House property (22 to 27).pptThe assessee should be owner of property.

House property

1. KSN RAO. MSBC, DVG. 1
Income from House property (22 to 27)
Chargeability:sec.22:-
The taxability under this head, if following conditions are satisfied.
1.The property consist of any building or lands appurtenant thereto.
2.The assessee should be owner of property.
3.Which is not used by assessee’s business or profession.
The following are the important points of the above definition.
1) Building or land appurtenant thereto.:- Land consists to any building
is chargeable to tax under this head. Income from land is taxable
under ‘other sources’. The land appurtenant to building includes
compound, playground, kitchen-garden, courtyard etc,. In case of non
residential building car parking, drying ground, playing ground etc,.
Building includes residential house, auditorium for entrainment,
cinema hall, let out for office use, stadium open air theatre, dance
hall, music hall, lecture hall etc,. It may locate in India or abroad.

2. KSN RAO. MSBC, DVG. 2
The following are exceptions to the general rule.
Building or staff quarters let-out to employees or others. Rent collected
by staff is chargeable under business or profession head.
If a building is let out for bank, post office, police station, etc,. which
enables the assessee to carry his business more efficiently & smoothly is
income from business.
Composite letting of business with other assets like plant, machinery,
furniture etc,. is income from ‘other source’.
Paying-guest accommodation. It is assessable as business income.
Where the club provides accommodation to its member, it cannot be said
to be so provided as owner of the house property.
ANNUAL VALUE:- (A.V) It is the basis for arriving at the income to
be taxed under this head. Hence correct determination of AV of property
is important step. AV means the sum which building might reasonable be
expected to let from year to year.

3. KSN RAO. MSBC, DVG. 3
Ownership:-
It is only the owner of the house property, who is liable to pay tax, under this
head of income. It is the legal ownership which is essential and not beneficial
ownership. The following are the owners of house property.
1.Whose name the property is registered,
2.In case of mortgage, it is the mortgagor and not the mortgagee.
Deemed owners:-a) an individual who transfers any house property to his her
spouse, without adequate consideration not being transfer in connection with an
agreement to live apart or to a minor child not being married daughter, shall be
deemed owner of the house property so transferred.
b) holder of impartible estate.
c) a member of co-operative society or co. or AOP to whom building or its part
allotted or leased under scheme.
d) a person who is allotted to retain possession of any building in part performance
of a contract of the nature referred to transfer of property act.
e) under lease agreement over 12 or more years u/s269 UA .
f) if person taken land on lease on land and constructed house upon it.

4. KSN RAO. MSBC, DVG. 4
Exemption regarding income from house property:-
 There are two kinds. I. fully exempted II deductible from GTI.
I. Fully exempted:- 1. income from farm house
2. annual value of any one palace of ex-ruler
3. property income of local authority
4. property income of an approved scientific research institution
5. property income of a university or other educational institution
6. property income of a hospital or other medical institution
7. property income of a trade union
8. house property held for charitable purpose
9. property income of a political party
10. property used for own business or profession
11. one self-occupied property.
II. Deductible from GTI:- Income derived by co-operative society from the letting of godowns or
warehouse for storage, processing & facilitating the marketing of commodities, is wholly
deductible u/s80P(2)(e).
If the GTI of co-operative society (not being housing society or an urban consumer society or a
society carrying on transport business or society engaged in manufacturing with the aid of
power) does not exceed Rs.20000/-,any income from house property is fully deductible
u/s80p(2)(f).

5. KSN RAO. MSBC, DVG. 5
Computation of income from a let out house property:
Gross annual value (GAV) xxx
Less: municipal taxes xxx
Net annual value xxx
Less: Deduction u/s24
Standard deduction xx
Interest on borrowed capital xx xxx
Income from House property xxx
Annual value of Building let out:- sec.23(1) The annual value of a house property let out
shall be deemed to be-
a)The sum for which the property might reasonable be expected to be let from year to year, or
b)Where the property or any part of property is let and the actual rent received or receivable
by the owner excess of the sum reoffered to in (a), the amount received or receivable, or
c)Property or any part is let & was vacant during whole or part of PY & owing to such
vacancy the actual rent received or receivable by the owner in respect thereof is less than
sum referred to in (a), the amount so received or receivable.

6. KSN RAO. MSBC, DVG. 6
Deduction 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 PY shall be deducted in determining AV of the property.
Generally it includes service tax like fire tax, water tax, conservancy
tax, education cess, etc,.
The amount of actual rent received or receivable by the owner shall not
include unrealized rent subject to following condition-
1.The tenancy is bonafide,
2.The defaulting tenant has vacated, or steps have been taken to vacate,
3.The defaulting tenant is not in occupation of any other property of the
assessee,
4.Reasonable steps of instituting legal proceeding for recovery; of the
unpaid rent or satisfies AO.

7. KSN RAO. MSBC, DVG. 7
Gross annual value: (GAV)
AR is compared with ER and whichever high is GAV.
(AR=actual rent, ER=expected rent)
Determination of AR:- Rent received/receivable less cost of facilities like
lift, water pump, electricity, vehicle parking, gardener, etc,.
Determination of expected rent (ER) :-
a) where standard rent (SR) is not fixed:- MV or FR which ever high is
excepted rent. (MV= municipal value, FR= fair rent)
b) where SR has been fixed:- MV or FR whichever is high and it is compared
with SR, which ever is less is ER.
Computation of AV of a house under different situations:-
1.Computation of AV in case of let-out house, which neither remains vacant
during any part of PY nor there is any unrealized rent.
GAV shall be the ER or AR, which ever is greater.
From the GAV, the municipal tax paid by the owner during PY shall be
deducted and the balance shall be the AV of the property let-out.

8. KSN RAO. MSBC, DVG. 8
2. Computation of AV in case of let-out house which remain vacant
for whole or any part of the PY.
House remain vacant for full year-
In such case GAV will be nil.
House remain vacant for a part of the PY-
1) If actual rent received/receivable for let-out peroid is more than the expected rent, the
actual rent received/receivable will be GAV.
2) If the AR received/receivable for let-out period is less than the ER owing to such
vacancy the AR received/receivable will be the GAV.
3.Computation of AV of let-out house, which does not remain vacant during any part
of the PY but there is unrealized rent.-
The GAV of such a house will be determined as discussed in ‘1’. From GAV the
following deduction will be allowed and the balance will be AV; (a) taxes actually
paid by the owner to local authority, (b) unrealized rent (if conditions are satisfied).
4. Computation of AV of incase of let-out house, which remain vacant during part of
PY and there is unrealized rent.-
the GAV of such a house will be determined as discussed in ‘2’. From the GAV the
following deduction will be allowed and the balance will be the AV; (a) taxes
actually paid by the owner to local authority, (b) unrealized rent (if any).

9. KSN RAO. MSBC, DVG. 9
Deduction from AV:
The following are the deduction in case of let-0ut house
1.A sum of equal to 30% of AV as standard deduction for
expanses.
2.Interest on loan taken in respect of house property. Int. on loan
taken for the purpose of purchasing, constructing,
reconstructing or repairing is allowable as a deduction on
accrual basis.
Points to note: i) Int. on unpaid interest is not deductible. ii)
int. on fresh loan raised to repay original loan is allowable. iii)
brokerage or commission paid to raise loan is not deductible. iv)
Int. for pre-acquisition or pre-construction period- Int. payable
on this is available as deduction. It is pertaining to period prior
to PY shall be deductible in ‘5’ installment. In addition to
current year int., prior to PY int. 1/5 also allowed as deduction.
However int. paid outside India should subject to TDS, if no
agent is not in India.

10. KSN RAO. MSBC, DVG. 10
Building self-occupied for residential purpose:-
This divided into
1.Self-occupied house or unoccupied house. 23(2).
2.House self-occupied for part of the PY & let-out house for the part of the PY. 23(3).
3.More than one house occupied by the owner. 23(4).
So (self-occupied) or unoccupied:- Where house consists of a house or part on the house
which is occupied by the owner for the purpose of own residence or cannot occupied
because of employment, business or profession, he resides at any other place, in the
building not belonging to him- AV of such house or part of the house shall be taken to be
nil.
Point to be note: (1).The SO house or part of it should not be let-out during whole or part of the
PY. (2). Building consists of more than one floor/flat/unit and more than one
floor/flat/unit are self-occupied, the AV of all such floors/flats/units shall be taken to be
nil. (3). If a building consists of more than one floor/flat/unit, a floor/flat/unit is SO
and other floors/flats/units are let-out, the benefit of SO shall be available in relation to
the floor/flat/unit which is SO. If the MV or M. tax of each floor/flat/unit is not known
separately, it may apportioned b/w SO and let-out portions on a reasonable basis. (4). If
house constructed any part of PY than thereafter SO ,it will be taken as house is SO for
whole PY. (5).M .tax paid to property of not deductible. 6. No question of unrealized
rent in case of house SO.

11. KSN RAO. MSBC, DVG. 11
Deduction from AV(SO):-
If the property acquired, constructed, repaired, or
reconstructed with borrowed capital, the maximum amount
of deduction of interest shall be Rs.30000/-.
Where such property is acquired or constructed with
borrowed capital after 31.3.199 the deduction shall be
allowed upto Rs.150000/-. The acquisition or construction
should complicate within 3 years from the end of the
financial year in which capital was borrowed.
Assessee should furnish a certificate from the person to whom
any int. is payable. Amount paid to repay original loan is
deductible.

12. KSN RAO. MSBC, DVG. 12
2. House SO for part of the PY &let-out part of the PY;-
The AV value of SO house shall not be nil, if
a)The house or part of the house is actually let during whole or part of
the PY. Or
b)Any such other benefit therefrom is derived by the owner.
In such a case the house will be treated as let-out and the AV will be
determined u/s23(1).
3.More than one house in the occupation of the owner:- Where more
than one house occupied for his residence for full PY, except one
house (which he choose) all other houses are deemed as let-out. The
income from deemed to be let-out shall be computed as per 23(1).
Points to note: 1) question of vacant or unrealized rent does not arise.
2) question of actual rent does not arise. 3) ER (expected rent) will
be GAV. 4) full amount of int. on loan taken or acquisition,
construction, repairs, renewal will be allowed as deduction.
5) assessee should choose the house in such a manner that his taxable
income from house property is the minimum. Such option can be
changed from year to year.

13. KSN RAO. MSBC, DVG. 13
Chart showing computation of taxable income from let-out house property
GAVXXX
Less: local taxes paid by the owner during PY xx
Unrealized rentxx
AVxxx
Less: deduction u/s24
i) 30% of AVxx
ii) int. on loan taken for purchase, construction or repair
of the house, relating to PY xx
iii) int, on loan for the period prior to PY in which the
house is completed is also allowable in five equal
annual installments xx xxx
Taxable income from house property. xxx

14. KSN RAO. MSBC, DVG. 14
Chart showing computation of income from SO house:-
1.GAV –nil.
2.Municipal taxes paid by owner during PY – not
deductible.
3.Standard deduction for expanses-nil.
4.Int. on loan- deductible upto Rs.30000/-or
Rs.150000/-as the case may be.
5.Loss from self-occupied house- …….

15. KSN RAO. MSBC, DVG. 15
Chart showing computation of income from house property:-
1.GAV xxx
2.Less: municipal taxes paid during PYxxx
annual valuexxx
less: 1. 30% of AV xx
2. int. on loan (no limit applies)xxxxx
Income/ loss from house propertyxxx