 35,000 36,000 40,000 40,000 30,000 32,000 32,000INCOME TAX — 7 Solution - . i er but not more Expected rent—Municipal value or fair rent, whichever is greater OFE tha, standard rent : TW WV Pees ae z ,000 35,000 36,000 2. Bepectad hu 000 32,000 82,000 2. Actual 35,000 36,000 Gruss Annual Value 1 or 2, whichever is, 30,000 3 . . alee the following information compute Annual Value of the properties for the ‘Assessment Year 2020-21 : as I n il Vv ui 0 0 28, 000 t z 1. Fair rent 30,000 25,000 3, ios 4 ici aluatic 25,000 27,000 29,000 25,00 26,004 3 Sr ais aa 28'800 30,000 27,600 30,000 2,05) to rent Pam, 2 Siecle = paid oe Zag 2108 Municipal tax Paid for Paid for Paid for Not pai if icici PY. PY. PY. 1,400 fr 2019-20 2018-19 aot) 6 months & 2019-20 2020-21 2,500 5,400 5,800 6. Date of completion of 10.2019 construction = — = (b) The gross annual value (municipal value) of a house is ¥ 1,00,000, Municipal tax is | charged @ 20% of the municipal value. However, the landlord can pay municipal tax @ 15% for ten years in advance and in that case no tax shall be charged from him in future. Mr. X paid Z 1,50,000 to the municipality during the previous year. Compute the annual value of the house. (a) Computation of Annual Value of the Properties (for the Assessment Year 2020-21) I I Ir Vv z zg z z z 30,000 27,000 29,000 24,000 13,000 2. Actual rent 28,800 30,000 27,600 ’ er | 30,000 _ Less : Municipal tax paid 2, 5,400 ' Annual Value 24,600 30,000 ing ev ‘was in existence for six months during the previous year, hence, G.A.V. for six months has be* nicipal tax paid during the previ i is cada enna ae? rom 7m or ening (b) Computation of Annual Value of the House (for the Assessment Year 2020-21) al tax paid 11,50,000 Annual Value (-) 50,000 id by owner exceeds G.A.V, there can be negative annual value, Om173 Z INCOME FROM HOUSE PROPERTY ’ te _phputaton of Annual Value of a house under different situations (1) Computation of Annual Value in case of Jet-out houge, which neither remains vacant during any part Cie previous year nor is there any unrealised rent. . ‘The goss ann vals el bt expected rent or actual rent, whichever is greater: - , the municipal tax paid by the owner during the previous year hall be deducted and the balance shall be the annual : Illustration 4 annual value of the property detent < Determine the annual value of the house in the following cases : A B 4 Municipal value 1,00, 000 1,00, 000 Fair rent, * 1,20,000 —1,20,000 , Standard rent _ 90,000 —1,40,000 ‘Actual rent received 1,832,000 96,000 , Municipal tax 10% of M.V. Paid by Paid by ‘ owns tenant¥ solution ua i Computation of Annual Value of the House ; A B Mn z z i (a) Expected rent * 90,000 —1,20,000 he (b) Actual rent 1,32,000 96,0 001 }00 Gross Annual Value (a) or (b), whichever is greater 32, ¥,20,000 : 10,000 Nil Less : Municipal tax paid by owner ; Annual Value 1,22,000 —_1,20,000 Computation of Annual Value in case of let-out house which remains vacant for whole or any part of the previous year (A) House remains vacant for full year : In such a case the gross annual value will be nil. (B) House remains vacant for a part of the previous year : (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. i) 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 wil be the gross annual value, stration . ~ Determine the annual value of the house in the following cases = Expected rent % 1,00,000 se remains vacant for (a) 1 month, (b) 3 months. (a) Computation of Annual Value of the House t for 11 months % 1,10,000 is more ed rent ¢ 1,00,000 Annual Value .) Computation of Annual Value of the House months 7 90,000 is less % 1,00,000 due to vacancy Annual Value(es vt INCOME TAX a a as —~ du (3) Computation of Annual Value in case of let-out house, which does not remain vac, ring any part of the previous year but there is unrealised rent. bl The gross annual value of such a house will be determined as discussed in (1). From 4, 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). [See Form ITR-2, Schedule HP : Income from House Property item b] ‘Sections 33 and 24 were substituted by the Finance Act, 2001, with effect from the Assessment Year 2002-03 to simplify the computation of income from house property. If the, | deduction for unrealised rent is given in a manner other than the manner provided in item, b (given above), the procedure will become cumbersome instead of simple. , | Further, a rule or notification notified by the Central Board of Direct ‘Taxes is binding, | on the department. Hence, computation of the annual value of a building in the manne, rovided in the Form (Return of Income) is valid. J = Illustration 6 From the following information compute the annual value of the house : z Municipal value 1,50,000 Fair rent 1,80,000 Standard rent 60,000 Actual rent 20,000 pn Municipal tax paid by the owner 20% of M.V. Unrealised rent % 40,000. Conditions of Rule 4 are satisfied. Solution Computation of Annual Value of the House z z tC (a) Expected rent 1,60,000 (b) Actual rent 2,40,000 Gross Annual Value (a) or (b), whichever is greater 240,000 ss : (i) Municipal tax (20% of & 1K 000) 30,000 i) Unrealised rent ((rxe\ 40,000 _ 70,00 ; ~Annual Value 1,70,00 (4) Computation of Annual Value in case of let-out house, which remains vacant duringe rt of the previous year and there is unrealised rent. fe gross annual value of such a house will be determined as discussed in (2). From th nual value the following deductions will be allowed and the balance will be the annus! es actually paid by the owner to the local authority; ealised rent. (If conditions of Rule 4 are satisfied.) t 2,00,000 1;80,000 2/50,000 30,000 P* vacant for two months during the previ ,000. Conditions of Rule 4 are satished. aay owner % 15,000 and by the tenant % 15,000,_ a - —————F5 ‘ INCOME FROMHOUSE PROPERTY 78 solution ei ‘omputation of Annual Value o ‘ (a) Expected rent & 2,00,000-7 snnunl Veluo ofthe Bie In (tet: ‘ \ (a) Ketual rent (® 60,000 ~ 60,000 vacaney)& 8,00,0001? ° Gross Annual Value ~ “ 3,00,000 [ase : Municipal tax paid by owner 16000 Unrealised rent 30,000 45,000 004 45,000 Annual Value = Deductions from Annual Value (Sec. 24) ‘The income chargeable under thé head ‘Income from House Property’ (in case of let-out house) 5] ll be computed after making the following deductions from its annual value : (YA sum equal to 30% of the annual value as the standard deduction for expenses (except interest) [Sec. 24(a)] Points to note : (i) Standard deduction @ 30% of annual value shall be deducted whether any expenditure js incurred or not. (ii) If the owner of the house occupies more than two houses for his residential purposes, ‘except two houses all other self-occupied house/houses are deemed as let-out. In such a case standard deduction @ 30% of annual value shall be allowed. (ii) In respect of two houses which are treated as self-occupied house, the standard deduction is not allowed. Note : For self-occupied house see ahead. (2) Interest on loan taken in respect of house property purpose of purchasing, constructing, reconstructing or repairing ‘as a deduction on the 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 able as a deduction under this section. ion paid for raising the loan is not deductible. i interest payable in respect of ho tea tor the acquisition or construction of house property and pertaining to the period the previous year in which such property has been acquired or constructed shall be five equal annual installments commencing from the previous year in which the ‘acquired or construct 7 amount of mterest shall not include any amount of such lowed as a deduction under any other provision of the Act, terest for the previous years prior to the current year, which is to be deducted in five shall be deducted in addition to the interest of the current year ic., for the current previous year + Ysth of interest for able shall be the interest rior $9 the year in which the house is constructed or purchased. COMPUTATION OF PRE-CONSTRUCTION PERIOD interest on loan for pre-construction period it is compulsory to know 1. Preconstruction period starts from the date of loan taken up to the preceding the year in which the construction of house property has tt of loan, whichever is earlier. This aspect is explained with interest on loan taken for the the house property is allowable 1 loan taken for the above information calculate the duration of pre-construction period aken to construct the house property. Assume in all the cases,INCOME TAX Case ; - Date of Loan taken Date of Completion of Construction of the house property (A) Ist March, 2017 Sist March, 2019 (B) 31st Jan., 2018 Ast April, 2020 (C) 30th Sept,, 2018 3st Aug., 2019 (D) 16th Nov., 2017 Ast Nov., 2019 Solution Case (A) : In this case, construction of house property has been completed on 31st Marg, 2019. The pre-construction period will be—from 1st March, 2017 up to 31st March, 2018 jt months, Case (B) : In this case, construction of house property has been completed on 1st April, 202) © pre-construction period will be—from 31st Jan., 2018 up to 31st March, 2020. ie. 26 month, Case (C) : In this case, construction of house property has been completed on 31st Ay 201 oy he pre-construction period will be—from 30th Sept., 2018 up to Bist March. 2050 ett months, Case (D) : In this case, construction of house property has been completed on 1st Nov,, 2019 Ky Dre-construction period will be—from 15th Nov, 2017 up to Bist March, 2019. i¢ 1612 months. ° > Example 2 X takes a loan of t 45,000 @ 15% p.a. for of the house is completed on 20.1.2020. Da‘ duration of pre-construction Solution Since the loan is repaid prior to 31.3.2019 [i.e., 31st March occurring prior to completion of construction]. The pre-construction period begins with 1.6.2014 till date of Tepayment ie, ____ 30.9.2017. The period from 1.6.2014 to 30.9.2017 shall be considered as. pre-construction period, Deduction for interest shall be allowed in 5 equal annual installments beginning with the year of completion of construction which is the Previous Year 2019-20, Interest Calculation : 15... 40 months [1.6.2014-30.9.2017] 48,000 x99 x “mone EG gone 50.9.2017) =F 22,500 Interest not deductible _: Any interest chargeable under the Income Tax Act, which is payable outside India on which tax has not been paid or deducted at source and in respect of constructing a house on 1.6.2014. Constructiy te of loan repayment is 30.9.2017. Compute the period and the amount of interest. ey ‘Tact evasion of tax by the recipient of such interest. (Sec. 25) = Iilustration 8 In the following cases determine the amount of interest deductible for the Previous Yeu! 2019-20, assuming the loan of ¥ 2,00,000 was taken for the construction of the house @ 12% p* and the house had been let out : m Date of Completion Loan Repaid up to Date of Borrowing of Construction 31.38.2019 12 31.12.2014 Full (3) 1.0530 31.03.2015, Half . ‘01. 30.06.2016 One-fourth and paid % 50,000 on 1.10.2019 rest paid or payable in respect of funds borrowed forthe construction or acquis’ cP and pertaining to the period prior to the previous year in which the prope"!__ 7 © equal annual installments commencing from ructed or acquired. ious year is also deductible. Keeping in view this, hall be as under : a lence, the interest for the Previous Years 2012-13 five annual installments as under : has been constructed or acquired is allowed in fiv the previous year in which the house was const Further, the interest for the relevant previ the deduction for the Previous Year 2019-20 s (a) Building completed on 31.12.2014. Hi and 2018-14 48,000 shall be allowed in L PLY. 2014-15 %9,600 IL PY. 2 f . PY. 2015-16 i Il, PY. 2016-17 % 9,600 IV. PY. 2017-18 acon | V. PY. 2018-19 % 9,600 ° ‘Thus, no installment of interest is due for the Previ i . during the Previous Year 2019-20, hone, interest deductible Nil,” Spa Be Toan is due (b) Building completed on 81.3.2015. Hence, the interest fo i - » th 14 SS (Gom 1.10.2018 to 31.8.2014) & 12,000 shall be allowed in five annual i installments as under 8) I, PY. 2014-15 2,400 IL. PY, 2015-16 = 2,400 Ml. PY. 2016-17 2,400 IV. PY. 2017-18 % 2,400 7 V. BY. 2018-19 2,400 |. ; i, Thus, no installment of interest is due for the Previous Year 2019-20. However, half loan & 1,00,000 @ 12% p.a. is due. The interest on this loan 7 12,000 shall be allowed lactic 000 @ 12 is. . allowed as a deduction for the . (c) Building completed on 30.6.2016, Hence, the interest for the Previous Years 2014-15 and 2015-16 (from 1.1.2015 to 31.3.2016) ¥ 30,000 shall be allowed in five annual installments as under : I. PY. 2016-17 = 6,000 I. PY. 2017-18 6,000 ( I. P-¥. 2018-19 = 6,000 : IV. PY. 2019-20 = 6,000 V. PY. 2020-21 = 6,000 Further interest from 1.4.2019 to 30.9.2019 on & 1,50,000, & 9,000 and from 1.10.2019 to 31.3.2020 on % 1,00,000, ¥ 6,000 shall be allowed. ‘Thus, the interest deductible for the Previous Year 2019-20 would be 6,000 + 9,000 + 6,000 = ¥ 21,000 ‘fart showing Computation of Taxable Income from Let-out House Property Gross Annual Value of the house Less : Local Taxes paid by the owner during the Previous Year Unrealised rent spose Annual Value Less : Deductions w/s 24 : (@) 30% of Annual Value (iia) Interest on loan, taken for purchase, construction or repair of the house, relating to the Previous Year (b) Interest on loan for the period prior to the previous year in which the house is completed is also allowable in five equal annual installments Taxable Income from House Property la Prasad has a house property let-out for residential purposes. The following the property let-out : tal value & 8,500 p.m. jalised & 9,000 p.m.INCOME TAX Rent payable under the Rent Control Act % 8,500 per month. ‘The rent payable for a similar house is % 9,000 p.m. He has paid 15% of the Municipal valuation as local taxes, 2 ge of valuation as Educating and Health Cess. ‘The construction of property began in Sep interest up to $1.3.2016 and 7 50,00 premium paid % 2,000 p.a. Compute 2020-21. Solution borrowed loan for the construction a int property, on Computation of Income from Hi (for the Assessment Year 2020 G.A.V. (Actual rent is more than expected Less: Less ; Standard deduction : 30% of A.V. Interest for Previous Year Vth of Interest up to 31.3.2016 Note : Now no deguction is allowed except standard deduct ) BUILDINGS SELF-OCCUPIED FOR ‘PK buildings self-occupied by the owner (an indi can be divided as under : ay(e) ‘House or part of a house occupied purposes of his own residence, or (b) Unoccupied house. (House self-occupied for part of G interest during thi % income from house property unicipal tax including education and he the previous year and let-out for part of in February 2017. He hag Nnich he has paid % 2,00,000 a; o Previous Year. Fire insurang: ‘for the Assessment Year t. 2014 and completed fouse Pro z ; 1,08,009 £) (qo0eX? Ba) i nd Ae cess cee v 17,349 “ ‘Annual Value / 90,66) phere 27,198 (isthe 50,000 40000 _1,17,195 000 _1,17,195 Loss from House Property ©)26,535 tion and interest on Joan for house. RESIDENTIAL PURPOSES [Sec. 23(2) vidual or HUF) for residential purposes full previous year for the (Sec. 23(2)a)] [Sec. 23(2Xb)) he previous {Sec. 23(3)] by the owner for the year. (3) More than two houses in the occupation of the owner. [Sec. 23/4) (1) Self-occupied house or Unoccupied house. “Whore the property consists of a house or part of a house which : (@) is in the occupation of the owner for the purposes of his own residence; or (b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at . that other place in a building not belonging to him, annual value of such house or part of the house shall be taken to be nil. Points tonote: _ a. The solfoceupie| house or part ofit should not be let-out during the whole or any p= _ Ifa building consists of more th i 5 eat eres patie eerie tog ine 3, Ifa building consists of r ‘units s| taken to be nl ga building consists of more ethan one floorfat/unit and a floor/fat/unitis self-occupist pel taxes paid b; : fae to eens one? regarding such property are not deduct lue to arrive at the net annual value.INCOME FON Tig, " 6 Insuehy “eave Cho quontion at 1 PROPERTY a ‘ty, vise, MO the. \ pavise NOUN Fomainod vag Pion 0 Anat Vg Hed Vacant or unrotived ront does not A ta) where such property he Dhow nent \ or W) reconstructod wi WH Gi eduined, Ci) ¢ rm \ y Fintona Hilal horrannt {li conntruetod, Gi) repairs r for deduction of intone, 2 7OWed On oF bofons Hy Hl Fepaired, (iv) renowed ‘ (b) where such property hae bo & 20,000; before 31.9,1999, tho 4 wximum limit % capital borrowed ator feet AD Tepairod Gd ronowod or (ii) r + 30,000: 1909 tho maximuns ti onstructed with the of intorest sball be iL for doduetion (©) where such house ator 81.3, 99, th The acquisition the finaneial your in wh, (@ toclaim tho deduction Porson to whom any of interest payablo by propor ho deduct oF construct rowed; ASKOBHOO Shor on tho en Mild furnish ae intorest is payable ital borrowed, ficato, from the y tho assosuen for in , } specifying tho amount of the property or een es os for the purpose of Such nequisition or construction ‘ to be repnid as a now tons "ole oF part of Lhe capital borrowed which romains * ‘Now loan’ me vholo or par i ital beet Means tlhe whole or part of a loan takon by tho assosseo subsequent to S capital borrowed for the purpose ot Fopayment of such enpital, ; ©) sii Fee sions relating to intorost are the Same as discussed under lot-out house & ~ 7 . ~ a —_— / showing Computation of Income from Solf-occupied House ‘ (i) Gross Annual Value—Nil, | (ii) Paeral fe Paid by owner during the Previous year, Not deductible (ii) Annual Value—Ni (iv) Standard deduction for expenses—Nil i ¥) Interest on loan—Deduetible up to & 30,000 or & 200,000 as the case may be (vi) Loss from sol-occupied house—z......... This loss can be set-off against income head of income. Note: Amendments of sections 28 und 24 wef. tv Avsoxamont Your 2020. from other house property or under any other! ) 1. Tho benofit of nil annual value shall bo allowed for two solf-oceupied houses instond of ono house, 2, The nggregato of amounts of interest deduction (for both solFoccupied houses) shall not. exceed % 2,00,000, «Illustration 10 3 2 5 construct a house is % 30,000 Joan of & 3,00,000 taken on,1.4.2017 @ 10% p.a. to cons for Ree Yoar 201 20, when the construction of the ones as Sansa ay ie : was i ime tion, Compute for the ing tw 8 also paid but not elaimed as a deduction. : ee operty if the house is (i) let-out, and (ii) self-occupied. 30,000 1 i car erest for 2 years prior to the current provious year vert; tne egastruction of Ue house fs complete oom 2000 0,000 deductible in 6 equal installments. § J - 175 ; Eupied house ree icti ved to the extent of ¥ 42,000, eo Rd eae intoreat is deductible up to ® 2,00,000, pon after 1.19160 _ INCOME TAX - = or = Mustration 11 Tum took a Joan of % 16 lakh @ 10% p.a, on 1.7.2017 for constructing a house, 1, construction of the house was completed in the Previous Year 2019-20. Compute the amount of interest deductible in computing the income from house Property for the Asmessment Year 2020-21 if the house is (i) let out, (ii) self-occupied. Solution (i) Houne let-out + z Interest for the Previous Year 2019-20 a 160,069 Interest from 1.7.2017 to 313.2019 & 2,80,000 deductible in five equal installments acrid 216,009 Gi) Self-oceupied + ‘The deduction shall be allowed to the extent of € 2,00,000 only. = Mlustration 12 LIC of India sanctioned a loan of % 16,00,000 to Mr. Ram @ 12% p.a. for the construction of a house. The loan was given in installments as under : 1 Installment on 1.7.2013 & 5,00,000 1] Installment on 1.4.2015 % 6,00,000 III Installment on 1.8.2015 % 6,00,000 ‘The construction of the house completed in November, 2015 and it is self-occupied for residential purposes. Determine the amount of interest deductible ws 24 for the Assessment Year 2020-21. No part of the loan repaid till date. Solution Computation of Deductible Interest u/s 24 (for the Assessment Year 2020-21) t Interest for pre-construction period from 1.7.2018 to 31.3.2015 Interest for the Previous Year 2019-20 on % 16,00,000 taken on or after 1.41999 1,05,000 1,92,000 Interest deductible : 1/5 of 1,05,000 for pre-construction period 21,000 Interest for the Previous Year 2019-20 192.000 . ; -_ 213,000 Maximum deduction permissible Foo 000 Mustration 13 On the basis of the following information determine the annual value of the house : . Half of the house is self-occupied; 2, Half of the house let-out for % 7,500 p.m.; ‘unicipal value of the house is’ 1,50,000 on which tax is paid @ 20%. Computation of Annual Value of the House A. V. of self-occupied portion V. of let-out portion (Expected rent & 75,000INCOME FROM HOUSE PROPERTY — purine the previous vooe coo Ce OUSE PROPERTY 16 h, 3. During the previous year the let 5 , the tenant did not pay the rent ne Pottion remained vacant for three months and ‘ conditions regarding the claim for none, mOM: The landlord could not fulfil the \ 4, Municipal tax paid % 36,000. Municipal veo rent, : value & 1,20,000. sotution Computation of Annual Value of the House , () A.V. ofSelteccupied portion ssesoment Year 2020-25 x z i (i) G. A. V. of let-out portion ( 60,000 — ' a ess: Municipal tax (1/3 oF z 38,000) ant Boon 33,000 ( 12,000 33,000 ( +1. The assessee could not fulfil condi . Annual Value 33,000 Notes: 1 Om puting annual veloc. ve tte conditions regarding unrealised rent, hence it is not deductible in 2, G.A. V. of let-out portion has been com; @) Expected rent of one-third portion ¢ 40;c08 ee Gi Actual rent for lout period 46,000, (i) or (i), whichever is greater—z 45,000, (2) Ho self-occupied for part of the previous year and let-out for part of the previous year. (Sec. 23(3)] ‘The annual value of self-occupied house shall not be nil if, @) eles or part of the house is actually let during the whole or any part of the previous (b) any other benefit therefrom is derived by the owner. In such a case the house will be treated as let-out house and the annual value will be determined ws 23(1). » Ilustration 15 From the following information determine the annual value of the house : ¥ Municipal value EO Da Fair rent 1,20,000 Standard rent 190,000 The house was solfoccupied forfour months and then let-out (a)@ 19,090 p.m. (b) 25,000 pm, Municipal tax paid by the owner @ 10,000. Solution Computation of Annual Value of the House (a) ) z Municipal value 80,000 Fair rent 1,20,000 Standard rent Fenn Expected rent 100) Actual rent G o0ex' 1,20,000- G.A.V, (Expected rent or actual rent, whichever is greater) 20,000 “Paeraas ¢ # + Municipal tax paid ‘Annual Value 90,000 —_1,10,000 péthan two houses in the occupation of the owner (See. 234 ‘the houses occupies more than two houses for his residence for full previous SE ena (etch ‘ee chooses or for which he exercises an option) all other houses are ‘bs let-out. The income from the deemed let-out house(s) shall be computed in the same doutced under ‘Computation of Income from Let-out House’ (See. 23(1)] ts to note ; / he question of the house yemained vacant or unrealised rent does not arise. The question of actual rent does not arise.a. INCOME TAX _ (3) ‘The expected rent will be the gross annual value. 7 ; (4) ‘Tho fall amount of intorest on loan taken for acquisition, construction, reP8'rs, Teneway of the house will be allowed as deduction. (5) ‘The assessee should choose the houses in such a mai hor operty is the minimum. Such an option can -out House ‘utation of Income from Deemed Let: nner that his taxable income fro, ‘be changed from year to year, showing Comp’ z (i) Gross Annual Value (ii) Less : Municipal taxes paid during the P-Y. Annual Value Less : (i) 80% of AN. ii) Interest on loan (No limit applies) (Gi) Interest on loan (No limit SPSS" Tacome/Loss from House Property ration 16 . 5 is the owner of two houses which he uses for his residential purposes. Compute his ‘Assessment Year 2020-21 from the following taxable income from house property for the information : First House—Fair Rental Value & 1,20,000. Second House—Fair Rental Value % 90,000. Municipal tax paid @ 10% of Fair Rental Value. Interest paid for the previous year, on the loan taken on 10.4.2018 for purchase of the first house? 2.20,000. He borrowed 7 40,000 @ 15% on 1.4.2018 for the construction of the second pense, a ech was completed in December 2018. He could not pay the interest during 2046.18, hence paid interest this year for two years (including interest on unpaid interest) 2 12,600. Fire Insurance Premium paid = 1,400 and % 200 on the first and the second house respectively. Solution Computation of Income from House Property e Os (for the Assessment Year 2020-21) Mt ait t " ye Lov " att) ni (a) Annual Value of the first self-occupied house | \ded (b) Annual value of the second self-occupied house Fe Nil Ni Interest on loan % 2,20,000 + 6,000 2,00,000 Less : Interest on Loan allowed up to % 2,00,000 200,000 Loss from House Property =2,00,00! Notes :1. Loss of& 2,00,000 for the Assossment Year 2020-21 can be set-off against income under any other bead. thotie ng income under other head or income is less than the loss, the balance of unabsorbed loss wil# cfd for BA. ‘Ys. to be set-off against H. P. income only. (See page (184) in detail) 2. Interest is allowed on the basis of due, Hence interest for the first year would have been allowed on 4 basis. Interest on unpaid interest is not deductible. Hence € 6,000 only has been deducted as interes Property held as stock-in-trade (w.e.f. the Assessment Year 2018-19) [Sec. 23 (I .ere the property consisting of any building or land appurter is held # V ppurtenant there to is hel in-trade and the property or any part of property is not let during the whole or any P ¢ previous year the annual value of such property or part of the property, for the peri ie year (two years wef the Assessment Year 2020-21) from the end of the financial ¥% carta ompletion of construction of the property is obtained from the compel®* je Annual Value value of let-out house or deemed let-out h i sey eo tone reece tien the poms the— _INCOME FROM HOUSE PROPERTY 2 _ > pent received in arrears or unrealised rent realised (Sect2ee) The amount of ent received in arrears or the amount of unrealised rent realised subsequently by an assessee shall be charged to Income-tax in the financial year in which such rent is received cr realised, whether the assessee is the owner of the property or not in that financial year. m the amount of arrears of rent received o i i sfouhamount shall be allowed as deduction ©” unrealised rent realised subsequently, 30% mustration 17 ‘A deduction of @ 50,000 was allowed to Mr. X in the Assessment Year 2016-17 relating to unrealised rent; Daring the Previous Year 2019-20 he realised 40,000 from the tenant and spent % 10, isation. Determine th t q spent Touse Property’ for the Assessment Year 2026-31, snetele Under the head Income Would your answer be different if Mr. X had disposed of the house in 2018-19? solution Where a deduction has been allowed in respect of unrealised rent, any amount realised in a later year shall be assessable under the head ‘Income from House Property’. Any expenditure incurred for realisation of unrealised rent is not deductible. However, 30% of the amount realised shall be allowed as a standard deduction. Hence, 7 40,000 less ® 12,000 = 28,000 assessable in the Assessment Year 2020-21. Ifthe assessee is not the owner of the property at the time of realisation of unrealised rent, even then the amount is assessable in his hands. 1s Ilustration 18 Mr. Alet-out a house to Mr. B on 1.4.2012 @ ¥ 3,000 p.m. for five years. After the expiry of five years, Mr. B refused to vacate the house. Hence, Mr. A filed a suit to get the house vacated and incurred expenses % 1,000 in this connection. Later on, Mr. A agreed to renew the tenancy for five years w.e.f 1.4.2017 ifB pays him rent @ 4,000 p.m. B agreed to it and paid the arrears of rent from 1.4.2017 to 31.3.2019 on 1.6.2019. Mr. A paid the following amount during the Previous Year : (i) House tax ¢ 6,000; Gi) Insurance premium % 800; Gii) Ground rent % 500. Find out the income from house property for the Assessment Year 2020-21. Solution Computation of Income from House Property (for the Assessment Year 2020-21) z G.A.V. (Rent received @ & 4,000 p.m.) 48,000 Less : Municipal Tax 6,000 Annual Value 42,000 Less : 30% of A.V. 12,600 z 29,400 Add : Arrears received from 1.4.2017 to 31.3.2019 @ 1,000 p.m. 24,000 Less : 30% of arrears received 7,200 16,800 Income from House Property 46,200 nount spent on filing suit to get the house vacated and other expenses are not deductible. a Toperty owned by Co-owners (Sec. 26) the house property is owned jointly by two or more persons and their respective lefinite and ascertainable, they shall not be assessed as an association of persons in property but they shall be assessed individually on their shares in the income house property owned by co-owners is self-occupied by each of the co-owner, the e property for each co-owner will be nil. Each co-owner will be entitled to the 000/2,00,000 on account of interest on money borrowed for the purposes of184 INCOME TAX ch is owned by the co-owne,, Il be first computed as if th," puted will be apportion, Whe: a ieesastaie Eau property or part ofthe house property, whic Property is owned by ‘om such property or part of the property wi eae yy one person and thereafter the income so com gst each co-owner on the basis of their definite share. = Illustration 19 X, Y and Z are three friends owning equally a house property consisting of 5 identi units. One unit is self-occupied by each oa of ‘them for their residence. The remaining 3 uni are let-out on a monthly rent of € 6,000 per unit. The ‘municipal value of the house property j, s % 80,000 during the year. The othe, ¥ 4,00,000 and the municipal taxes paid the amount to expenses were as under : ? (i) Collection charges Hid a er alee ruction of house in 1998 1,30,009 (iii) Interest on loan is taken for consti a 130 One of the let-out units remained vacant for three months during the Financial wen 2019-99, ‘Mr. Y could not occupy his unit for 8 months as he was transferred to some eines a ae oes no} own any other house property. The other taxable income OFX, ¥ and Z are % 90,000, & 1,00,000 ang & 1,20,000 respectively. Compute the oes income under the head ‘Income from House Property’ and also the total income of the three friends for the Assessment Year 2020-21. House Property Solution Computation of Taxable Income from (for the Assessment Year 2020-21) Let-out units (60% of Full House) Expected rent ® 2,00,000 ‘Actual rent % 2,16,000 — 18,000 = 1,98,000 ‘Actual rent is less than expected rent due to Vacancy. Hence, gross annual value Z 1,98,000 GAY. Less : Municipal tax paid (50% of 80,000) Annual Value Less : Deductions : z (i) 80% of A. V. 47,400 65,000 1,12,400 (ii) Interest on Loan (1/2) Share of each co-owner = 1/3 of € 45,600 = 15,200. Taxable Income from Let-out Units _ 45,600 Self-occupied units (50% of Full House) x Y Z t Nil z z Nil Nil Annual Value Less : Interest on loan 65,000/3 = & 21,667 restricted to the maximum of % 30,000 for each co-owner 21,667 21,667 21,668 Loss from self-occupied unit 37667 - 21667 © - 21.08 Computation of Total Income of three Friends (for the Assessment Year 2020-21) y Z z z u t units pied units 15,200 15,200 House Property -21,667 - 21,667 able Income S67» «6.467 90,000 1,00,000 ‘Total Income 83,533 93,533marriage. The assessee paid interest of income from house property. Solution _ INCOME FROM HOUSE PROPERTY is ote : Interest on Ioan shall be divided into 6 equal parts, Out of the total loa F Note efor solf-oecupied uni in . Out of the total loan ¥¢ will be for let-out units and ¥% will be for selFoccupiod units, But in the caso of selF-oceupied unit, there is the maximum limit of€ 30,000, (The Toa Naken prior to 14-1999.) Tes, however, immatess Ht Fa aabe meee material that MY could not occupy this unit Ge to his transfer to = Loss from House Property If the aggregate of permissible deductions under secti of the property, there will be a loss from that property. ‘This lace Sato angie tha income from any other house property. If the loss cannot be wholly set-off against the income from any other house property, the balance of the loss shall be set-off against income under any other head in the same year. The balance of unabsorbed loss from H. P. will be c/fd for 3 A. Ys. to be set-off against income from H. P. only. =a Self-occupied house. If there is a loss on account of interest on loan uj imum of = 30,0007% 2,00,000 in relation to self-occupied house or houses such ne ‘he setoff first against income from house property and then the balance of such loss can be set-off against income under any other head. The balance of unabsorbed loss will be carried forward for eight ‘assessment years to be set-off against income from house property. Restriction regarding set off of loss under the head “Income from house property” against any other head of income (w.e.f. the Assessment Year 2018-19) (Sec. 71 (3A)] Set off of loss under the head “Income from house property” against any other head of income shall be restricted to two lakh rupees for any assessment year. However the unabsorbed Joss can be carried forward for eight subsequent years for set-off under the head income from house property. a Illustration 20 ‘The particulars of a residential house are given below for the Assessment Year 2020-21 : z ‘Municipal value 44,000 Fair rent 48,000 Standard rent 36,000 Actual rent 37,200 ‘Municipal taxes paid 8,800 Ground rent payable 60 5,000 Interest on money borrowed for construction Collection charges actually paid The assessee mortgaged the property for ¢ 36,000 which was spent on his daughter's 3,000 on the mortgage loan this year. Compute his Computation of Income from House Property (for the Assessment Year 2020-21) (a) Expected rent ¥ 36,000 (M.V. or FR., whichever z is greater but not more than S.R.) (b) Actual rent = 37,200 G.A.V. (a) or (b), whichever is greater 37,200 : Municipal Taxe: 38 ce ae ara Annual Value 28,400 z 13,520 Income from House Property 14,880 for marriage is not deductible. 14,880us INCOME TAX = Illustration 21 Mr. Hari Kishan owns three houses in Agra city. He got a house as a gift from a widow o, the condition that she will be paid ® 24,000 per annum for her maintenance. The house ha, been let at % 2,300 p.m. and the municipal taxes paid & 3,000. ‘The value of the second house according to municipal records is ¥ 14,800 and standard ren, % 15,000, but it has been let at ? 1,500 p.m. and the tenant has undertaken to bear the cost g¢ repairs. Municipal taxes paid amounted to % 2,000. 2 ‘The third house which was constructed in 1.1.2014 with a borrowed capital of @ 1,50,009 @10% per annum interest from a firm of Sydney (Australia), is occupied Mr. Hari Kishan ag his residence. Municipal valuation of this house is t 8,000 per annum and the municipal tax ig levied @ 10% but it could not be paid during the year. The outstanding loan on 1.4.2019 was = 1.20,000 and nothing was repaid out of capital sum during the year. Interest has a remitted to the Sydney firm without deducting any tax from it and there is no person in India who can be treated as the agent of that firm in India. Find out his income from house property for the Asses: Solution sment Year 2020-21. Computation of Income from House Property (for the Assessment Year 2020-21) First House: z Gross Annual Value (Actual rent) 27,600 : Municipal Taxes _ 3,000, fess ° Annual Value 24,600 Less : Deduction : 30% of A.V. 7,380 17,220 ‘Second House : G.A.V. (Expected rent 7 14,800 or actual z rent Z 18,000, whichever is greater) 18,000 Less : Municipal Taxes 2,000 Annual Value 16,000 Less : 30% of A.V. 4,800 11,200 Third House : (Self-occupied) Nil Income from House Property 28,420 Notes: 1. Now the annual charge is not deductible. 2. Under section 24, whether the tenant has undertaken to bear the cost of repairs or not, 30% of the annual value is deductible. 3. The annual value of self-occupied house is taken to be nil, ws 23(2) and no deduction is allowed ws 4 except for interest. In the given case interest has been paid t 12,000 but it is not deductible w/s 25 as neither the tax at source has been deducted nor there is any person in India who may be treated as his agent. Mustration 22 Mr. A has four houses, the municipal valuations of which are t 10,000, t 8,000, ¢ 6,000 % 6,000 respectively. He lives in the first house. In the second house, he runs his business. third ae let out for = 400 per month. A loan was taken on Ist April, 2014 for the fetien of the fourth house, the construction of which began on Ist May, 2014 and end 5 January, 2016. The house was let out on Ist February, 2016 @ = 600 p.m. For the pear 201020 Hie interest paid by him in respect of the loan amounted to t 800 amd pou 3° a pats and 2015-16 the interest paid has been ¥ 1,500 and z 1 oon On teen ere, assessed and paid @ 10% of the municipal valuatic® : ‘ouse property for the Assessment Year 2020-21._ INCOME FROM HOUSE PROPERTY is % solution Computation of Income from House Prop: q (for the Assessment Year 2020-21) z % 1, Annual value of the first house in which the assessee lives re % 2 Annual value of the second house in which the assessee runs his business Nil F GAN of the third house z z i : (Expected rent 6,000 or actual rent : 7 4,800, whichever is greater) 6,000 : Less : Municipal Taxes (10% of & 6,000) “600 Annual Value 5,400 : Less : 80% of A.V. 1,620 3,780 4. GAN. of the fourth house : (Expected rent ¥ 6,000 or Actual rent 27,200, whichever is greater) 7,200 Less: Municipal Taxes (10% of @ 6,000) 600 Annual Value —-—6,600 Less : 80% of AV. 1,980 Interest on Loan for the Previous Year 2019-20 "800 ‘V/5th of interest on the loan paid in the Previous Year 2014-15 3,080 300 3,080 Income from House Property Notes: 1. As the second house is being used for his business; its income is not taxable under the head ‘Income from House Property’. 2. Interest on the loan previous years prior to construction of the house is allowable in five equal annual installments commencing from the year in which the house is constructed. Here the house was inthe Previous Year 2015-16, so the interest for the Previous Year 2014-15 will be allowable in five | ‘equal installments ‘commencing from the Previous Year 2015-16. For the Assessment Year, 2020-21 fifth installment of 300 has been deducted. The interest for the Previous Year 2015-16 would have been allowed fully in the Assessment Year 2016-17. a Illustration 23 ; ‘Mr. X is the owner of a house at Agra, particulars in respect of which for the year ended 31st March, 2020 are as below : z 1. Actual rent received 4,500 2. Municipal Valuation 4,200 3. Total Municipal Tax 630 4, Municipal Tax paid by Mr. X 420 __ 5, Municipal Tax paid by the tenant 6. Interest on Loan is taken for renewing the house 7. Unrealised rent allowed in the Assessment Year 2016-17 recovered during the year Compute Mr. X’s Income from House Property for the Assessment Year 2020-21. Computation of Income from House Property (for the Assessment Year 2020-21) z z V. (Actual Rent being higher than E.R.) 4,500 : Municipal Taxes paid by owner 420 Annual Value 4,080 1,224 150 Income from the House Property 2,000 210 150 2,000 600 1,400INCOME TAX = Mlustration 24 bo Ais the owner of house property in Delhi. Its M. rent is % 90,000. It has boon let out for € 90,000 p.n. comes to % 10,000 but the landlord has taken an agreeme} tenant would pay the tax directly to the municipality. The Jandlor« V.is @ 75,000; FR. is 7 1,00,000; Standary "The municipal tax payable by the owne, nt from the tenant stating that th, id, however, bears the following expenses on tenant's amenities under an agreement : z Water charges 1,009 Lift maintenance 1,009 Lighting of stairs 809 Gardener's salary 12 The landlord claims the following deductions + = Repairs 000 Land Revenue ea Collection charges Legal expenses incurred in connection with the purchase of land on which the house is built Compute the taxable income from house property Solution for the Assessment Year 2020-21. Computation of Taxable Income from House Property (for the Assessment Year 2020-21) Gross annual value of the property is calculated as under : t Rent realized 90,000 >, Less : Value of tenant's amenities provided by the landlord : z (i) Water charges 1,000 ) Lift maintenance 1,000 (ii) Lighting of stairs 800 (iv) Gardener's salary 1200 4,000 Actual Rent 36,000 Gross Annual Value 30,000 Less : Municipal tax paid by the owner Nil Annual Value 90,000 Less : 30% of A.V. 27,000 Taxable Income from House Property 63,000 Notes:1. Other expensee aro nat deductible. . As the municipal taxes are not borne by the owner no deduction has been made on this it. 3. Gross Annual Value has been determined as under : eee tape (a) Expected rent—M.V. % 76,000 or FR. @ 1,00,000, but not more than S.R. 90,000 = % 90,000 ©) Actual ren © 86,000 ‘ Nv. 1 (b), whichever is greater, Mustration 25 Shri Ramesh i i i i Shri Ramesh is the owner of two houses. He has furnished the following particulars for the irst House—Its municipal valuation is % 40,000. Iti i z I h ,000. It is used by Ramesh for his own resident? id Pear ee premium and % 4,000 municipal tax. He also paid interest on tH ,000. was taken to repay another loan taken for the construction of thi House—Uts municipal valuation is % 24,000 and standard rent is 30,000 (Rett applicable). It has been let out at % 3,000 per month. He made the followisf t = 6,000 3,000 300— — ______ INCOME FROM HOUSE PROPERTY 189 Legal & C xpenses incurred to get the house vacated 3,000 ‘This house remained vacant for 2 months. z 9,000 could not be recovered from the de ant, The tenant has vacated the house. The conditi ° ‘ . ions of Rule 4 are satisfied. , ort his taxable income from house property for the Assessment Year 2020-21. Sol Computation of Taxable Income from House Property (for the Ass airs House Sell-occupied): jessment Year 2020-21) ‘Annual Value ‘Less : Interest on Loan second House : (i) Expected rent % 24,000 (ii) Actual rent % 36,000 — 6,000 =z 30,000 z z Nil 20,000 (a) 20,000 G-A.V. [Gi or Gi), whichever is greater] Less : Unrealised rent eS Ecco iecaee Municipal tax 6,000 15,000 en Annual Value 15,000 (b) 10,500 Loss from House Property (a — b) “9,500 Jote : Other expenses are not allowed. | Illustration 26 Mr. Dilip owns a big house, the construction of which was completed in May 2015. 50% of he floor area is let out for residential purposes on a monthly rent of & 3,200. However, this ortion remained vacant for one month during 2019-20. 25% of the floor area is used by the wner for the purpose of his profession, while the remaining 25% of the floor area is utilised for he purpose of his residence. Other particulars of the house are as follows : z (i) Municipal Valuation 75,000 (ii) Standard Rent 90,000 iii) Municipal Taxes paid 12,000 (iv) Repairs 3,000 _(v) Interest on capital borrowed for repairs 28,000 Compute the taxable income under the head house property of Mr. Dilip for the Assessment ear 2020-21. olution Computation of Taxable Income from House Property (for the Assessment Year 2020-21) z z Annual Value of Vth portion being used for own profession (Not considered under this head) Annual Value of 1/4th portion self-occupied wa for residence il Less : Interest (% 28,000 x 1 + 4) 5 7,000 (a) (=) 7,000 Gross Annual Value of 1/2 portion let out for resi- i dential purposes 35,200 : ici id ss: 1/2 of municipal taxes pal Annual Value : Deductions allowed : (3) 30% OFA. Von for repairs 14000 22,760 ii an is ae 440 (ii) 1/2 Int. on loi (b) 6,440 Loss from House Property (a — b) (-)_560100 - __INCOME TAX Note : The G.AY. of let out portion has been computed as under : () Municipal value of half houso % 37,500 Gi) Standard rent of half house % 46,000 (a) Expected rent of half house (i) or (ii), whichever is less % 37,500. (b) Actual rent of half house % 38,400 ~ 3,200 = ¥ 35,200. Actual rent is less than expected rent due to vacancy, hence, G.AV. % 35,200. = Illustration 27 Ram owned a house property at Chennai which was occupied by him for the purpose ofhis residence. He was transferred to Mumbai in June, 2019 and therefore he let out the property with effect from Ist July, 2019 on a monthly rent of & 2,500. The corporation tax payable in Tespect of the property @ 20% was ® 6,000 of which 50 per cent was paid by him before 31:3.202, Interest on money bo, rowed for the construction of the property amounted to 20,000. Compuie the income from house property for the Assessment Year 2020-21. Solution Computation of Income from House Property (for the Assessment Year 2020-21) (a) Expected rent 2 30,000 (b) Actual rent % 22,500 G.A.V. (a) or (b), whichever is greater em Less : Municipal tax paid ea vaiea Less : 30% of A.V. 8,100 20,000 Interest on loan Loss from House Property = Illustration 28 Mr. X is an Income Tax Officer at Agra. He owns a house at Agra which was constructed on Ast February, 2019 and was occupied by him for his own residence. He took a loan of @ 70,000 on ist August, 2017 @ 12% p.a. interest for the construction of this house. Nothing has been repaid out of this loan. Other information in respect of the house is as under = z Municipal Valuation 24,000 Municipal Tax 10% of the above Repairs 7,000 8,400 Interest on Loan The municipal tax of the Agra house is unpaid. ‘Mr. X was transferred to Kolkata on Ist October, 2019 where he resides in a house taken on rent of @ 5,000 per month and his house at Agra was let out on Ist December on rent of? 2,000 per month. Compute Mr. X’s taxable income from House Property for the Assessment Year 2020-21. Solution Computation of Taxable Income from House Property (for the Assessment Year 2020-21) (Treated as Let-out House) z (a) Expected rent 24,000 (b) Actual rent 8,000 G. A. V. (a) or (b), whichever is greater 24,000 Less : Municipal taxes being unpaid disallowed —4 Annual Value 2400 Deductions allowed : ') 80% of A. V. 7,200 ii) Interest on Loan 9,520 Income from House Property_ ____INCOME FROM HOUSE PROPERTY 191 Notes :1. The house at Agra was solFoccupiod for six months (from April to September) and let out for four months (fom December to March. Hone, iis treated ne oat nomen and ek ou 9, Interest on loan for the provious year amounta to i ion pri "mount ‘ond interest for pre-construction fro st August, 2017 to 81400 and interest fer pre-construction period from Sst March, 2018, i.e. for 8 months amounted to ® 6,600 is to be allowed in five equal iments every year, ie., USth of & 5,600 ie., & 1,120 = € 9,520. + Illustration 29 For the Assessment Year 2020-21, compute income from house property on the basis of the following information : t Municipal value of the house 40,000 Municipal taxes paid 8,000 House was self-occupied. It contains two units. But one unit of the house was let out @z 1,500 pm. from 1.10.2019. In respect of the house the following expenses were incurred : (i) Fire Insurance Premium 800 (ii) Ground Rent 1,000 (iii) Land Revenue 1,200 ALoan of ¢ 40,000 was taken on April 1, 2015 @ 15% p.a. for the construction of this house. The house was completed on 31.5.2017 and only half the loan was repaid till 31.3.2019. Solution Computation of Income from House Property (for the Assessment Year 2020-21) z z One unit is self-occupied for a full year Annual Value Nil Less : Interest up to & 2,00,000 2,700 Loss from self-occupied unit (&) 2,700 Second unit self-occupied for part of the Previous Year and let-out for part of the Previous Year Treated as let-out G.A.V. (Expected rent % 20,000 or Actual rent % 9,000, whichever is greater) 20,000 Less : Municipal tax paid 1/2 4,000 16,000 Annual Value 16,000 Less : 30% of A.V. 4,800 Interest on let-out unit 2,700 7,500 Income from let-out unit (B) 8500 Income from House Property (BA) 5,800 Notes : 1, Interest has been computed as under : z Pre-construction interest is for 2 years, which amounts to = 12,000. ‘V5th of % 12,000 2,400: 3,000 Interest for the current year me ee oe 2. Other expenses are not deductible. Mustration 30 Mr. X is the owner of two houses which he uses for his residential purposes. He submits lowing information in respect of these houses for the Previous Year 2019-20 : IHouse II House z z 80,000 2,00,000 1,00,000 240,000 10,000 30,000 urance premia 1,000 2,000 on loan is taken for the construction of the house 60,000 3,00,000 comes are & 2,50,000. Compute his total incomeYJ INCOME TAK Computation of Incomo from House Property (for the Assessment Year 2020-21) Self-occupied Houses : I. House A.V. Il. House A.V, Less : Interest on loan % 60,000 + 3,00,000 Max. deduction allowed upto ¥ 2,00,000 Loss from House Property Computation of Total Income (for the Assessment Year 2020-21) Other Income Tess: Loss ‘Total Income = Illustration 31 M, a resident of Delhi, owns two houses, particulars of which are as below : 1 z z Standard rent under the Rent Control Act 76,000 72,000 Municipal valuation 80,000 90,000 Fair rent 1,00,000 —1,20,000 Defacto rent — 90,000 Municipal taxes paid during the previous year 12,000 14,500 Fire insurance premium 1,000 9,000 Water benefit tax (due but outstanding) 1,200 1,500 Interest on loan is taken to construct the house 45,000 11,500 Rent of lease (due but outstanding) 1,500 1,500 Use of the asset Self: Rented for occupied — residence Ascertain the taxable income of M for the Assessment Year 2020-21 from the head ‘Income from House Property’. The house I is constructed in Feb., 2020 whereas the house II in 2010. Solution Computation of Taxable Income from House Property (for the Assessment Year 2020-21) Selfoccupied Letout z Gross Annual Value : Nil 90,000, Less : Municipal taxes paid = 14500 Annual Vah Ni 5,500 Less : 30% of AV. Nain NT one Interest on loan (045,000 (-) 11,500 Income from House Property (-)45,000 41,350 G.AYhas ben determined as wio2 0m House Property ® 8,650 (i) Municipal value @ 90,000; ii) Fair rent ¥ 1,20,000; Gif) Standard rent # 72,0 Beer caree sdljar Gi whichever is greater but not more than standard rent ® 72,000 G.A.V. (a) or (b), whichever is greater = 90,000. terest on loan for self-occupied house is ded .er expenses are not deductible. is deductible up to ¥ 2,00,000.INCOME FROM HOUSE PROPERTY 7 — qustration 32 . . ‘pr. Shyam owns a house property in Pune which is let out for ¢ 8,000 month. It's Municipal and Municipal Taxes are respectively % 80,000 and 30%. Dr. Shyam paid Municipal yaluation E 7 7 ts of past four years along with of the Previous Year. Other expenses relating to the property Tee following # z (i Repair and Insurance Premium 7,000 (i) Interest on Ioan for the purchase of house 42,000 ‘The house remained vacant for three months during the year. Compute income from house property for the Assessment Year 2020-21. solution Computation of I utation of Income from House P1 (for the Assesoment Year 202021) z Gross Annual Value (% 8,000 x 9) 72,000 Less : Municipal Tax (% 24,000 x 5) 1,20,000 Annual Value - 48,000 Interest —42,000 Loss from House Property — 90,000 ‘Notes: 1. Actual rent is less than expected rent due to vacancy. 2. 30% of A.V. is not deductible as the A. V. is negative. SUMMARY >) Basis of Charge : The annual value of any property is assessable under this head if: (1) Assessee is the owner of property. | (2) Property means building and attached land. | (3) Property should not be used by the owner for his business or profession. | Points to note: (1) Income is charged on the basis of annual value. | (2) Rent from the vacant plot of land is assessable under the head ‘Income from Other Sources’, | (8) Sub-letting is chargeable under ‘Income from Other Sources’ |G) Paying-guest accommodation is chargeable under ‘Profit and gains of business of profession’. (6) House property situated abroad—Income is chargeable under this head if the assessee is | ordinarily resident in India. |) Disputed ownership ; If the title of ownership is disputed in a court of law, the income is | chargeable in the hands of the recipient of income. | Property owned by co-owners : If respective shares of co-owners are definite and ascertainable, income is chargeable individually and not as AOP. | Computation of G.A.V. : (a) or (b), whichever is greater. (a) Expected rent—municipal value or fair rental value, whichever is more but not more than standard rent. (b) Actual rent received or receivable. Computation of Annual Value Gross Annual Value Less ; (i) Local taxes paid by the owner during the PY i) Unrealised rent (Subject to certain conditions) Annual Value eductions from annual value : (i) 30% of Annual Value, | : (i Interest on loan is taken to purchase, construct, repair or renovation of the house (on due basis). | cupied House one or two : Annual Value—Nil. jon. Interest up to ¢ 30,000/2,00,000.