 COMPUTATION OF INCOME FROM LET OUT HOUSE

PROPERTY:
COMPUTATION OF INCOME.

GROSS ANUUAL Rs. XXXX/-

VALUE (GAV)
-LESS MUNICIPAL Rs. XXXX/-
TAXES
NET ANNUAL VALUE
Rs. XXXX/-
-LESS 1. Standard
DEDUCTIONS U/s Deductions u/s 24
24 Rs. XXXX/-
2. Standard
Deductions u/s 24
Interest on
Borrowed Capital
Rs. XXXX/-
NET INCOME Rs. XXXX/-
FROM LET OUT
HOUSE
PROPERTY:
  COMPUTATION OF GROSS ANNUAL VALUE:

STEP I FIND OUT REASONABLE

EXPECTED RENT OF THE
PROPERTY.
STEP II FIND OUT THE RENT
ACTUALLY RECEIVED OR
RECEIVABLE
STEP III FIND OUT WHICH IS
HIGHER in the amount
computed in Step I or Step II.
STEP IV Find out loss because of vacancy.
STEP V STEP III minus STEP IV is
GROSS ANNUAL VALUE.
 COMPUTATION OF REASONABLE EXPECTED RENT:
In majority cases reasonable expected rent is determined by
taking into consideration following factors:
a. Municipal Valuation (MV): Local authorities make a
survey of valuation of all buildings in their jurisdiction.
Such valuation defines the earning capacity of the building.
b. Fair rent of the Property: Fair rent of the property can be
determined on the basis of a rent fetched by a similar
property in the same locality.
c. Higher of (a) or (b) is generally taken as reasonable rent.
d. Standard Rent: If however, the property is covered by Rent
control Act, then Reasonable Rent cannot exceed Standard
Rent.
Standard Rent is maximum rent which a person can
recover from his tenant under Rent Control Act.

 Amolak Ram Khosla vs. CIT [1981] 7 Taxman 51

Held: The Supreme Court has held that the landlord cannot
reasonably expect to receive from a hypothetical tenant
anything more than Standard Rent.
 Dr. Balbeer Singh vs. MCD [1985] 152 ITR 388 SC
Held: Reasonable Expected Rent cannot exceed Standard
Rent. Reasonable Expected Rent can however, be lower
than Standard Rent.
ILLUSTRATIONS: Reasonable Expected Rent.

Rs. in A B C D E
thousand.
Municipal 40 40 40 40 40
Value
(MV)
Fair Rent 46 46 46 48 51
(FR)
Standard NA 45 35 45 63
Rent (SR)
Reasonable 46 45 35 45 51
Expected
Rent under
Step I [MV
or FR
whichever
is higher,
subject to
maximum
of SR.
 INCOME FROM HOUSE PROPERTY DEDUCTIONS:
1. Section 24 (a): 30% of the Net Annual Value is available
as Standard Deduction.
2. Section 24 (b): Interest on borrowed capital is allowable
as deduction if capital is borrowed for purpose of
purchase, construction, repair, renewal or
reconstruction of property.