A

Project
Report

On

At

“Income from House

Property”

Submitted By

“H&R Block Your Tax Expert”

Mr. Maruti Prasad

In Partial Fulfillment of
Miss. Riya Rajesh Jain
Under the Guidance Of
Master Degree of Business Administration
Affiliated to Savitribai Phule Pune
University

Institute of Industrial and Computer Management and

Research Pradhikaran, Nigdi, Pune

Batch 2017– 2019

 Declaration

It is hereby declared that all the facts and figures included in the Summer Internship
Project is a result of my own research and investigations including formal analysis of the
entire project work and the same has not been previously submitted to any examination
of this University or any other University.

This declaration will hold good and in my wise belief with full Consciousness.

Date:

Place: Nigdi, Pune. Name & Signature of the Student

 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my project
guide Mr. Maruti Prasad for his/her exemplary guidance, monitoring and constant
encouragement throughout the course of this summer internship project. The blessing,
help and guidance given by her/him time to time shall carry me a long way in the
journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to Company project guide
for his/her cordial support, valuable information and guidance, which helped me in
completing this task through various stages.

I am obliged to staff members of H&R Block The Tax Expert, for the valuable
information provided by them in their respective fields. I am grateful for their
cooperation during the period of my SIP.

I would also like to thank our director Dr. Abhay Kulkarni and HOD MBA Ms.Manisha
Kulkarni and whose wisdom & foresight, I continually benefit from.

I also take immense pleasure to thank Head-Corporate Relations, for giving me an

opportunity and placing me for the SIP and Project Coordinator Ms.Vidhya Hittalmani for
supporting us throughout the process of SIP.

Lastly, I thank almighty, my parents, brother, sisters and friends for their constant
encouragement without which this summer internship project would not be
possible.

Name & Signature of the Student

 INDEX

Sr. No Content Page No.

1 Executive Summary
2 Objective of the Study
3 Company Profile
4 Research Methodology
5 Data Analysis
6 Data Interpretation
7 Suggestions
8 Conclusion
9 Reference
10 Annexure
 Chapter 1

Executive Summary
 Executive Summary

Title – INCOME FROM HOUSE PROPERTY

Objectives –

● The treatment of rental income from properties under

different circumstances.
● Determine the Annual value of a House Property.
● Treatment of income/loss from House Property.

Scope: -

● The scope of Income charged under the Head Income from House
Property is defined by section 22 of the INCOME TAX ACT and the
computation of Income falling under this Head is governed by
section
23 to 27.
● Tenure for summer Internship Project is of 2months 15 days.

Name of organization: - H & R BLOCK

Your Tax Expert

Research & Methodology/study method: Simple random sampling says that: There is
an equal chance of each element of the clients to be included in sample and choices
are independent to each other and each possible sample combination has an equal
chance of being chosen.

Sample size : 5

Data collection Method

● Primary Data
- Questionnaire
- Telephonic Interview
- observations
 ● Secondary Data
-Websites
- Books

- Case study

Data analysis & interpretation: -

● Case study
● Graphs & charts

Observations/Finding: -

● If the portion of a property is let out and a portion is self-occupied, then, the
income will be computed separately for let out and self-occupied portion.
● Flat 30% deduction is given on Net Annual Value in case of Let out property and
deemed to be let out property.
● In case of Self-occupied property, the Gross Annual Value and Net Annual Value
will be NIL.
● In case of self- occupied property the Income from House Property will always
Negative.
● The amount of tax deduction available u/s 24 stays limited to Rs 2 lakhs only for
both the self-occupied and let out property from F.Y 2017-2018.
● If House Property is Co-owned then according to Percentage of ownership the
owner can take the benefits of interest and principal, but the condition is that both
are paying EMI separately. In such condition

Suggestions: -

As the provisions is applicable to Individual and HUF following are the suggestions
to taxpayers and the government.

1. The taxpayer can do tax planning as per the above provision

2. It helps to the government as the compliance will be increased.
 3. It will reduce the burden of huge tax payments to the taxpayers.
4. Every tax payers may own their own house by making proper planning.

Conclusions: -

Income from house property plays a important role while calculating the total income.
Tax planning helps tax payers to reduce tax burden and pay minimum taxes to the
Government. Tax planning is a tool for reduction of taxes. Therefore, while purchasing a
house property or taking loan for house property it is required to make tax planning.so
that additional burden of taxes can be reduced. Proper tax planning helps to the
Assesses. Tax Planning made for avoidance of payment of taxes kill the basic aim of
taxes. Therefore perfect tax planning makes it easier for payment of taxes.

Limitations: -

The limitation of study is lack of information being provided by the

organization or assesse because of the privacy policy of the organization. As for the
survey sample random sampling is used ,in which sample is conceptually simple yet
problematic at times.

References: -

● www.hrblock.in
● www.incometaxindiaefiling.gov.in
● www.incometaxindia.gov.in
● The Institute of Chartered Accountants of India
● Published material on Income tax sites on the Internet- www.google.com.
 Chapter 2
Objectives of the Study
Objectives –

● The treatment of rental income from properties under

different circumstances.
● Determine the Annual value of a House Property.
● Treatment of income/loss from House Property.

Scope: -

● The scope of Income charged under the Head Income from House
Property is defined by section 22 of the INCOME TAX ACT and the
computation of Income falling under this Head is governed by
section
23 to 27.
● Tenure for summer Internship Project is of 2months 15 days.
 Chapter 3
Company Profile
 Company Profile

H&R Block

Type Public

Traded as NYSE: HRB S&P 500 Component

Founded January 25, 1955; 63 years

ago Kanas city, Missouri,
U.S.
Founder Henry Bloch

Richard Bloch

Headquarter Kanas city, Missouri, U.S.

Area Served United states, Canada, Australia, India

Key People Jeffrey J. Jones II (CEO)

Tony Bowen (CFO)
Robert Gerard
(Chairman)
Products Tax Preparation

Business Services

Revenue $ 3.0 Billion (FY 2017)

Net Income $ 409 Million (FY 2017)

Total Assets $ 2.7 Billion (FY 2017)

Total Equity $ (60 million) (FY 2017)

No. of Employees 2300 (Regular full time in FY 2017)

87500 (including season employees)

H&R Block World Headquarters Building in Kanas City, Missouri.

❖ Our Legacy:

In 1955, brothers Henry and Richard Bloch founded the company known
today as H&R Block. The pair began working together in the late 1940s, operating the
United
Business Company, which provided bookkeeping services to small businesses in Kansas
City, Missouri.
As an added courtesy, the brothers offered individual Income Tax Return preparation to
the executives of their client companies. Word of this particular service spread, and
before long, they were preparing individual tax returns by the score. Henry and
Richard saw that concentrating on tax preparation services would be both an innovative
and sound business venture. Thus, H&R Block Inc. was formed in 1955, with Henry as
president and chief executive officer and Richard as chairman of the board.
As the company has evolved and achieved significant milestones, H&R Block has
remained committed to the factors that led to its success: superior customer service, a
pledge to stand behind our work and a commitment to serving clients. H&R Block is
dedicated to being the most trusted, state-of-the-art tax preparation firm at the best value.
Today, H&R Block is providing tax preparation assistance around the world, including the
United States, Canada, Australia, Brazil and India. We prepare more than 20 million
tax returns annually.

❖ Mission:
We look at your life through tax, and we find ways to help. We’ve been true to that
mission since the beginning when brothers Henry and Richard Bloch founded the
company in 1955. In that time, we’ve prepared more than 720 million tax returns. And
we’ve grown to have company-owned and franchise retail locations in all 50 states,
Puerto Rico and other U.S. territories, on U.S. military bases internationally and
around the world.
 ❖ Company Formation:

In 1955, brothers Henry and Richard Bloch founded the company known today as H&R
Block. The pair began working together in the late 1940s, operating The United
Business Company, which provided bookkeeping services to small businesses in
Kansas City, Missouri.

As an added courtesy, the brothers offered individual Income Tax Return preparation to
the executives of their client companies. Word of this particular service spread, and
before long, they were preparing individual tax returns by the score. Henry and
Richard saw that concentrating on tax preparation services would be both an innovative
and sound business venture. Thus, H&R Block Inc. was formed in 1955, with Henry as
president and chief executive officer and Richard as chairman of the board.
As the company has evolved and achieved significant milestones, H&R Block has
remained committed to the factors that led to its success: superior customer service, a
pledge to stand behind our work and a commitment to serving clients. H&R Block is
dedicated to being the most trusted, state-of-the-art tax preparation firm at the best value.
Today, H&R Block is providing tax preparation assistance around the world, including the
United States, Canada, Australia, Brazil and India. We prepare more than 20 million tax
returns annually
 ❖ Formation of H&R Block in India:
H&R Block forayed into India in January of 2012 and today we are the Largest
Consumer Tax Filing Company in India. We have already tied up with 500+ corporates
and e-Filed 6+ lakh returns, with 8.8/10 customer satisfaction score. H&R Block India
strives to blend tax expertise with a strong focus on continually improving the client
experience to provide all its clients with an unparalleled value proposition.
And, we believe it is our people, highly trained Tax Experts, who have enabled H&R
Block to become the world’s largest individual tax services provider! Each H&R Block
Tax Expert provides personal advisory services to each client with the goal being to give
the most accurate advice and to prepare and e-file individual tax returns with complete
accuracy. Our Tax Experts work hard to ensure that each client pays the lowest income
tax liability each year.
The Company was founded by Henry and Richard Bloch in 1955 in Kansas City, U.S.A.
It is the largest tax filer in the world with over 2.5 Crore clients served. H&R Block
forayed into India in January of 2012.

❖ Services of H & R block

1. Online Income Tax e-filling by tax experts

Let H & R in-house team of tax experts prepare and file your tax returns online. Avail
this service starting at Rs. 249

Income Tax Return Process

1. Provide your basic details and we will call back within 24 hours

2. Upload or Email your tax documents to the tax expert and complete the payment process

3. Get your return prepared and filed with maximum deductions and tax savings
Advantages of Online Income Tax Return
Filing with Experts.
● An online facility to securely access your documents anytime, anywhere
● Tax vault to Securely access yo8ur Documents anytime, anywhere s
● 100% data confidentiality & Information security
● Service fee based on your Tax complexity
● Submission of your Signed ITR-V to CPC Bengaluru and details on how to e-
verify your ITR
● Year-round Support to assist you

2. Self e-filing of Income Tax returns for Rs 199 FREE with #1 Tax filing
Portal

We have a highly Intuitive Software that makes e-filing Easy

Do hassle-free e-filing Of tax returns with H&R Block

● Free of cost
● Intuitive Online Application
● The most Accurate Income tax Calculation engine in India
● Comodo Secured
● We auto rotate your Form 16 which saves your Valuable time
● Post filing support if required

3. Inperson tax filing:

Don’t just file taxes Save it as well with H&R Block’s Dedicated advisors
 A year round Personalized services Strating at Rs.3499

Why H&R Block:

● Largest tax services company in India with 6 lakhs+ filers

● Global brand with 60 years history of maximizing tax refund
● Thorough tax assessment to ensure every deduction is utilized
● Effective year round investment planning to maximize tax saving
● Expertise in complex capital gain, esop, foreign income taxation
● On time representation against any tax scrutiny or enquiry

● Secure & systematic processes with regular updates to clients

● Well-lit comfortable offices with scheduling to save time

3. NRI taxation & e-filling features

Let our team in-house advisors expert in handling NRI taxes Prepare and file your
Indian tax returns online. Avail this service starting at Rs. 2999

● Preparation and filling of Income Tax returns for Indains living abroad
● Holistic tax advice
● Advice relating to repatriation issues/ foreign exchange regulations
● Liaising with the tax department
● An online facility where the need based advance tax planning service is provided
at attractive prices
● Complete assistance in order to make optimum utilisation of tax benefits available
to NRIs under Indian Domestic tax laws and double taxation avoidance
agreements (DTAAs)
4. U.S. tax filing services In India

Get your U.S. taxes prepared and filed when you are in India ny our team of In-house
tax experts in India

● Federal and state Tax Return filing.

● Filing of FBAR- the report of foreign bank and financial Accounts
● Streamlined Foreign Offshore Compliance procedures
● FATCA compliance and its related Advisory services
● Tax planning and advice

5. Income tax Consultation and Scrutiny

These are just a few of life’s situations which require guidance and consideration form
an H&R Block Tax expert.

● Going Abroad
● Selling or Buying a property
● Liquidating your Investments in share or mutual funds?
● Changing Job?
● Starting a business?
Is Your Return Selected
for a Scrutiny Assessment?

Going through the Scrutiny proceedings for Income Tax return can be overwhelming
&time Consuming. With H&R Block, you can leave the worries of Income Tax return
to the experts.
H&R block’s tax experts are here to assist you with all stages of the Income tax scrutiny
Process; from examining the validity of the notice received to compilation of
information and representation before the Officer to obtaining the Final assessment
Order.
 6. Business Income tax Return filing:

Get your ITR-3 and ITR-4 filed by experts

Service Offerings:
● Selection, Preparation and filing of Right ITR by Our in-house tax experts
● Maximise your tax savings with our expert advice and assistance
● Proactive advice in optimising your deductions and expenses
● Complete assistance with any Notice or Scrutiny from the IT Department
● Get year Round access to your Tax expert for all your queries

7. Tax Deducted at Source (TDS)

Service Offerings:
● Registration of TAN ●
Monthly calculations of TDS liability and preparing of challan
(Form 24Q, 26Q, 27Q, 27EQ) ●
Verification of Information from the NSDL website ●
Quarterly TDS Return Filing ●
Tax saving advice

❖ Filing Process at H & R Block:

1. Provide your details and get a call back to discuss your tax situation

2. Email your tax documents to the expert upon confirmation of the service

3. Pay fees to get your return diligently prepared and filed by our expert

4. Year round access to your tax expert

❖ Early GST:
 1. GST Reconciliation Services

Our Early GST Reconciliation service is designed to help corporates do a pre-check

of their returns, before they are filed on the GSTN network and reduce the chance of
mismatch significantly through invoice matching with vendors and customers.

Who should use

● Organizations having large number of inward invoices and
● You are dealing with multifold small & medium sized vendors
Service offering
● Early reconciliation of your invoices with that of your vendors before filing your returns
with the GSTN
● Automatic categorization of the mismatches to ease the process with real time dashboard
for the key statistics
● Dedicated team to handle your mismatches & follow up with vendors on actionable

2. GST Registration Services

Our GST registration services are designed to help you in getting your business
GST compliant, by providing step by step guidance during the entire registration
process RS. 1,999/GSTIN.

Who should use

● You want the benefit of input tax credit
● Your clients deal only with GST registered suppliers
Service offering
● Step by step guidance during the entire GST registration process. We fill out the
application
● Assistance with all GST registration related queries
● No physical visit required, completely online process.
 3. GST Compliance Services

Our earlyGST compliance service aims to help corporates become GST compliant
by providing end to end return filing solutions, to ensure the businesses remains
100% compliant.

Who should use

● Firms or companies not wanting the increased burden of filing GST themselves throughout
the year
● Organizations not having the in-house expertise to track GST laws, formats and processes
Service offering
● Comprehensive review of your accounting data to ensure your records are 100% GST
compliant
● Dedicated account manager to handle your GST return filing with post filing support
● Real time and continuous reconciliation with vendor’s books of accounts using SmartRec
System

GST-ready Invoicing Software

Generate personalized bulk GST invoices on the fly

How it works:

1. Register for using earlyGST invoicing Software

2. Add customers and item master ( individually or in Bluk )
3. Raise invoices ( individually or in Bluk )
4. Track invoices by their status as paid. Overdue, draft and pending
 4. Compare your GSTR 3B and GSTR 2A

Use our simple tool to find out how much ITC you are claiming and how much have
your suppliers shown against your GSTIN
Why do you need to check this?

● To avoid missing any ITC that you have not claimed yet
● Make corrections to your books of accounts before it is too late for FY 2017-18
● Avoid any notice from GST department for any discrepancy between your books &
supplier’s records
● Prevent yourself from any audit issues later
● Find out if your vendors are GST compliant and filing timely returns and take informed
decisions of which vendors you want to deal with

5. e-Way bill Generator

Offline Excel tool for generating bulk e-way Json with maximum number of Validations

Bill Generation Process

1. Download e-way excel template

2. Enter Invoice and transporter details

3. Validate and prepare JSON
4. Upload JSON to create e-way bill
Bill Generator Benefits
● Easily create JSONs with number of invoices.
● Validate the data before generating JSONs.
● Highlighting and recording multiple errors at the same time
● Easy to use 100 % Free

Organisational Structure
 ❖ Key Features:
Let’s throw some light on the important aspects or Points to look for in GST software
that would ultimately be useful for the Business units, tax payers, etc. Small/Large-scale
units or Entrepreneurs or Vendors can concentrate more on Business due to
Automation. ● Import Tally Data from Pervious Systems and other third-party
Systems ● Security feature that will protect confidential business
information which is robust in both tax filing and data security feature
● Invoicing, Accounting and GSTN Validator ●
Easy Automatic Reconciliation and Notification of mismatches ●
Capability to prepare Ledgers, P&L and Balance Sheet after uploading the Invoices ●
Should be able to file returns of multiple clients through longer sessions instead of
having to log in multiple times ●
User friendly interface with step by step process that allows to navigate back and
forth(Excel like Interface) ●
Flexibility in integrating the existing systems with the new application (GST
software) and provide a seamless experience.
 Top 5 Competitors of H&R Block in India

Name of The Company Clear tax

Estimated Annual Revenue $2.3M
Employees 96
Founded 2011
Headquarter Bengaluru, Karnataka
Status Private, Independent Company
Industry Sector Internet Software

Name of the Company Filling Mantra

Estimated Annual Revenue $2.3M
Estimated Employees 67
Founded 2015
Head Quarters Hyderabad
Status Private, Independent Company
Industry Sector Business Support Services, Business
Information research

Name of the Company myITreturn

Estimated Annual Revenue -
Estimated Employees 164
Founded 2006
Headquarter Nariman Point, Mumbai, Maharashtra
Status Private, Subsidiary of Skorydov
Systems Private Ltd

Industry Sector Business Information Research

Name of the Company India Fillings

Estimated Annual Revenue $2.1M
Estimated Employees 115
Founded 2013
 Headquarter Chennai, Tamil Nadu
Status Private, Independent Company
Industry Sector Business Support Services

Name of the Company Taxmantra

Estimated Annual Revenue $3.8M
Estimated Employees 62
Founded 2009
Headquarter Kolkata, West Bengal
Status Private, independent Company
 Theoretical Background

Meaning of House Property: -

House property consists of any building or land appurtenant thereto of

which the assesses is the owner. The appurtenant lands may be in the form of a
courtyard or compound forming part of the building. But such land is to be
distinguished from an open plot of land, which is not charged under this head but under
the head „Income from Other sources‟ or „Business Income‟, as the case may be.
Besides, „house property‟ includes flats, shops, office space, factory sheds,
agricultural land and farm houses. Further, house property includes all type of house
properties, i.e., residential houses, godowns, cinema building, workshop building,
hotel building, etc.

Section 22 [ Basis of charge]

1. Determination of Annual Value of the property is laid down in section 23 for the
computation of income under the Head “INCOME FROM HOUSE
PROPERTY”.
2. The annual value of any property comprising of building or land
appurtenant thereto of which the assesses is the owner, is chargeable to tax
under the head “Income from House Property”.

Essential conditions for taxing income under this head

Income from house property is taxable in the hands of its legal owner in
whose name the property stands. „Owner‟ for this purpose means a person who can
exercise the rights of the owner not on behalf of the owner but in his own right. A
person entitled to receive income from a property in his own right is to be treated as
its owner, even if no registered document is executed in his name.

The following three conditions must be satisfied before the income of the property can
be taxed under the head “Income from House Property”:

● The property must consist of buildings and lands appurtenant thereto;

● The assesses must be the owner of such house property;
 ● The property may be used for any purpose, but it should not be used by the owner
for the purpose of any business or profession carried on by him, the profit of
which is chargeable to tax. If the property is used for own business or profession,
it shall not be chargeable to tax. Ownership includes both free-hold and lease-
hold rights and also includes deemed ownership.

● Where it is held by the assesses as stock-in-stock of a business; where the

assesses is engaged in the business of letting out of property on rent.

Section 23(1) [ Determination of Gross Annual Value (GAV) of Let-

Out Property]
Deductions from income from house Property [Sec.24]

Income chargeable under the head “Income from house property” shall be
computed after making the following deductions, namely:- source (As amended by
Finance Act,

i) Standard deductions
From the net annual value computed, the assessee shall be
allowed a standard deduction of a sum equal to 30% of the net annual value.

ii) Interest on borrowed capital:-

Where the property has been acquired, constructed, repaired,
renewed or reconstructed with borrowed capital, the amount of any
interest payable on such capital is allowed as a deduction.

The amount of interest payable yearly should be calculated

separately and claimed as a deduction every year. It is immaterial whether
the interest has been actually paid or not paid during the year.

Interest attributable to the period prior to completion of construction: It may so

happen that money is borrowed earlier and acquisition or completion of
construction takes place in any subsequent year. Meanwhile interest becomes
payable. In such a case interest paid/payable for the period prior to the
previous year in which the property is acquired/constructed will be
aggregated and allowed in five successive financial years starting from
the year in which the acquisition/construction was completed.

Interest will be aggregated from the date of borrowing till the end of the previous
year prior to the previous year in which the house is completed and not till
the date of completion of construction.

Deductions provided under Sec.24

 The deductions under Sec. 24 include standard deduction and interest on
borrowed capital and no other deduction is allowed from net annual value. Any amount
paid for brokerage or commission for arrangement of the loan will not be allowed
as deduction.

Determination of Annual Value

What is Annual Value?

Income from house property is taxable on the basis of annual value. Even if the property
is not let out, notional rent receivable is taxable as its annual value.

1. As per Sec. 23(1)(a) the annual value of any property shall be the sum for which
the property might reasonably be expected to be let out from year-to-year. In
determining the annual value there are four factors which are normally taken into
consideration. These are:

i) Actual rent received or receivable,

ii) ii Municipal value,
iii) Fair rent of the property,
iv) Standard rent.

Computation of annual value of a property [Sec. 23(1)]

As per the Act the annual value is the value after deduction of Municipal
taxes, if any, paid by the owner. But for the sake of convenience, the annual value may
be determined in the following steps:

Step I: Determine the gross annual value.

Step II: From the gross annual value compared in Step I, deduct Municipal tax
actually paid by the owner during the previous year.

The balance shall be the net annual value which, as per the Income-tax Act is
the annual value.
Example:- Mrs. X has let out one house property @ Rs. 62,000 p.m., Municipal
Valuation Rs. 72,000 p.m., Fair Rent Rs. 90,000 p.m., Standard rent Rs. 1,00,000
p.m., Municipal Tax paid Rs. 40,000.
Compute Net Annual Value.

Solution:-

Particulars Amount Amount

Gross Annual Value 10,80,000

Working Note:-
a) Fair Rent (Rs.90000*12) 10,80,000

b) Muncipal value (Rss. 72,000 *12) 8,64,000

c) Higher of a) or b) 10,80,000

d) Standard Rent (Rs. 1,00,000 *12) 1200000

e) Expected Rent (Lower of c or d) 1080000
f) Rent received/receivable (Rs. 62,000 *12) 744000
Gross Annual Value shall be higher of e) or f) 1080000

Less: Municipal Tax 40000

Net Annual Value 1040000

To understand how income on house property & subsequent tax on such income is
calculated, one needs to gain some knowledge about the following related terms.
Annual value: It is the capacity of the property to earn income.
Municipal value: It is the value of the property as derived by municipal authorities.
Fair Rental Value: It is an assumed rental value of the property which is calculated
by comparing it with a similar property having similar features.
Standard rent: It is a fair amount of rent prescribed by Rent control Act which
ensures that tenants are not exploited while owners receive a fair amount of rent.
Actual rent received/receivable: It is the actual amount of rent received by the
owners from the tenants.

Gross Annual Value (GAV):

The one which has highest value among the below three terms is considered Gross
Annual Value:
a) Rent received or receivable
b) Fair Market Value
c) Municipal Valuation
If the Rent Control Act is applicable, then the one which has highest value among the
below two items is considered Gross Annual Value:
a) Standard Rent
b) Rent Received

Net Annual Value (NAV) is calculated as:

NAV = GAV – Municipal Taxes Paid
Deductions: To calculate the actual taxable income from house property, the following
two deductions are allowed under section 24 of the Income Tax Act.
a) Standard Deduction which is 30% of the NAV, is allowed as a deduction towards
repairs, rent collection, etc. irrespective of the actual expenditure incurred. This
deduction is not allowed if the Gross Annual Value is nil.
b) Interest on home loan is allowed as a deduction under section 24.
Annual Value: Annual Value = NAV Deductions.

The annual value has to be determined for different categories of properties.

These categories are:

Category A. House property - Let out throughout the previous year.

Category B. House property- Let out and was vacant during the whole or part of the
previous year.

Category C. House Property- Part of the year let out and part of the year occupied for
own residence.
A

COMPUTATION OF “INCOME FROM HOUSE PROPERTY”

FOR DIFFEREENT CATEGORIES OF PROPERTY:

1. Property Let out throughout the year:

Step 1: Determining the gross annual value:
According to sec 23(1), the annual value of any property shall be deemed to be: -
a) The sum for which the property might reasonably be expected to be out
from year-to-year (i.e., expected rent); or

b) Where the property or any part of the property is let out and the actual rent received
or receivable by the owner in respect thereof is in excess of the sum referred to
in clause a), the amount so received or receivable i.e. the actual rent.

culars Amount mount

utation of GAV

: Compute GAV
 =
Higher of MV and FR, but restricted to SR

: Compute Actual rent

received/receivable Less: unrealized
rent
: Compare step 1 & step 2

: Gross Annual Value is More than step 3 XXX

S ANNUAL VALUE XXX

Municipal Taxes (XXX)

A
NNUAL VALUE XXX

Deduction under section 24

0% of NAV (XXX)

Interest on borrowed capital (XXX)

ME FROM HOUSE PROPERTY XXX

2. Let out property vacant for part of the year

culars Amount Amount

utation of GAV

: Compute ALU
=Higher of MV and FR, but restricted to SR

: Compute Actual rent

received/receivable Less: unrealized
rent
: Compare step 1 & step 2
: Gross Annual Value is More than step 3 XXX
A
ctual rent is lower than ALU owing to vacancy, then
Actual Rent is the GAV.
A
ctual rent is lower than ALU due to other reason,
then ALU is the GAV.

wever, in spite of vacancy, if the actual rent is higher

than ALU, then actual rent is GAV

S
S ANNUAL VALUE XXX

Municipal Taxes (XXX)

A
NNUAL VALUE XXX

Deduction under section 24

0% of NAV (XXX)

Interest on borrowed capital (XXX)

ME FROM HOUSE PROPERTY XXX

3. Self –Occupied property or Unoccupied property:

ulars
nts
a
l Value under section 23(2)

-Deduction under 24
 i) Interest on borrowed capital
Interest on loan taken for acquisition or construction of house on or
after 1.4.1999 and same was completed within 3 years
from the end of the financial year in which Capital was
borrowed, interest payable or paid subject to a maximum
of Rs. 200000(including apportioned pre-
construction interest)

ii) In case of loan for acquisition or construction taken prior to

1.4.1999 or loan taken for repair, renovation or reconstruction
at any point of time paid or payable subject to maximum
e from House property

4. House property let out for a part of the year and self -occupied
for part of the year.

ulars
utation of GAV

: Compute ALU
=Higher of MV and FR, but restricted to SR

: Compute Actual rent

received/receivable Less: unrealized
rent
: Compare step 1 & step 2

: Gross Annual Value is higher than step 3 XXX

m pute for the whole year and actual rent received
/ receivable computed for the Let -out period.

S
S ANNUAL VALUE XXX

Municipal Taxes (paid by the owner during (XXX)

the previous Year)

A
NNUAL VALUE XXX

Deduction under section 24

0% of NAV (XXX)

Interest on borrowed capital (XXX)

ME FROM HOUSE PROPERTY XXX

5. Deemed to be let out property

ulars nts nts

Annual Value

ER is the GAV of House Property

ER= Higher of MV and FR, but restricted
to SR.

Municipal taxes (paid by the owner during )

the previous year

nnual Value

Deductions under section 24

)
a) 30% of NAV

)
b) Interest on borrowed
capital (actual without any Ceiling
limit)
ME FROM HOUSE PROPERTY
 6. House Property, a portion let out and a portion self-occupied

ulars nts

al Value under section 23(2)(self-occupied)

-Deduction under 24

i) Interest on borrowed capital

Interest on loan taken for acquisition or construction of house on
or after 1.4.1999 and same was completed within 3
years from the end of the financial year in which Capital
was borrowed, interest payable or paid subject to a
maximum of Rs. 200000(including apportioned pre-
construction interest)

ii) In case of loan for acquisition or construction taken

prior to 1.4.1999 or loan taken for repair, renovation
or reconstruction at any point of time paid or payable
subject to maximum of Rs.30000.

utation of GAV(let out property)

: Compute ALU
Higher of MV and FR, but restricted to SR

: Compute Actual rent

received/receivable Less: unrealized
rent
: Compare step 1 & step 2
 : Gross Annual Value is More than step 3 XXX
A
ctual rent is lower than ALU owing to vacancy,
then Actual Rent is the GAV.
A
ctual rent is lower than ALU due to other
reason, then ALU is the GAV.

wever, in spite of vacancy, if the actual rent is

higher than ALU, then actual rent is GAV

S ANNUAL VALUE XXX

Municipal Taxes (XXX)

A
NNUAL VALUE XXX

Deduction under section 24

0% of NAV (XXX)

Interest on borrowed capital (XXX)

ME FROM HOUSE PROPERTY XXX

Owner/deemed owner:
The person who is entitled to receive the income is called owner of the property, while the
person who receives financial benefits from the property but is not registered as its owner
is called deemed owner of the property. Income from house property is taxable for the
person who actually receives monetary benefits from the property but may or may not be
the registered owner of the property.
Deemed Ownership [Sec. 27] As per Sec. 27, though the following persons are not the
legal owners of the property, yet deemed to be the owners for the purpose of Sec. 22 to 26
● Transfer to a spouse/child [Sec. 27(i)]:

If an individual transfers any house property to his or her

spouse/ minor child otherwise than for adequate consideration, the transferor in
that case is deemed to be the owner of the house property so transferred. This
would, however, not cover cases where property is transferred to a spouse (or
minor married daughter) in connection with an agreement to live apart.
Note:- Where the individual transfers cash to his/her spouse or minor child and
the transferee acquires a house property out of such cash, the transferor shall not
be treated as deemed owner of the house property. Such transaction will,
however, attract clubbing provisions.
Holder of an impartible estate [Sec. 27(ii)]

The holder of an impartible estate shall be deemed to be the

individual owner of all properties comprised in the estate. The impartible estate,
as the word itself suggests, is a property which is not legally divisible.
Member of a Co-operative Society, etc. [Sec. 27(iii)]

A member of a co-operative society, company or

other association of person to whom a building or part thereof is allotted or
leased under a House Building Scheme of a society/company/association, shall
be deemed to be owner of that building or part thereof allotted to him,
although the co-operative society/company association is the legal owner of
that building. Person in possession of a property [Sec. 27(iiia)]

A person who is allowed to take or retain the

possession of any building or part thereof in part performance of a contract of
the nature referred to in sec. 53A of the Transfer of Property Act shall be the
deemed owner of that house property. This would cover cases where the
a) possession of property has been handed over to the buyer;
b) sale consideration source (As amended by Finance Act, 2013) :
www.trpscheme.com has been paid or promised to be paid to the seller by the
buyer ;
c) sale deed has not been executed like power of attorney/agreement to sell/will,
etc., have been executed. The buyer would be deemed to be the owner of the
property, although it is not registered in his name.
Person having right in a property for a period not less than 12 years [Sec.
27(iiib)] A person who acquires any right in or with respect to any building or
part thereof, by virtue of any transaction as is referred to in sec. 269UA(f), i.e.,
transfer by way
 of lease for not less than 12 years shall be deemed to be the owner of that
building or part thereof. This will not cover the case where any right by way
of lease is acquired on mouth-to-mouth basis or for a period not exceeding
one year.

Home Loan Tax Benefits

Tax Benefit on Interest Paid on Home Loan u/s 24 of Income Tax Act
Tax Benefit on payment of interest on housing loan is allowed as a deduction under
section 24 of the Income Tax Act. Section 24 of the Income Tax Act states that the
amount of interest on housing loan whether accrued or paid, shall be deducted from
the income from house property. Here, the loan must have been taken for the purpose of
purchase or construction or repair or renewal or reconstruction of a residential
house property.

Two types of deductions are available u/s 24

1) Standard deduction of 30% of annual value
2) Interest paid on home loan
Standard deduction:
A tax deduction of 30% of net annual value of the property is allowed to the taxpayer.
Net annual value is calculated as gross annual value minus municipal taxes Paid. This
deduction is allowed irrespective of the amount spent on insurance, repairs, water and
electricity supply, etc.

Tax Deduction for Home Loan Interest

▪ The maximum tax deduction that you can get here on interest payment of home loan
taken for a self-occupied property is Rs. 2 lakhs.
▪ In case the property for which the home loan has been taken is not self-occupied ie.
rented or deemed to be rented, no maximum limit for tax deduction has been
 prescribed and the taxpayer can take deduction of the whole interest amount u/s 24.
However, if the owner has not occupied the property himself due to his employment,
business or profession carried on at any other place, which has forced him to reside
at any other place,
▪ It is also important to note that this tax deduction of interest on home loan u/s 24 is
deductible on payable basis, i.e. on accrual basis. Hence, deduction u/s 24 should be
claimed on yearly basis even if no payment has been made during the year as
compared to section 80C (deduction on principal repayment) where deduction is
then the amount of tax deduction available u/s 24 stays limited to Rs 2 lakhs
only.allowed only on payment basis.
▪ The tax benefit under section 24 is reduced from Rs 2 lakhs to Rs 30,000, if the

property is not acquired or construction is not completed within 3 years from the
end of Financial Year in which the loan was taken. However, the limit of 3 years
has been increased to 5 years from Financial Year 2016-17 and onwards.

Pre-construction interest

Deduction on pre-construction interest is allowed when you have taken a loan for
purchase or construction of a house property. However, if the loan is taken for repairs or
reconstruction then deduction is not allowed. The deduction for this interest is allowed in
5 equal instalments starting from the year in which the house is purchased or the
construction is completed.
Though pre-construction interest is allowed to be claimed as tax deducted in 5 equal
yearly instalments, which can be claimed beginning the year in which the construction of
property is completed, the total amount that can be claimed in a year is subject to a
threshold of Rs 2,00,000 in case of a self-occupied house property.

Tax Benefit on Home Loan Principal Repayment u/s 80C

The amount paid as repayment of principal amount of home loan taken for the
construction or purchase of a new house property by an individual/HUF is allowed as tax
deduction u/s 80C of the Income Tax Act.

Amount of Deduction Available

The maximum tax deduction allowed u/s 80C is Rs 1,50,000. The tax deduction on
principal repayment is also a part of the various deductions allowed u/s 80C, which
includes amount invested in PPF Account, Tax Saving Fixed Deposits, Equity
Oriented Mutual funds, National Savings Certificate, Senior Citizens Saving Scheme,
etc. The deduction limit of section 80C is inclusive of all these options. This tax
deduction is available on payment basis and does not depend on the year for which
the payment has been made by the assessee.

Deduction on Stamp Duty & Registration Fee

The amount paid as stamp duty & registration fee is also allowed as a tax deduction u/s
80C. This deduction can be claimed whether the assessee has taken a loan or not. You
can claim the deduction in the year you incur these expenses.

Conditions for Claiming Deduction

Certain conditions must be satisfied to claim deduction u/s 80C for principal repayment
of home loan:

▪ You can claim deduction only if the construction of property is complete and you
have received a completion certificate for the same.
▪ No deduction would be allowed under this section for repayment of principal for
those years during which the property was under construction.
▪ Deduction is also available whether the property is self-occupied or let out.
▪ The benefit can also be claimed for more than 1 house property.
Reversal of Tax Benefits

If you have claimed the deduction u/s 80C, then you should avoid selling the house
property in less than five years from the end of financial year in which you received its
possession. If you sell the property within this time limit then you will not be eligible to
claim any deduction for the principal repaid during the current F.Y. and the total amount
of tax deduction already claimed in respect of earlier years shall be deemed to be your
income of such year in which you sold the property and you will be liable to pay tax on
that income.

Section 80EE: Deduction for First Time Home Buyers

Just like the deduction u/s 24, deductions under section 80EE is also available on the
interest paid on home loan by taxpayer or assessee. However, unlike section 24, this
deduction is only available to first time home buyers. It was first introduced in the
Union Budget for Financial Year 2013-14 as a means to help home buyers in the lower
income group through tax reliefs.
At that time, the amount of tax benefit given by this section was Rs 1 lakh, which was
available to be claimed only once by the first time home buyer.

Revised Deduction Limit

The government reintroduced section 80EE in the Union Budget 2016-17. The quantum
of deduction has been changed to Rs 50,000 for interest paid on home loan. This
deduction is available over and above the deduction of section 24 and section 80C which
are Rs 2,00,000 and Rs 1,50,000 respectively.

Conditions Necessary for Claiming Deduction u/s 80EE:

▪ The deduction would be available to be claimed from Financial Year 2016 onwards.
▪ The deduction can be availed on home loans sanctioned between 1st April 2016 and
31st March 2017 only
▪ The value of property for which the loan has been taken should be less than Rs 50 lakh
▪ The home loan amount should not exceed Rs 35 lakh
▪ The tax benefit here can be claimed till the time repayment of loan continues
▪ Deduction is only applicable on home loan paid for first house property
▪ The property in question can be either self-occupied or non-self-occupied
▪ If you claim deduction under this section then you will not be eligible to claim the
deduction u/s 24 again for the same amount of interest.

Eligibility for Claiming Section 80EE Deductions:

The eligibility of the home loan borrower depends on the following points:

▪ The deductions under this section can be claimed only by individual taxpayers on
properties purchased either singly or jointly.
▪ There are a few types of assessees which are not allowed to claim this deduction like
Hindu Undivided Families (HUFs), companies, trusts, Association of Persons (AOP)
etc.
▪ Section 80EE is applicable on a per person basis instead of a per property basis. So,
suppose you have purchased property jointly with your spouse and you both are
paying the instalments of loan, then you both can individually claim this deduction
▪ It is not necessary to reside in the property for which you want to claim this
deduction. So, borrowers staying in a rented accommodation can also claim this
deduction
How to Claim Section 80EE Tax Deductions:

You can claim this deduction for the Financial Year 2016-17 while filing return by filing
the applicable I-T return form and specifying the amount of interest paid in appropriate
place. You will also need a document from the lender specifying the interest and
principal amount paid that you paid. In addition, you will have to furnish a document
from the lender stating the interest and principal amounts on your home loan as
well as the amount paid till date.
Who is a Co-owner?

Co-owners are the persons who have signed property agreement jointly. They must have
their names in the property papers as owners of the property. They should have also
contributed towards the purchase of the said property. Co-owner maybe a spouse,
children, parents or even the sibling.

Who is a Co-borrower?

A co-owner must also be a co-borrower or a co-applicant of the loan. His/her name

should appear in the loan agreement. Owners who are not co-borrowers and do not pay
the EMI would be ineligible for the tax benefits. Even if the co-owner is a co-borrower
of the loan but does not contribute to the EMI payments, he/she will be devoid of tax
benefits.

Types of Co-ownership

Following are the types of ownership:

1. Tenants-in-common
When two or more people hold the title of the property, but their share is not specifically
mentioned, it is known as ‘tenants-in-common’. All the co-owners are equal
partners, and each one of them may use the entire property. In the event of the death
of one co-owner, the interest will not pass to the others but will go the one
mentioned in the will of the deceased. He will then become a tenant-in-common
with the other survivors.

2. Joint-tenancy
This type of ownership allows the interest of the deceased co-owner to pass on to the

surviving joint-owners.
Advantages and Disadvantages of Joint-Ownership in Property
Apart from the tax deductions, there are other advantages and disadvantages too
of joint-ownership.

Advantages

1. Loan Eligibility – This is a huge advantage regarding the home loan being
sanctioned by the bank. If there are more than one applicants for the loan, the bank
will consider the combined income of all the applicants to decide the eligibility of
repayment, and as a result, the chances of sanctioning the loan will go increase.
2. Repayment of Loan – More the number of joint-owners, easier is the repayment
process as it divides the burden of EMIs among all the partners. It is highly advisable
for working married couples to buy properties jointly.
3. Higher Affordability – The spouses, can jointly apply for the loan. The burden is
equally divided between the husband and wife making it easier for the repayment.
Also, the tax benefits can be availed by them and will be very beneficial to the
family.
4. Stamp Duty – In some states the stamp duty charges are lower for women by 1-2 %.
Hence, they are encouraged to buy property jointly.
5. Succession – In case of single ownership, succession can be a tedious process. On the
contrary in case of joint ownership, if one spouse dies, the property automatically
goes to the other.
Disadvantages

1. Documentation – One of the very few disadvantages is the extensive documentation

required for co-ownership. Depending on the number of applicants the process has to
be repeated twice or thrice.
2. Credit Score – As the co-owners have a joint liability of payment towards the loan,
if one of the co-owner defaults, this will reflect in the credit history of all the
joint-owners.

Tax Benefits of Co-ownership in Property

Following are the tax benefits of co-ownership in property:

Joints Home Loans

Most individuals while buying property go for a home loan. It is advisable to jointly
register for the home loans to avail the benefits of joint-ownership in the property. If
done so, all the co-owners of the property can claim deductions individually on the
stamp duty & registration charges, interest and principal repayment amounts.
The co-owner must also be a co-applicant/co-borrower of the loan. In this case, they can
claim a deduction of Rs 2 lakhs, u/s 24(b), individually for the interest paid on loan. The
share of interest paid by each partner will be calculated according to his/her share
towards the purchase of the property. The combined deduction availed by all the co-
owners should not exceed the total interest obligation for the year. A deduction on
principal payments of the loan, including the stamp duty and registration charges, is
also available to each co-owner u/s 80C within the overall limit of Rs150000.
These deductions should be claimed in the ratio of share in the ownership of the
property.

Eligibility
1. Besides being a co-owner of the property, one must also be the co-borrower of the
loan and must make payments towards interest and principal obligations for claiming
these deductions. In the case where a loan is taken by parents and child together for a
property owned by the parents, and the child later pays off the loan, he/she won’t be
eligible for claiming tax benefits as the condition of being a co-owner is not met.
2. Tax benefits on a house property can be claimed from the start of financial in which
the construction was completed. If the property was under construction, expenses
before the start of the financial year in which possession of the property is received,
or construction is completed are claimed in five equal instalments starting the year in
which construction is completed.

Section 80EE
The income tax department has reintroduced this section to help the lower income groups
to take a home loan. Under section 80EE deduction of up to Rs 50000 can be claimed by
first time home buyers either singly or jointly. However, its available only to individual
taxpayers and to HUFs, AOPs, etc. This deduction is available over and above the
benefits of section 80C and section 24(B). for claiming this deduction, one needs to
satisfy below conditions:

1. Value of this house bought should not exceed Rs 50 lakhs

2. Loan taken for this house should not exceed Rs 35 lakhs

3. The loan should be taken from a Financial Institution or a Housing Finance Company

4. The loan should be sanctioned between 01.04.2016 to 31.03.2017

5. As on the date of sanction of loan you should not own any other house
Rent Received for Jointly Owned Properties
Deduction u/s 24 of 30% which is calculated on the rent received to arrive at annual value
is also available to joint owners of the property. The rental income received is to be
apportioned in the ratio of ownership and deduction is calculated accordingly.
Capital Gains on the Sale of Jointly Owned Property
On the sale of jointly owned property, all the co-owners must declare their capital gains
from such sale. The sale consideration of the property is apportioned among the co-
owners based on their share of ownership. If the capital gain from the sale of the house
is invested in another purchase or construction of another house, the exemption is
allowed u/s 54. If the capital gains arising from the sale of property are invested in
specified bonds, each co-owner is entitled to claim deduction under section 54EC up
to Rs 50 Lakh. Deductions u/s 54F is also available for joint owners limiting
the purchase only to one residential house property. For this section, the condition of
not owning more than one house property must be considered individually for each
co-owner.
Inadmissible Deduction [ section 25]
Interest chargeable under this act which is payable outside India shall not be deducted
if- ● Tax has not been paid or deducted from such interest and
● There is no person in India who may be treated as an agent under section
163. Taxability of recovery of Unrealized rent and arrears of rent received:

● Unrealized rent is deducted from actual rent in determination of annual value

under section 23, subject to fulfillment of conditions under Rule 4. Subsequently
when the amount is realized, it gets taxed under section 25AAin the year of
receipt.
● If the assesses has increased the rent payable by the tenant and the same has
been in dispute and later on the assesses receives the increase in rent as arrears,
such areas is assessable under section 25B.

lized Rent {section 25AA} s of rent {section 25B}

Taxable in the hands of the assesses le in the hand of the assesses

whether he is the owner of whether he is the owner of that
the property or not property or not.

le as income of the previous year le as income of the year in which

in which he recovers the he receives the arrears of rent.
unrealized rent.

duction shall be allowed. f the amount of arrears shall

be allowed as deduction

lized rent means the rent which has s of rent is in respect of rent
been deducted from actual rent in not charged to income-tax for
any previous year for determining any previous year.
annual value.
a

Other Important points:

1. The Actual Rent received should not included any amount of rent which is not
capable of being realized i.e. unrealized rent while determined Gross Annual Value
in case let out property, provided the conditions specified in Rule 4 are satisfied.
2. If the assesses has occupied more than one house for hid residential purpose, only
one house (according to his choice) is treated as self- occupied and all other
houses will be “deemed to be let out”.
3. In case of house property which is deemed to be let out, the expected rent would
be the gross annual value. All deductions permissible to a let-out property would
be allowable in case of a “deemed to be let out” property.
4. If the portion of a property is let out and a portion is self-occupied, then, the
income will be computed separately for let out and self-occupied portion.
Cases Where Income from house property is exempt from tax:

No Section Particulars

e from any farm house forming part of agricultural income

A) l value of any one palace in the occupation of an ex-ruler

e from house property of a local authority.

e from house property of an approved scientific

research association.

C) Property income of Universities, educational institution, etc.

rty income of any registered trade union.

e from house property held for charitable or

religious purpose.

rty income of any political party.

rty used for own business or profession.

elf-occupied property of an individual/HUF.

Chapter 4
Research Methodology
 Research Methodology
Research process:

How many House property Do you have in F.Y.2017-2018?

1.None 2. owned 1 house 3. owned 2 or more

Select 2 option further Questions

1.Type of House Property.

Self/family Occupied or
vacant.

● Is there any house loan applicable on this

property? If yes then is this deduction reflecting in your
form 16.
● Is the house property co-owned?
If yes then Name of owners and their share in that House property.

Given on rent.

● Rental details of property

1.Amount of rent earned during FY.2017-2018?
2.Amount of property tax paid during FY.2017-2018?
3.Tenant name.
● IS there any housing loan applicable on this property?
If yes then interest payable on your housing loan for FY 2017-2018.
● Is the house property co-owned?
If yes then Name of owners and their share in that House property.

Select 3 option further Questions

1.Type of House Property.

Self/family Occupied or
vacant.
 ● Is there any house loan applicable on this
property? If yes then is this deduction reflecting in your
form 16.
● Is the house property co-owned?
If yes then Name of owners and their share in that House property.

Given on rent.

● Rental details of property

1.Amount of rent earned during FY.2017-2018?
2.Amount of property tax paid during FY.2017-2018?
3.Tenant name.
● IS there any housing loan applicable on this property?
If yes then interest payable on your housing loan for FY 2017-2018.
● Is the house property co-owned?
If yes then Name of owners and their share in that House
property. Also add Second or more property details as per
requirements.

Research/study the SIP:

Research/study the SIP is related to EMPIRICAL Research.

It is data-oriented. This research provides insights through observations or experiences. In

this research the primary data are collected, analyzed and tested to prove some
hypotheses. Empirical research can be conducted through both the qualitative and
quantitative approaches. Empirical research is based on observation and
measurement. It attempts to develop new ideas by collecting primary data. In this
research the researcher takes a step further and collects the data to test the theory.
Research Design:

DESCRIPTIVE Research design is used in the SIP. It describes the

characteristics of a phenomenon. In other words, it can be said that descriptive research
seeks to explain a phenomenon and the reasons and assumptions behind the specific
behavior. It emphasizes on explaining the phenomenon by providing factual and
accurate information, but does not discuss the variables responsible for a situation.

Sampling Method:

Simple Random Sampling is done. This is the most famous and simple
method of sampling where each unit of the client is equally probable of getting included
in the sample. Sample random sampling says that: There is an equal chance of each
element of the clients to be included in sample and choices are independent to each
other and each possible sample combination has an equal chance of being chosen.

For selecting the sample for my survey some criteria were considered,
they are:

● How many house properties is owned?

● Is any house property rented or vacant?
● Which house property is self-occupied or vacant or let out?
● Is house property being co-owned?

Total No. of clients :

250 Sample size:10

Data collection method:

 Chapter 4
Data Analysis
 Data Analysis

Case Study1. Self-Occupied and Co-owned property.

1.Mr. X is the co-owner of the property along with his brother holding 60%and 40%
share of property respectively.

Gross Annual Value- 180000;

Interest charged by bank – 25000;

Mr. x and his brother took fresh loan o and interest on that is – 5000.

Compute the income from the house property chargeable in the hand of Mr. X for A.Y
2018-2019.

Solution:

Particulars Amounts Amounts

Gross Annual Value 180000

Less: - Municipal taxes NIL

Net Annual Value 180000

Less: Deduction Under Chapter 24

(i) 30% of NAV 54000
(ii) Interest on housing loan
-Interest on loan taken from bank 25000
-Interest on fresh loan to repay 5000 84000
old loan for this property.

Income from House Property 96000

Share of Mr. X (60%) 57600

 1.1 Self-Occupied and Co-owned property.

Interpretation:

● Section 26 provides that where the House property is owned by two or more than
two person whose share are definite and ascertainable, the share of each such
person in the Income from House Property, as computed in accordance with
section 22 to 25 shall be included in his respective total income.

● Therefore, 60% of the total income from House Property is taxable in the hands
of Mr. X since he is the 60% owner of the Property.
 Case Study 2: One House Property with Two Identical units

First unit of the house is Self-occupied by Mr. P and another unit is rented for
₹ 8000 p.m. the rented place is vacant for 2
months. Municipal valuation: ₹ 190000 p.a.

Municipal tax paid by Mr. P: 15% of municipal valuation

Interest on borrowed capital: ₹ 1500 p.m.

Solution:

Particulars Amounts ( ) Amounts ( ₹)

(A)Rented unit (50% of total

area) Actual Rent

Rent received for whole year 96000

(₹ 8000x12)

Computation of Gross Annual Value

Actual rent received owing to vacancy 80000

(₹ 96000-16000)

Actual rent received is Gross Annual Value 80000

Gross Annual Value

Less: Municipal Taxes 14250

15% of ₹ 95000

Net Annual Value 65750

Less: Deduction under section 24-
(i)30% of NAV 19725
(ii) Interest on borrowed capital 9000 28725
(₹ 750 x 12)

Taxable Income from Let out property 37025

(B) Self – Occupied unit (50% of

total Area)

Net Annual Value NIL

Less: Deduction under section 24-

(i)Interest on Borrowed Capital 9000 (9000)

Income from House Property 28025
 Case Study 3: Property let out throughout the year

Rent received per month is 35000;

Municipal tax per year is 1500;

Interest on borrowed capital is

250000; Interest on New capital is

25000; Principal Amount

72000;

Share of owner is 100%.

Solution:
Particulars Amount ( ) Amount Amount ( ₹)
₹ (₹)

Gross Annual Value 420000

Rent per month (35000 x
12)
Less: Municipal taxes (1500)
Net Annual value 418500
Less: Deduction under section 24
A) 30% NAV (125550)

B) Interest on (250000)
Borrowed capital
 C) Interest on New (25000) (200000) (325550)
Borrowed Capital

Income from House Property 92950

Interpretation:

● In case if House Property is let out for whole year then there is chances of
getting Income from House property and that is computed in total Taxable
Income.
● As it is let out property we can take whole amount of Interest on borrowed
capital but from F.Y 2017-2018 the bottle neck for interest on loan is total
200000.
● Principal amount 72000 is deducted under section 80C, Bottle neck for 80C
is 150000.
● As Share of owner is 100 % that’s why the total principal amount and
Interest amount is charged under the owner income only.
 Case study 4: Let out Property Vacant for part of the year and
also co-owned.

Rent per month is

15000; Vacant for 3
months;

Municipal tax 50% paid by tenant, total municipal tax paid is

3000; Interest on borrowed capital is 340000;

Principal amount is 92000;

Share of Mr. is 50 % and Mrs. X is 50%.

Calculate the total taxable income of both under Income from House property.

Solution:
Particulars Amounts Amounts ( )
(₹) ₹

Mr. X Mrs. X

Gross Annual Value 67500 67500

Rent amount (15000 x
9)
Less: Municipal Tax (750) (750)
50% paid only

Net Annual Value 66750 66750

Less: Deduction under section 24

a) 30% NAV (20025) (20025)

b) Interest on borrowed loan (170000) (170000)

Income/Loss from House property (123275) (123275)

Interpretation:

● Section 26 provides that where a house property is owned by tow or more

persons whose shares are definite and ascertainable the share of each such
person in the income of house property, as computed in accordance with
sections 22 to 25, shall be included in his respective total income.

Therefore, 50% of the total income from house property is taxable in the hands
of Mr. X and Mrs. X since they are equal owner of the property.

● Principal amount 92000 is deducted under section 80C, Bottle neck for 80C
is 150000.
● For 3 Months the House was Vacant that’s why That income has not
been considered.
● Loses from House Property can reduces the Taxability of Income.
 1.2 Losses from House Property

Case study 5: Self Occupied or Unoccupied property

House was constructed in the year 2011 with loan amount of ₹ 2000000;

The construction was completed on 30.11.2013;

Accumulated interest up to 31.3.2013 is ₹ 150000;

During previous year Mr. R paid ₹ 240000 which include ₹ 180000 as interest.

Compute Mr. R Income from House Property.

Solution:

Particulars Amounts ( ) Amounts ( ₹)

Net Annual Value of one House used NIL
for self-occupied under section 23(2)
Less: Deduction under section 24
Interest on Borrowed capital 200000
● Interest on loan was taken for
construction of house on or aftern1.4.99
and same was completed within 5 years
– interest paid or payable subject to a
maximum of ₹ 200000 (including
apportioned pre-construction interest)
will be allowed as deduction.
● In such case total interest is ₹ 180000
+ ₹ 30000 (being 1/5th of ₹ 150000)
= 210000.
However, the interest deduction is restricted to ₹
200000

Loss from House Property (200000)

Interpretation:

● Interest payable on borrowed capital for the period prior to the previous year in
which the property has been acquired or constructed, can be claimed as
deduction over a period of 5 years in equal installments commencing from the
year of acquisition or completion of construction.

● In case of self-occupied property, the gross annual value and Net annual value
will be always NIL.
● Also, if house property is self-occupied income from that House Property will
be Negative.
Case study 6: Let out for the part of the year and self – occupied for
the part of the year.
Property let out for ₹ 50000 p.m. up to December 2017, after that property is self-
occupied but standard rent for that area is ₹ 480000

Rent for November and December are not realized;

Municipal Tax is ₹ 60000;

Interest on borrowed capital is ₹ 25000.
 Compute income from house property for the A.Y 2018- 2019.

Solution:

Particulars Amounts ( ₹) Amounts ( ₹)

Computation of GAV

Actual rent 350000

(50000 x 9) -(50000x2) = ₹ 450000-₹100000

Standard rent 480000

Gross Annual Value 480000

Less: Municipal tax (60000)

Net Annual Value 420000

Less: Deduction under section 24

a) 30% NAV 126000

b) Interest on borrowed capital 25000 (151000)

Income from House Property 269000

Interpretation:

● Comparing Actual rent and standard rent which ever is higher is the Gross
Annual Value.
● Rent which is not received is unrealized rent. It means that the rent payable but
not paid by the tenant and which the owner is not able to realize from the tenant.
● If property is let out for one day in F.Y then for whole year the property is
treated as Let–out property, though it is self-occupied for part of year.
 Case study 7: Deemed to be let out property

Particulars House I House II

Rent amount 90000 160000
Municipal taxes 12000 12000
Interest on property ----- 55000
during the current year

Compute Mr. N Income from House Property for A.Y 2018-2019 and suggest which
house should be opted by Mr. N to be assessed as self – occupied so that his tax liability
is minimum.

Solution:

Let us first calculate the income from each house property assuming that they are
deemed to be let out.

Particulars House I House II

Gross Annual Value 90000 160000

Less: Municipal taxes (12000) (12000)

Net Annual Value 78000 148000

Less: Deduction under section 24

a) 30% of NAV (23400) (44400)

b) Interest on borrowed capital (-------- (55000)
)
Income from House property 54600 48600

Option 1 (House I – self occupied and House II – deemed to be let

out)

Particulars Amounts ( ₹)
House I (self – occupied) Nil
House II – (deemed to be let out) 48600
Income from House Property 48600

Option II (House I – Deemed to be let out and House II – Self –

Occupied)

Particulars Amounts ( ₹)
House I – (Deemed to be let out) 54600
House II – (Self – Occupied) (30000)
(interest deduction restricted to
30000)
Income from House Property 24600

Interpretation:

● Option 2 is more beneficial, Mr. N should opt to treat House II as self-occupied

and House I as deemed to be let out. His income from house property would be ₹
24600 for the A.Y 2018-2019.
● Mr. N has more than one House Property for Self-occupied. As per the section
23(4), he can avail the benefits of self – occupation (i.e. benefits of “NIL” Net
Annual Value) only in respect of one the house property, at her option. The other
house property would be treated as “deemed to be let out property”, in respect
of which the Expected rent would be the Gross Annual Value. Therefore,
consider the most beneficial option while deciding which house property should
be treated as self-occupied.
● In option 2 Annual value is NIL, but interest deduction would be available subject
to a maximum of ₹ 30000. Incase of money borrowed for repair of self-occupied
property the interest deduction would be restricted ₹ 30000, irrespective of the
date of borrowable.
1.3 Self-occupied and Let out property.
 Case study 8: A portion let out and a portion self – occupied.
During F.Y 2017-2018, 1/3 portion is let out for residential purpose at a monthly rent ₹
5000;

2/3 portion is self-

occupied; Municipal taxes
are 10560;

Mr. Y took of ₹ 100000 1-7-2010 for construction of building and was completed on
31-5-2013.

Interest on borrowed loan is ₹ 12% per annum and every month such interest was paid.

Compute income from house property of Mr. Y for the A.Y 2108-2019.

Solution:

There are Two units of the house.

Unit I with 2/3rd area is used by Mr. Y for self-occupied throughout the year and no
benefits id derived from that unit, hence it will be treated as self-occupied and its
annual value will be NIL.

Unit II with 1/3rd area is let out throughout the year and its annual value has to be
determined as per section 23(1).

Computation of Income from House property

₹ ₹
Particulars Amounts ( ) Amounts ( )
Unit I (2/3rd area-
self occupied)

Annual Value NIL

Less: Deduction under section
24(b)

a) 2/3rd of 18600 (12400)

Income from Unit I (12400)

Particulars Amounts ( ₹) Amounts ( ₹)

Unit II (1/3rd area- let out)

Gross Annual Value 60000

Less: Municipal Tax (3520)

(10560x1/3)

Net Annual Value 56480

Less: Deduction under section 24

a) 30% of NAV (16944) 23144

b) Interest on Loan (6200)
(18600x1/3)

Income from Unit II 33336

Income from House 20936

Property (12400) +33336

Interest on loan taken for construction of building

Interest for the year (1.4.17 to 1.3.18) = 12% of 100000.

Pre-construction interest = 12% of 100000 for 33 months (from 1.7.10 to 31.3.2013)

= 33000

(1/5th of pre-construction interest 33000x1/5 = 6600)

Therefore, total interest deduction under section 24 = 12000+6600=18600.

Interpretation:
● Interest payable on borrowed capital for the period prior to the previous year in
which the property has been acquired or constructed, can be claimed as
deduction over a period of 5 years in equal installments commencing from the
year of acquisition or completion of construction.

Chapter 6
Data Interpretation
 Data Interpretation

➢ Findings:
● The Actual Rent received should not include any amount of rent which is not
capable of being realized i.e. unrealized rent while determined Gross Annual Value
in case let out property, provided the conditions specified in Rule 4 are satisfied.
● If the assesses has occupied more than one house for hid residential purpose, only
one house (according to his choice) is treated as self- occupied and all other
houses will be “deemed to be let out”.
● In case of house property which is deemed to be let out, the expected rent would
be the gross annual value. All deductions permissible to a let-out property would
be allowable in case of a “deemed to be let out” property.
● If the portion of a property is let out and a portion is self-occupied, then, the
income will be computed separately for let out and self-occupied portion.
● Flat 30% deduction is given on Net Annual Value in case of Let out property and
deemed to be let out property.
● In case of Self-occupied property, the Gross Annual Value and Net Annual Value
will be NIL.
● Incase of self- occupied property the Income from House Property will always
Negative.
● The amount of tax deduction available u/s 24 stays limited to Rs 2 lakhs only for
both the self-occupied and let out property from F.Y 2017-2018.