SANSKAR SARJAN EDUCATION SOCIETY

D.T.S.S COLLEGE OF COMMERCE

KURAR VILLAGE MALAD (EAST) MUMBAI-400097

Accredited by NACC with A Grade

Permanently affiliated to University Of Mumbai

An ISO 9901:2008 certified college

PROJECT REPORT ON

(DISTINGUISH BETWEEN DEDUCTION AND EXEMPTION, INCOME

FROM HOUSE PROPERTY, INCOME FROM OTHER SOURCES)

By

(ROHIT PATHAK)

ROLL NO - 60

M.COM PART -II

(Semester - III)

PROJECT GUIDED BY

(PROF. PRIYANK KHATRI)

SUBMITTED TO

UNIVERSITY OF MUMBAI

ACADEMIC YEAR:-2019-2020

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 DECLARATION
I, Mr. ROHIT PATHAK, student of MASTER OF COMMERCE, Semester - III,
D.T.S.S. College of commerce hereby declare that the work embodies in this project.
"(DISTINGUISH BETWEEN DEDUCTION AND EXEMPTION, INCOME FROM
HOUSE PROPERTY, INCOME FROM OTHER SOURCES)"from my own
contribution to research work carried out under the guidance of Prof. PRIYANK
KHATRI is the result of my own research work and has not been previously
submitted to any other University for any other Degree /Diploma to this or any other
University .
Wherever reference has been made to previous work of others has been clearly
indicated as such and included in bibliography.
I hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.
The information submitted as true and original to the best of my knowledge

Date:-

Name/Signature of learner

Certified by

Name and Signature of Teacher

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 Acknowledgement

To list who all helped me is difficult because they are so numerous and the depth is so
enormous.
I would like to acknowledge the following being idealistic channel and fresh
dimension in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me chance to do
this project.
I would like to thank my Principle, Dr. Sussmita Daxini, for providing the necessary
facilities required for completion of this project.
I take this opportunity to thank our Co-ordinator Mr. Kanduri Nagraju, for his
moral support and guidance.
I would also like to express my sincere gratitude towards my project guide
Prof.Priyank Khatri whose guidance and care made the project successful.
I would like to thank my college Library, for having provided various reference
books and magazines related to project.
Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project, especially my Parents and my peers who
supported me throughout my project.

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 Index of Contents
Chapter No Chapter Name Page
No.
1. 1. Introduction
1.1 Income from others sources
1.1.1 Introduction 7
1.1.2 Items included in income from others 9
sources
1.1.3 Deduction in income from others sources 16
1.1.4 Amount not deductible 19
1.1.5 list of exemption under section 10 20
1.2 Income from house property

1.2.1 Introduction 26
1.2.2 Definition. 27
1.2.3 when income is charged under income 28
from house property
1.2.4 basic of house property: 29
Self-occupied house property
Let out property
Inherited property
1.2.5 Steps to calculate income from house 40
property
1.2.6 House property income exempted from 42
income tax
1.2.7 points to be considered while computing 43
income from house property
1.2.8 how to save tax in house property
1.3 Distinguish between deduction and
exemptions
1.3.1 Introductions 46
1.3.2 Definition 47
1.3.3 Distinguish between deduction and 49
exemptions:
Sections
Allowable
Included or not
Conditional
Objectives
Basic differences
2. Research Methodology 60
Research Design

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 Research Methodology
Objectives of the study
Significance of the Study

Research Method
Sampling techniques
Sample Size
Data Collection Method
3 Literature Review 65
4. Data Analysis and Interpretation 68
5. Conclusion and Suggestion 74
Bibliography
Annexure

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 Index of Table

Table No. Name Page

No.
1.10 An incomplete, a ruined or demolished house cannot 67
be termed as house property
1.20 Can Annual Value (Net Annual Value) be negative? 68
1.30 Is it necessary that the Municipal tax paid by owner 69
should be deducted from Gross annual value?

1.40 What if dividend from Indian company is taxable and 69

would it effect the annual taxation of a individual?

1.50 Is exemption in income from other sources help in 70

reduction of tax?
1.60 Should margin of deduction for specific person should 71
be increased?
1.70 Is Deductions and exemptions help to reduce tax 72
burden of the assesse?
1.80 If the assessee satisfies the conditions that he is entitled 72
to deduction in all cases?

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Chapter 1.

1.1.1INTRODUCTIONS

Income from other sources is a category under the Income Tax in which we can consider
all the different sources of income which doesn’t fall under other heads such as income
from salary, or house property or capital gains.

This type of income falls under two categories: recurring and non-recurring.

Recurring income: Any income received at regularly at equal intervals. This generally
includes interest income from savings bank, post office savings, fixed deposits,
recurring deposits etc.

Non-recurring income: Any income received only once. This generally includes
Income from lottery, gambling, horse racing etc.

Income from Other Sources Tax. ... It includes incomes which are not taxable
in other heads of income. Income from Other Sources is one of the heads
of income chargeable to tax under the Income tax Act. 1961.

Section 56 defines the items chargeable under this head.

Section 57 defines the deductions allowable from income under this head.

Section 58 clarifies which deductions are not allowable.

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Section 59 brings to tax any amount recovered during the year against any deductions
allowed earlier.

“Income from other sources” is the residual head of income. Hence, any income which
is not specifically taxed under any other head of income will be taxed under this head.

As per section 56(1), income of every kind, which is not to be excluded from the total
income under this Act, shall be chargeable to income-tax under the head "Income
from Other Sources" if it is not chargeable to Income-tax under any of the first four
heads specified in Section 14.

In other words, the following conditions must be satisfied before an income can be
taxed under the head "Income from Other Sources":

i. there must be an income;

ii. such income is not exempt under the provisions of this Act;
iii. such income is not chargeable to tax under any first four heads viz., "Income
from Salary", "Income from House Property", "Profits and Gains of Business
or Profession" and "Income from Capital Gain".

Income from other sources is, therefore, a residuary head of income.

Sub-section (2) of section 56 specifies nine incomes which are always taxable under
the head “Income from other sources”

As per section 56(1), income of every kind which is not to be excluded from the total
income under this Act shall be chargeable to income-tax under the head "Income from
other sources", if it is not chargeable to income-tax under any of the heads specified in
section 14, items A to E. Therefore, an income which is not income from"Salaries",
"Income from house property", "Profits and gains of business or profession" or
"Capital gains", is to be computed and brought to charge under the head Income from
other sources."1. Thus, an income which is neither chargeable under the first 4 heads
of income nor which is exempt from tax under sections 10 to 13A, is chargeable to tax
under the head "Income from other sources".

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1.1.2 ITEMS INCLUDED UNDER INCOME FROM OTHER SOURCES

Dividend

family
interest on pension
securities

Income from
Hiring of other sources
machinery Gift recieved
and furniture

lottery gambling

The Income Tax Department classifies income into five categories for streamlining
the process of income tax reporting. They are:

 Income from Salary

 Income from House Property

 Income from Capital Gains/Loss

 Income from Business and Profession

 Income from Other Sources

Therefore, ‘Income from Other Sources’ can be defined as income that is not included
in any of the other listed categories. Besides, there are certain other incomes that are
always taxed under this category. Besides the above, there are some other incomes
also which are chargeable under the head 'Income from Other Sources'.' They are:

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i) Any fees or commission received by an employee from a person other than his
employer.
ii) Any annuity received under a will. It does not include an annuity received by an
employee from his employer.
iii) All interest other than interest .on securities.
iv) Income of a tenant from sub-letting the whole or a part of the house property.
v) Remuneration received by a non-professional for doing examination work, viz., a
professor getting such remuneration.
vi) Income of royalty
vii) Director's fees. .
viii) Rent of land not appurtenant to any building.
ix) Agricultural Income from land situated outside India.
x) Income from markets, ferries and fisheries, etc.
xi) Income from leasehold property.
xii) Income of other persons included in the total income of the assessee, e.g., if the
assessee and his spouse are partners in the sarne firm, the share of income' of the
spouse is included in the total income of the assessee under the head 'Income from
Other Sources'.
xiii) Income received by non-professionals in consideration of writing articles in
Journals.
xiv) Interest received on foreign securities.
xv) Income from undisclosed sources.

All those incomes which are not exempt and are to be taxed and are at the same time
not covered in any of the four heads of income namely salary, house property, capital
gains and business and profession is included in the head of income from other sources.

The income included here is taxable on cash or mercantile basis whichever method
assessee follows. There are certain incomes, which are specifically mentioned in
section 56 of the income tax act to be included in the head of income from other sources,
but there are various other incomes, which are not specified in section 56 of the income
tax act but are still included in the income from other sources.

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The following income shall be chargeable to income tax under the head "Income from
other sources", namely: -

Dividend: Dividend is chargeable at a rate of 10% if aggregate amount of dividend

during that year exceeds 10, 00,000. This is applicable for individuals/hufs. If the
dividend is received from a domestic company and it is chargeable under dividend
distribution tax, then it will be exempted.

One-time income: Income from lotteries, crossword puzzles, horse races, games,
gambling or betting. It includes any winnings from lotteries, crossword puzzles, races
including horse races, card games and other games of any sort or from gambling or
betting of any form or nature whatsoever. These receipts are chargeable to tax under
the head “Income from other sources”.

Interest on securities if it is not taxable under “Profits and Gains of Business or

Profession”. Interest on debentures, Government securities/bonds is taxable under the
head “Income from other sources” provided the income is not chargeable to Income-
tax under the head profits and gains of business or profession.

Income from machinery, plant or furniture: This is applicable if income is not

chargeable to tax under the head ‘Profits and Gains of Business or Profession’. Interest
on debentures, Government securities/bonds is taxable under the head “Income from
other sources” provided the income is not chargeable to Income-tax under the head
profits and gains of business or profession.

Composite rental income from letting of plant, machinery or furniture with buildings,
where such letting is inseparable. Again, this is applicable if this income is not taxable
under the head ‘Profits and Gains of Business or Profession’.

Winnings from lotteries: The amount of winnings from lotteries, crossword puzzles,
card games, betting and gambling is taxed under S.56. Lottery includes prizes awarded
to any person by draw of lots or by chance or in any other manner whatsoever, under
any scheme or arrangement by whatever name called. It includes any winnings from
lotteries, crossword puzzles, races including horse races, card games and other games
of any sort or from gambling or betting of any form or nature whatsoever. These receipts

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are chargeable to tax under the head “Income from other sources”. Receipts by way of
winnings from lotteries, crossword puzzles, races including horse races, card games and
other games of any sort or from gambling or betting of any form or nature whatsoever
are chargeable to tax under the head "Income from other sources" even if the person
receiving the amount of winnings is a dealer in sale and purchase of lotteries, etc.

Advance Money Received in the course of negotiations for transfer of a Capital

Asset. Where any sum of money, received as an advance or otherwise in the course of
the negotiations for transfer of a capital asset, is forfeited and the negotiations do not
result in transfer of such capital asset, then, such sum shall be chargeable to income-tax
under the head “Income from other sources”.

Gifts: Any sum of money, the aggregate value of which exceeds Rs. 50,000 is received
without consideration or property (whether movable or immovable) is received without
consideration or property is received for an inadequate consideration by any person on
or after 1.4.2017, if the amount of such gift or inadequate consideration exceeds Rs.
50,000. As per section 56(2) (vi), in the case of an individual and HUF, if any sum of
money is received without consideration on or after April 1, 2006 from any
person/persons in excess of Rs. 50,000 in a year, entire amount is chargeable to tax in
the hands of the recipient. If the amount of receipt is upto Rs. 50,000 it would be exempt
from tax. Any sum of money received in the following cases shall not be considered for
this purpose:

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  Money received from a relative–The term 'relative' means (i) spouse of the
individual; (ii) brother or sister of the individual; (iii) brother or sister of the
spouse of the individual; (iv) brother or sister of either of the parents of the
individual.
 Money received on the occasion of the marriage of the individual. Marriage gift
may be received from relatives, friends or any other person. Gifts on other
occasions as, for example, birthday, etc. will, however, be chargeable to tax.
 Money received by way of will or inheritance.

Thus, a sum of money received by a firm, a company, AOP, BOI without consideration
is not taxable under section 56(2) (vi). In the case of an individual and HUF, gift of
money in excess of Rs. 50,000 in a year is taxable whether the recipient is a resident or
non-resident; likewise, the donor of gift may be resident or nonresident.

Employees' Contribution towards Staff Welfare Scheme: Any sum received by the
assessee from his employees as contributions to any provident fund, recognized or
unrecognized or superannuation fund or any fund set up under the provisions of the
Employees' State Insurance Act,1948, or any other fund for the welfare of such
employees is taxable in the hands of the employer under the head "Income from other
sources" if it is not chargeable to income tax under the head "Profits and gains of
business or profession".

Sum Received under Keyman Insurance Policy: any sum received under a Keyman
Insurance Policy, including the sum allocated by way of bonus on such policy, if such
income is not taxable under the head "Salaries" or "Profits and gains of business or
profession".

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In Short U/s 56(2) Income chargeable to tax under this head which are specifically
stated are: - 1) Dividend.

2) Any winnings from lottery, crossword puzzles, races including horse races, card
games and other games of any sort or from gambling or betting of any form or nature
whatsoever.

3) Any sum received by assessee from his employees by way of contribution to P.F.,
Super Annuation fund or any other fund if it cannot be charged under head profits and
gains of business profession.

4) Income by way of interest on securities if it cannot be charged under the head profits
or gains from business or profession.

5) Income from machinery, plant or furniture belonging to the assessee and let on hire
if such income is not chargeable under head profit or gains from business or profession.

6) Where machinery, plant or furniture is let out along with building & letting of
building is inseparable from letting of other assets, then income from such assets shall
be treated as income from other sources if it is not chargeable under head income from
business or profession.

7) Any sum received under a Keyman Insurance Policy, if such income is not
chargeable to tax under the head ‘Profits & Gains of Business or Profession’ or ‘Salary’.

8) Any sum of money exceeding ` 50,000 received without consideration by an

individual or HUF from any person.

Exception to this clause: -

1] Money received from any relative i.e. spouse, brother, sisters, parents, in-laws,
brother/sister of parents, any lineal ascendant or descendent of the individual & spouses
of above mentioned persons.

2] Money received on the occasion of marriage.

3] Money received under will or inheritance.

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4] Money received in contemplation of death of the payer.

5] Money received from a local authority.

6] Money received from any fund, foundation, university, other educational institution,
hospital, medical institution, any trust or institution referred to in section 10(23C).

7] Money received from a charitable institute registered under section 12AA.

Apart from these income which cannot be included under any other head is taxed as
income from other sources. e.g. 1) Income from subletting. 2) Interest on bank deposits.
3) Income from Royalty if not business income 4) Agricultural income from a place
outside India. 5) Rent of plot of land 6) Salary payable to M.P. or M.L.A. etc

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1.1.3 DEDUCTIONS FROM 'INCOME FROM OTHER SOURCES' [SECTION
57]

1. Deductions for expenses from dividend income [Section 57(i) and 57(iii)]:

The following expenses can be claimed as deductions from gross dividend income
other than the dividends referred to in section 115-O:

a. Collection charges: any reasonable sum paid by way of commission or

remuneration to a banker or any other person for the purpose of realizing the
dividend.
b. Interest on loan: Interest on money borrowed for purchasing the shares can
be claimed as a deduction. The interest can be claimed even if no income is
earned by way of dividend on such shares. It has been held by the Supreme
Court that if the expenditure has been laid out for the purpose of earning the
dividend income then whether income is actually earned or not is immaterial
and deduction on account of interest can be claimed.
c. Any other expenditure: Any other expenditure, not being a expenditure of a
capital nature, expended wholly and exclusively for the purpose of making or
earning such income, can be claimed as a deduction.

2. Deductions for expenses from Interest on Securities [Section 57(i) and (iii)]:

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As discussed in the case of dividends, the following deductions will also be allowed
from the gross interest on securities:

(a) Collection charges [Section 57(i)]: Any reasonable sum paid by way of
commission or remuneration to a banker, or any other person for the purpose
of realizing the interest.
(b) Interest on loan [Section 57(iii)]: Interest on money borrowed for investment
in securities can be claimed as a deduction.
(c) Any other expenditure [Section 57(iii)]: Any other expenditure, not being a
expenditure of a capital nature, expended wholly and exclusively for the
purpose of making or earning such income can be claimed as a deduction.

3. Deductions permissible from letting out of machinery, plant or furniture and

buildings [Section 57(ii) and (iii)]:

The following deductions are allowable:

1. Current repairs, to the premises held otherwise than as tenant.

2. Insurance premium against risk of damage or destruction of the premises.
3. Repairs and insurance of machinery, plant or furniture.
4. Depreciation based upon block of assets, in the same manner as allowed under
section 32 in the case of Income from Business and Profession subject to the
provisions of section 38 i.e. if it is partly let and partly used for own purpose,
deduction of expenses (including depreciation) shall be allowed to the extent it
is let out.
5. Any other expenditure: Any other expenditure, not being a expenditure of a
capital nature, laid out or expended wholly and exclusively for the purpose of
making or earning such income can be claimed as a deduction.

The income chargeable to tax under this head 'Income from Other Sources' is
computed after making the following deductions:

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1. In the case of dividend income (and interest on securities: any reasonable sum paid
by way of remuneration or commission for the purpose of realising dividend or
interest.

2. In the case of income in the nature of family pension:

 Rs. 15,000 or
 33 1/3 % (33.33%) of such income,whichever is lower.

3. In the case of income from machinery, plant or furniture let on hire:

 repairs to building [section 30(a)(ii)];

 current repairs to machinery, plant or furniture and insurance premium
[section 31];
 depreciation on building, machinery, plant or furniture [section 32]; and
 Unabsorbed depreciation [section 32(2)].

Under Section 57, the income chargeable under the head 'Income from Other
Sources' shall be computed after making the following deductions:

1) In the case of dividends or interest on securities, any reasonable sum paid by

way of commission or remuneration to a banker or any other person for the
purpose of realizing such dividend or interest on behalf of the assessee, is
deductible. No such deduction is allowed in case of a foreign company.

2) Where employees' contribution to Provident Fund, etc., are treated as the

income of the assessee (employer) it is included in his income from other sources
and a deduction of the sum, credited by the assessee to the employee's account in
the relevant fund on or before the due date, will be allowed under this head.

3) In the case of income from letting of machinery, plant or furniture along with
letting of buildings, which is chargeable to tax under the head 'income from other
sources', the deductions in respect of the following shall be allowed: i)
Expenditure incurred regarding current repairs of machinery, plant, furniture or
building. ii) Insurance premium paid regarding building, machinery, plant or
furniture against risk of damage or destruction of the assets. iii) Depreciation on
buildings, machinery, plant or furniture.

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4) In the case of income in the nature of family pension received by the widows or
heirs of deceased employee, a deduction of sum equal to 331/3% of such income
or Rs. 12,000, whichever is less, will be allowed.

5) Any other revenue expenditure incurred wholly and exclusively for the purpose
of earning such income. It should not be in the nature of personal expenses of the
assessee. No such deduction is allowed in case of a foreign company.

1.1.4 AMOUNTS NOT DEDUCTIBLE—SECTION 58

1) Personal expenses of the assessee.

2) Any interest paid outside India on which tax is not deducted at source.

3) Any salary paid outside India on which tax is not deducted at source.

4) Expenses covered by Section 40A of the Income Tax Act.

5) Any expenditure in connection with income by way of winning from lotteries,

card games, or other games of any sort, or gambling or betting of any form will
not be allowed as deduction. However, in case of income from horse races,
expenditure incurred to maintain the horses shall be allowed as deduction if
assessee is the owner of horses, and horses are maintained for running in horse
races.

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1.1.5 LIST OF EXEMPTIONS UNDER SECTION 10 OF INCOME TAX ACT

Section 10 of the Income Tax Act, 1961, provides a long list of tax exemptions
especially for the salaried employees to reduce the burden of taxing such as House
Rent allowances, Children Education Allowance, Hostel Allowance, Gratuity, Leave
Travel Allowances etc. This comprehensive guide by H&R Block will help you
understand all these tax exemptions so that you can save your taxes better.

Income exempt u/s 10

There are certain types of incomes which are fully exempt from Income tax as per
section 10.

Section 10(1) – Agriculture Income Exemption

 As per section 10(1), agricultural income earned by the taxpayer in India is

exempt from tax. Any rent or revenue derived from land used for agricultural
purposes or agricultural produce to sell in the market.
Any income from farm house subject to certain satisfactory conditions specified in
section 2(1A) would be exempt. As per section 10(1), agricultural income earned by
the taxpayer in India is exempt from tax. Agricultural income is defined under section
2(1A) of the Income-tax Act. As per section 2(1A), agricultural income generally
means:

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 a. Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes.
b. Any income derived from such land by agriculture operations including
processing of agricultural produce so as to render it fit for the market or sale of
such produce.
c. Any income attributable to a farm house subject to satisfaction of certain
conditions specified in this regard in section 2(1A). Any income derived from
saplings or seedlings grown in a nursery shall be deemed to be agricultural
income.

Section 10(10BC) of the income tax act

The employee is entitled to enjoy the exemption on tax over receiving the
compensation for natural disaster from central government.

Section 10(2) – Amount received by a member of the HUF from the income of
the HUF, or in case of impartible estate out of income of family estate

 As per section 10(2), amount received out of family income, or in case of

impartible estate, amount received out of income of family estate by any member
of such HUF is exempt from tax.
 Example-1. HUF earned ` 5, 00,000 during the previous year and paid tax on its
income. Mr A, a co-partner is an employee and earns a salary of ` 20,000 p.m.
During the previous year Mr A also received ` 1, 00,000 from HUF. Mr A will
pay tax on his salary income but any sum of money received from his HUF is not
chargeable to tax in Mr A’s hands.

Section10 (11A) payment from sukanya samriddhi account

As per section 10(11A), any payment from an account opened in accordance with
the Sukanya Samriddhi Account Rules, 2014 made under the Government
Savings Bank Act, 1873 is exempt from tax. In other words, interest and
withdrawals from such account will be exempt from tax under section 10(11A).

Section 10(16) – Stipend Scholarship

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 Scholarship is free education to students. It covers the cost of education like
tuition fees and other related expenses.
 The scholarship may have been given by Govt., University, Board, Trust, etc. is
exempt to the fullest amount. ‘Cost of education’ includes not only the tuition
fees but all other expenses which are incidental to acquiring education.
Scholarship may have been given by Govt., University, Board, Trust, etc. The
exemption is irrespective of actual expenditure incurred by the recipient to meet
the cost of education.

Section 10(15) Interest on securities

Interest up to Rs 3500 in Post Office Savings Exempted from Income Tax – As per
sub-clause (i) of clause (15) of Section 10 of the Income Tax Act, income by way of
interest (among certain other incomes) will not form part of taxable income, if
notified by the Government and subject to conditions in the notification.

Section 10(18) of Income Tax Act – Pension received by certain winners of

gallantry awards

Individual who has received any of the gallantry awards stated below will have to pay
no taxes on their pension:

 service to Central or State Government

 awarded ‘Param Vir Chakra’ or ‘Mahavir Chakra’ or ‘Vir Chakra’ or such other
notified gallantry awards
Also, any amount received as a family pension by any member of the family of such
an individual will also qualify for exemption u/s 10(18).

Section10 (17) Allowance to M.P/M.L.A

This exemption is in respect of- daily allowance received by a M.P or M.L.A , any
allowance received by a M.P under the members of parliament Rules 1986. Any
constituency allowances received by a M.L.A.

Section10 (17A) Awards Instituted by Government

22
Any payment received in pursuance of following (whether paid in cash or in kind) is
exempt from tax:

 Any award instituted in the public interest by the Central Government or State
Government or by any other body approved by the Central Government in this
behalf.
 Any reward by the Central Government or any State Government for such
purpose as may be approved by the Central Government in this behalf in the
public interest.

Section10 (19) Pension to family members of armed forces

family pension received by the widow or children or nominated heirs, as the case may
be, of a member of the armed forces (including paramilitary forces) of the Union,
where the death of such member has occurred in the course of operational duties, in
such circumstances and subject to such conditions, as may be prescribed shall be fully
exempted

23
What are the deductions which cannot be allowed while computing taxable income.
Under Section 58 of the Income Tax Act, the following deductions cannot be claimed
while computing income from other sources:

 Any personal expenses of the income tax payee.

 Any interest paid outside India if no tax has been deducted at source.
 Any amount of salary paid outside India if no tax has been deducted at source
against that salary.
 Any expenditure exceeding Rs.10000/= [Rs.20000/= for F.Y.2016-17]
(Rs.35000/= in case transportation) paid in cash. It means any expenditure
made exceeding above limit must be paid by account payee cheque or demand
draft.
 Any expenses in connection with lotteries, crossword puzzles, card games and
gambling etc.
 Any kind of personal expenditure
 Any amount of Interest chargeable or any kind of salary which is payable
outside India without any TDS deduction.
 Sum paid on account of wealth-tax
 Any expenditure concerning or related to winnings from lotteries, crossword
puzzles, races, and gambling, etc.
 Any expenses specified under section 40A are not deductible.

Tax Deduction Allowed for Income from Other Sources

Under Section 57 of the Income Tax Act, the following are the tax deductions allowed
for Income from other sources:

 The expenses which are incurred for the realization of dividend or income of
interest
 The deductions to the extent of the amount remitted within the due date are
authorized. They are in respect to any contribution towards funds for the
welfare of the employees
 In case of a family pension, deductions are allowed to the extent of 33-1/3% of
pension amount or Rs. 15000, whichever is lower

24
 The deductions for current repairs, insurance and depreciation will only be
allowed for income earned by the way of lease rental
 Deduction on interest received on compensation or enhanced compensation
will be equal to 50%

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1.2 INCOME FROM HOUSE PROPERTY

1.2.1 INTRODUCTION

Income from house property

The annual value of property, consisting of any buildings or lands appurtenant thereto
of which the assessee is the owner, other than such portions of such property as he
may occupy for the purposes of any business or profession carried on by him, the
profits of which are chargeable to income tax, shall be chargeable to income tax under
the head "Income from House Property".

The annual value of any property you own is taxable under the head ‘income from
house property’. While there are a few deductions available from this income, income
from a property is not taxable under the head ‘income from house property’
when...

 The property is used for one’s own business or profession.

 The property is self-occupied.

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  It is income from a farmhouse.

 It is the property income of a local authority.

 It is the property income of a university or an educational institution.

 It is the property income of a trade union.

 It is property held for charitable or religious purposes.

 It is the property income of a political party.

 It is the property income of an approved scientific research association

1.2.2 DEFINITION-' INCOME FROM HOUSE PROPERTY'

The income from Houses, Building, Bungalows, Godowns etc. is to be computed and
assessed to tax under the head “INCOME FROM HOUSE PROPERTY”. The income
under this head is not based upon the actual income from the Property but upon
Notional Income or the Annual Value of the Building.

Income is taxable under this head “Income from House Property” if the following 3
conditions are satisfied:

Condition-1: The property should consists of any building or lands appurtenant

thereto.

Condition-2: The assessee should be owner of the property.

Condition-3: The Property should not be used by the owner for the purpose of any
business or profession carried on by him, the profits of which are chargeable to
Income Tax.

As per Section 2(2) ‘Annual Value’, in relation to any property, means its annual
value as determined under section 23; Under section 23 ‘Annual Value’ is defined
as: For the purpose of section 22, the annual value of any property shall deemed to
be – (a) the sum for which the property might reasonably be expected to let from
year to year; or (b) where the property or any part of the property is let and the actual

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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; or (c) where the
property or any part of the property is let and was vacant during the whole or any part
of the previous year and owing to such vacancy the actual rent received or receivable
by the owner in respect thereof is less than the sum referred to in clause (a), the
amount so received or receivable.

1.2.3 WHEN INCOME IS CHARGED UNDER INCOME FROM

HOUSE PROPERTY'

As per section 22 the following conditions must be satisfied, the property must be any
building or lands appurtenant thereto. This is called the house property. The property
must be owned by the assesse. The property must be not be occupied by the owner for
the purpose of any business or profession carried on by the owner, the profits of
which are taxable.

Essential Conditions for Taxable Income under this Head

(1) Property must consist of any buildings with or without adjoining lands

BUILDING: The term building is not defined in the Income tax Act. As per general
meaning it means a permanent structure built of bricks and/or stones, having a
foundation, doors, windows etc, which may or may not have a roof.

 Stadiums & swimming pools don‘t have any roof, but still they can be treated as
building.

 A house under construction, incapable of being let out, is not treated as building
until it is completed

Lands Appurtenant thereto: This term is also not defined in the Income tax act.It
means land which is attached to a building which is used as a part of building. e.g.
garden, garage, car parking, cycle stand Land, which is not adjoining, to any building
is not covered by this section. Rental income of such land is taxable under the head
income from other source

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Following are some examples of lands appurtenant thereto:- i. Garden given as rent
along with the house. ii. Parking area in the vicinity of the house given in rent along
with house. iii. Backyard of a House Note: - Any income from a plot (i.e.) a piece of
land shall not be taxable under the head of Income from house property. Such an
income shall be taxable under the head ‘Income from Business or Profession’ or
‘Income from Other Sources’.

(2) Assessee must be the owner of the property:- It is only the owner of the house
property, who is liable to pay tax, under this head of income. Thus where a person is
himself a tenant & and if he further let out this property (i.e. subletting), he is not
taxable under this head but under the head Income from other source, as he is not the
owner of the property.  Ownership includes legal ownership as well as deemed
ownership. If a person is owner of a building and not the owner of the land on which
the building is built, even then income form such building will be taxable in his
hands.

1.2.4BASIC OF HOUSE OF PROPERTY.

A house property could be your home, an office, a shop, a building or some land
attached to the building like a parking lot. The Income Tax Act does not differentiate
between a commercial and residential property.
All types of properties are taxed under the head ‘income from house property’ in the
income tax return. An owner for the purpose of income tax is its legal owner,
someone who can exercise the rights of the owner in his own right and not on
someone else’s behalf.
When a property is used for the purpose of business or profession or for carrying out
freelancing work – it is taxed under the ‘income from business and profession’ head.
Expenses on its repair and maintenance are allowed as business expenditure.

House property is further divided into let out

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 A. SELF OCCUPIED HOUSE PROPERTY

A self-occupied house property is used for one’s own residential purposes. This may
be occupied by the taxpayer’s family – parents and/or spouse and children. A vacant
house property is considered as self-occupied for the purpose of Income Tax.

Prior to FY 2019-20, if more than one self-occupied house property is owned by the
taxpayer, only one is considered and treated as a self-occupied property and the
remaining are assumed to be let out. The choice of which property to choose as self-
occupied is up to the taxpayer.

Features towards Tax Incidence on Self-Occupied House Property:

 A property occupied for own business purposes

Where an assessee uses his property for carrying on any business or profession, no
income is chargeable to tax under the head “Income from house property”. The
assessee, in such a case, is not entitled to claim any deduction on account of rent in

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respect of such house property in computing taxable profits of the business or
profession.

 When more than one property is occupied for own residential purposes -

Where the person has occupied more than one house for his own residential purposes,
only one house (according to his own choice)1 is treated as selfoccupied and all other
houses will be “deemed to be let out”. In the case of “deemed to be let out” properties,
the taxable income will be calculated in the manner explained in para 68 [gross annual
value shall be taken as reasonable expected rent]. In the case of one self-occupied
property (treated as such), the procedure for determining taxable income is as follows:

One Self-Occupied Property may fall in any one of the following categories ....

1. If such property is used throughout the previous year for own residential
purposes, it is not let out or put to any other use
2. If such property could not be occupied throughout the previous year because
employment, business or profession of the owner is situated at some other place
3. When a part of the property (being independent residential unit) is self-occupied
and the other part is let out
4. When such property is self-occupied for a part of the year and let out for the
other part of the year

A House Property fully utilised throughout the Previous Year for Self-Residential
Purposes

Where the property consists of one house in the occupation of the owner for his own
residence, the annual value of such house shall be taken to be nil, under section 23(2)(a),
if the following conditions are satisfied:

Condition 1: The property (or part thereof) is not actually let during whole (or any part)
of the previous year.

Condition 2: No other benefit is derived therefrom.

1. Where the Annual Value of such House shall be NIL [Section 23(2)(a) & (b)]

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Where the Property consists of a House or Part of a House which -

a. is in the occupation of the owner for the purposes of his own residence; or
a. 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,

The Annual Value of such House or Part of the House shall be taken to be NIL.

2. Where the Annual Value of such House shall Not be Nil [Section 23(3)]:

The annual value of self-occupied house shall not be nil:

i. if such house or part of the house is actually let during the whole or any part of
the previous year; or
ii. any other benefit therefrom is derived by the owner from such house.

3. Where Assessee has more than one house for Self-Occupation

[Section 23(4)]:

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If there are more than one residential houses, which are in the occupation of the owner
for his residential purposes then he may exercise an option to treat any one of the houses
to be self-occupied. The other house(s) will be deemed to be let out and the annual value
of such house(s) will be determined as per section 23(1)(a) i.e. the sum for which the
property might reasonably be expected to let from year to year. The assessee in this
case, should exercise his option in such a manner that his taxable income is the
minimum. Such option may be changed from year to year.

However, if an assessee has a house property which consists of two or more residential
units and all such units are self-occupied, the annual value of the entire house property
shall be taken as Nil as there is only one house property though it has more than one
residential units.

4. Deduction in respect of one Self-Occupied House where Annual Value is NIL :

Where annual value of one self-occupied house is nil, the assessee will not be entitled
to the standard deduction of 30%, as the annual value itself is nil.

Income from from property in case of self-occupied property is simple, as net annual
value is to be taken nil, but standard deductions is to be deducted from NAV.

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There are 2 deductions which are eligible for self-occupied house property which are
same in all case, to be deducted from NAV namely:

1. Standard Deduction of 30% of NAV.

2. Interest on housing loan.

Income from house property (self-occupied property)

Net Annual Value, which is nil minus eligible deduction.

B. Let out House Property

A house property which is rented for the whole or a part of the year is considered a let
out house property for income tax purposes

Income from house property can be computed with following steps:-

Step I

Fair Rental Value is the amount the owner of property could reasonably expect to
receive from a stranger for the same type of lodging; generally, the amount at which a
home with its furnishings could be rented to a similar size family in a similar location.
Municipal value is the value determined by local authorities by making a periodical
survey of all buildings in their jurisdiction. Such valuation helps in
charging municipal tax. Any taxes paid to the Government during the financial year

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(for which the income is being computed) on the property owned, such as house tax,
are allowed for deduction from the Gross Annual Value which is calculated on the
basis of the total rent receivable/received/deemed rent for the property for that FY. If
the owner does not pay the taxes on a property then he cannot avail the deduction too.
Owner can claim deduction even for arrears of house tax in the financial year in
which these arrears are actually paid.

Fair market value or municipal value (Government valuation) of the property,

whichever is higher.
Step II:

Amount calculated in Step I above or Actual rent receivable from house property,
whichever is higher.

Step III: Gross Annual Value (GAV)

The Gross Annual value is the current value, the actual rent (whether received or
receivable) or the fair rental value, whichever is highest or which the property might
be expected to attract on the open market in ideal circumstances where there is neither
a glut nor a shortage of accommodation.[1]

The following four factors are taken into consideration while determining the GAV of
a property:

1. The rent payable by the tenant (actual rent)

2. The municipal valuation of the property
3. The fair rental value (market value of a similar property in the same area)
4. The standard rent payable under the Rent Control Act

If a property is self-occupied then the GAV is considered to be nil.

.If the house property has remained vacant during any part of the year, the rental
income not received by taxpayer due to such vacancy shall be deducted from amount
calculated in Step II. So taxpayer will get Gross Annual Value of the property.

GAV= Amount computed in Step II minus Vacancy Loss.

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(Note- In case of self- occupied house property, as there is no rental income received
by taxpayer, Gross annual value of a self-occupied property is always ZERO)

Step IV: Net Annual Value (NAV)

Net Annual Value shall be computed as follows- Gross Annual Value of the property
minus municipal taxes paid during the year by the owner.

Points to remember-

1. The income from house property which is occupied by the owner for the purpose of
his own residence or could not be occupied by the owner for his residential purpose
due to his employment at other place is taken as NIL. The assessee, in this case, will
not be entitled to the standard deduction of 30% in this case. However, he is allowed
deduction of interest paid on house loan including the accumulated interest of the pre-
construction period.

2. Income from House property is added to the person's total income only if such
house or part of the house is let out for whole or part of the year, or any other benefit
derived from the house by the owner.

3. When the assessee has more than one house then, then he/she can exercise an
option to treat anyone of the house to be self-occupied. The other house(s) shall be
deemed to be let out.

Step V: Eligible Deductions

There are deductions which are eligible to be deducted from NAV namely:

Standard Deduction of 30% of NAV.

30% of annual value will be allowed as tax deduction while calculating income
under the head “income from house property”. This deduction is allowed under

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 section 24 irrespective of the amount of expenditure you have spent during the
financial year.

Interest on borrowed capital when the house property is self-occupied:

When the property is self-occupied the interest amount deduction is allowed as

 In case the property is acquired or constructed out of loan borrowed on or after

1/04/1999 and where such acquisition or construction is completed with in a
period of 3 years from the end of the financial year in which such loan is
borrowed then the interest amount shall be allowed as a deduction up to Rs. 1,
50,000 (Budget 2014 has increased this tax deduction limit from Rs.150000 to
Rs. 200000. So for financial year 2014-2015 Rs. 200000 will be allowed as tax
deduction instead of Rs. 150000 under section 24)
 In other cases Rs. 30, 000 will be allowed as income tax deduction from income
from house property.

Followings are cases where deduction under section 24 will be restricted to Rs. 30,
000;

1. Where the loan borrowed has been taken for the purpose of repair, renovation
or reconstruction of house property or
2. The loan amount is borrowed before 1/04/1999 or
3. Loan has been taken to acquire or construct a house but such acquisition or
construction not completed within a period of 3 years

If any interest amount is paid outside India without deduction of tax then such interest
amount will not be allowed as a deduction under section 25 of income tax act while
calculating income under the head income from house property.

Interest on Borrowed capital – Section 24:

Capital is borrowed from a bank or any financial institution for the purpose
of purchase, construction, repair, renewal or reconstruction of the house property then
under section 24, interest amount will be allowed as a tax deduction from house
property’s net annual value. Such amount will be allowed as a deduction on due basis

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i.e. it can be claimed as a deduction even though the amount has not been paid by you
during the financial year but charged to your loan account.

If you have taken a loan to repay the first loan then interest amount on the second loan
will be allowed as a deduction under section 24 from the net annual value.

If you have taken a loan for acquisition or construction of the house property and
during such construction period the interest amount has been accumulated then such
accumulated amount can be claimed as a deduction every year for a period of 5 years
(1/5th of the amount every year for a 5 years period) under section 24. Construction
period are the periods preceding the year of completion of construction.

Step VI: Income from house property

Net Annual Value minus eligible deduction.

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C. Inherited Property
An inherited property i.e. one bequeathed from parents, grandparents etc again, can
either be a self-occupied one or a let out one based on its usage as discussed above.
Son who inherits a property, has to pay tax on the income earned from the property.
We look at when this tax liability arises, in case of inheritance through a will and in
case of intestate inheritance
A person is taxed on the income earned by him. This income may be active income, in
the form of salaries or income from business. It may also be passive income, like
capital gains or interest or rental income from house property. Rental income is taxed,
on the basis of ownership of the property. So, unless you have become an owner of a
house property, the liability to pay tax does not arise. In case of inheritance, the tax
liability will arise at the point of time, when you become an owner of the property.

Inherited house property passed by his parents, and has to pay tax on the income
earned from that house property , the heir/s who are entitled to the inheritance,
become the owner/s of the property, on the day of death of the person, without there
being any need for anything to be done by anyone. The income from property, from
April 1 of the year, till the day of death, will be taxed in the hands of the legal
representative of the deceased. For the rest of the period, it will be taxable in the
hands of the person who has inherited the property.

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1.2.5 STEPS TO CALCULATE INCOME FROM HOUSE PROPERTY

The annual value of a house property is determined differently for different

categories. House properties are divided into 3 categories for this purpose. These are
as follows:

Case 1: House Property which is let out throughout the previous year
The Gross annual value of a property which was let out throughout the previous year
is taken to be higher of the following:
(a) Expected rent/Deemed Rent which is taken as the higher of the Municipal
valuation or Fair Rental Value
Or
(b) The actual rent received (or receivable) by the owner of a property which is partly
or fully let out.

This implies that in case the actual rent received is in excess of the expected rent then
the actual rent received is taken as the gross annual value. On the other hand, if actual
rent received is less than the expected rent then, expected rent is taken as gross annual
value.

Expected rent or Deemed Rent is the rent which the owner is expected to receive,
calculated on notional basis from the higher of the Municipal value or Fair Rental
value subject to maximum of the standard rent, n case property is covered under the
Rent Control Act.

Case 2: House Property which was partly let out and partly vacant during the
year.
In such cases where the house property was partly let out and partly vacant during the
year, there are two scenarios, which affect the actual rent received owing to such
vacancy.

Scenario 1: When the actual rent received or receivable is more than the expected
rent despite the vacancy. In that case, the gross annual value is taken as actual rent

40
received as it is higher than the expected rent. Expected rent is calculated as higher of
the municipal valuation or fair rent.

Scenario 2: When the actual rent received or receivable is less than the expected rent
due to the vacancy of the property for some time during the year. The gross annual
value of the property will be actual rent received or receivable.

Case 3: House Property which was let out for part of the year and rest of the
year occupied for own residence.
Since the house was let out for a part of the year and was self-occupied for the rest of
the year, the gross annual value is calculated as the rent that could have been received
in case property was let out for the whole year. The period of self-occupation is
irrelevant.

The Gross annual value is taken as higher of the

a) Expected rent by letting out the property for the whole year i.e. higher of the
municipal valuation or fair rent,
b) Actual rent received or receivable only for the period it was let out.

Some of the important points in case of income from house property:

Income from house property situated abroad: Income from any house property I
situated abroad is taxable only in case of an individual. Not ordinary resident and non-
resident pay tax on such property only when it is received in India. A resident will pay
tax on foreign property as if such property is situated in India.
Disputed Ownership: If the title of ownership is disputed in a court of law,The
decision as to who is the owner rests with the income-tax department. Generally, the
recipient of rental income or the person who is in possession of the property is treated
as the owner.

Composite Rent: If a building is let out to a person alongwith other facilities (e.g.
electricity, cooler, 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
seperated and that belonging to the building only will be taxed under the head 'House

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Property' and that which belongs to other facilities will be taxed under the head
'Income from dther Sources'. If the eomposite rent cannot be split up it will not be
taxed under the head 'House Property', but under the head ‘Other Sources. '

Property owned by Co-owners: Where a property is owned by two or more persons

jointly and their respective shares are definite and can be ascertained then income
from such property shall not be assessed on such persons as association of persons,
but the share of each person will be calculated and added to their respective total
income.

Income from sub-letting: This is chargeable under the head other sources as the
person sub-letting is not the owner.

1.2.6 HOUSE PROPERTY INCOMES EXEMPTED FROM

INCOME TAX

There are certain cases where the income from the house property are tax-free. They
are neither taxable nor included in the total income for taxation. The incomes that are
exempted from tax are described below.

1. The revenue generated from the buildings in and around the agricultural land
that forms a part of agricultural income is exempted from tax as per section
10(1). Eg. Renting or leasing of a farmhouse, storehouse.
2. Income from property confined to local authorities is tax-exempted as per
section 10(20).
3. House property income of a political party is free from tax under section 13A.
4. Revenue earned from a property belonging to an approved scientific research
association is exempted from tax under section 10(21).
5. Property income of educational organizations, medical institutions are free
from tax as per section 10(23C).
6. Income from property subjected to charitable or religious purpose is tax-
exempted as per section 11.
7. Property income of Certified trade union is exempted from tax under section
10(24).

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 8. The annual value of one palace possessed by an ex-ruler of Indian states is free
from tax as per section 10(19A) where other palaces come under taxation.
9. The annual value of one self-occupied property for own residence is exempted
from tax under section 23(2).
10. Income from property used for one’s own business or profession is also tax-
exempted under section 22.

1.27 POINTS TO BE CONSIDERED WHILE COMPUTING

INCOME FROM HOUSE PROPERTY

 Tax on the house is calculated on the property's NAV.

 If the taxpayer’s house is vacant for a certain period of time and later let out,
the computation of Income from House Property should be done only for the
rent received - not for the entire year.

 If the taxpayer’s house is vacant for the whole year and the individual is living
in another city due to his or her employment, but is still paying municipal
taxes, then this can be set off against income from other sources during the
same year.

1.2.8 HOW TO SAVE TAX IN INCOME HOUSE PROPERTY

There are a number of measures an individual can undertake to save tax on income
from house property are as follows

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 Become co-owner: If the individual and his or his or her spouse have jointly
taken a home loan, both can claim tax exemptions towards payment of
principal and interest

 Thinking about getting a second home: if the assesse already has one
property registered in his or her name, it is a good idea to register the second
property in the name of individual spouse or relative so as to avoid excess
taxation

 Multiple properties ownership: The Income Tax Act, 1961, states that if an
individual owns multiple house properties, only one of these will be regarded
as self-occupied. The taxpayer needs to evaluate the tax liability on all the
properties he or she owns and occupy the one with the highest tax liability and
give out the others on rent.

 Joint Home Loan If you jointly own a property with someone and also apply
for a joint home loan with your partner, you will both be eligible for tax
deductions on interest up to Rs. 1, 50, 000 each.

 Planning a second home? If you already have one self-occupied property

registered to your name and wish to avoid paying taxes on a second home,
register the second property on your spouse/relatives name to avoid excess
taxation.
 Joint ownership Taxation on income from house property can be divided
between co-owners, and hence lessen the load.

 Ownership of more than one property if you own multiple properties, only
one of these can be registered as your residence and fall under self-occupied
property (SOP). It is important to evaluate the tax liability on all your
properties and choose the one with the highest tax liability to call home, and
let out the remaining. You can also change the SOP every year.

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 Empty houses that you own will still be taxed based on the fair rental value,
so it’s advisable to let any and all empty properties out, enabling income and
no loss because of taxation.

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1.3.1 DEDUCTION AND EXEMPTION UNDER INCOME TAX

1.3.1 INTRODUCTION

Income Tax is a compulsory obligation which is levied on every citizen, based on

their paying capacity, age, and gender. In order to provide relief to the assesse from
payment of taxes, the tax law has certain provisions for deduction and exemptions,
which decreases the overall tax liability.

In deduction, the amount is first included in the income of the taxpayer and then the
deduction is allowed as per the rules, i.e. in full or part or when certain conditions are
satisfied.

An exemption, on the other hand, is the income which is not charged to tax.

While deduction is a part of Gross Total Income (GTI), but any person can avail its
benefit based on application.

Conversely, the exemption is not a part of GTI. The article provided below explains
the substantial differences between deduction and exemption. Deduction means
subtraction i.e. an amount that is eligible to reduce taxable income. Exemption means
exclusion, i.e. if certain income is exempt from tax then it will not contribute to the
total income of a person. The deduction is a concession, but Exemption is relaxation.
... Conversely, the exemption is unconditional.

Exemption and deduction are similar terms but there are some academic differences
between the two. Sometimes the terms are used interchangeably also.

1. Exempt income is tax free from the beginning or the income is not taxable
at all, for example interest on PF is exempt. Most of exempt incomes are
given in section 10 of income tax act
2. Deduction is given from taxable income,So income is first taxable and then
a portion of that is given as deduction for some expenses.

Tax deduction refers to the amount of money that is reduced from your total
taxable income. The final tax payable is calculated depending on the

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 balance ‘taxable income’. Tax deductions aim to promote the culture of
savings and investments among the general public.

However, it is good to know that tax deduction is only allowed on specific

investments or expenses incurred by the taxpayer. This includes medical
fees, transportation charges, donations made to charities, investments made
in specific avenues such as Equity Linked Saving Scheme funds (ELSS),
Public Provident Fund (PPF) and National Pension Scheme (NPS).

The Income Tax Act sections between 80C and 80U deal with all the
deductions available to taxpayers.
In the world of taxation, the word ‘exemption’ means exclusion. So, if a
particular income is exempt from tax, it will not be included in the total
revenue for tax purposes. This reduces the total taxable income of a
taxpayer. All exemptions are dealt with under Section 10 of the Income Tax
Act.

While certain incomes such as agricultural income are completely exempt

from taxation, there are other incomes that are partially exempted from tax.
This means only the portion of income that exceeds the exemption is subject
to tax. This includes:

a) House Rent Allowance (HRA)

b) Leave Travel Allowance (LTA)
c) Entertainment Allowance
d) Special allowances to meet personal expenses

1.3.2 DEFINATION OF DEDUCTION

Chapter-VI (80C to 80U) of the Income Tax Act, 1961 deals with deductions.
Deduction means the amount that will be subtracted from the gross amount.

If GTI is nil, then no deduction is allowable, or the amount of deduction cannot

exceed GTI i.e. deduction is allowable only to the extent of gross total income.

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Deductions are divided into three categories:

 Deduction regarding certain payments: Example: Life insurance premium

paid, medical insurance premium paid, donations to charitable institutions, etc.
 Deduction regarding certain incomes: Specific incomes from cooperative
societies, Royalty on patents etc.
 Other deductions

DEFINATION OF EXEMPTION

The exemption is derived from the word exempt which means an amount which is not
liable to something. In income tax, exemption refers to those incomes which are not
considered while calculating the total income. Hence, such source of incomes
excluded from taxable incomes or not chargeable to tax.

In the list of exempted incomes, certain incomes are completely exempt from tax like
agricultural income. But certain incomes are partly exempt from tax, in which
exemption is given up to the specified limit. The exceeding part of partly exempted
income will be subject to tax and considered while computing the gross total income.

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1.3.3 DIFFERENCE BETWEEN DEDUCTION AND EXEMPTION

1. SECTION

EXEMPTION :( Section 10)

Exemptions is laid down under section 10 of the act are the items of income
specifically excluded from taxable income. Exempt incomes are to be totally ignored
while computing income, following are the some of the exemptions under section 10

Section 10(1) – Agriculture Income Exemption. As per section 10(1), agricultural

income earned by the taxpayer in India is exempt from tax. Any rent or revenue
derived from land used for agricultural purposes or agricultural produce to sell in the
market.

Section 10(2) – Amount received by a member of the HUF. As per section 10(2),
amount received out of family income, or in case of impartible estate, amount
received out of income of family estate by any member of such HUF is exempt from
tax.

Section 10(2a) – Share of profit from Partnership Firm. As per section 10(2A),
share of profit received by a partner from a firm is exempt from tax in the hands of the
partner. Further, share of profit received by a partner of LLP from the LLP will be
exempt from tax in the hands of such partner.

Section 10(5) – Leave Travel Concession. Exemption is available in respect of value

of any travel concession or assistance received or due to the employee from his
employer (including former employer) for himself and his family members in
connection with his proceeding on leave to any place in India.

Section 10(7) of the Income Tax Act – Perquisites and Allowances paid by
Government to its Employees serving outside India.

49
Section 10(10CC) - Tax on Perquisites paid by employer. Sometimes for non-
monetary perquisites employer pay tax on behalf of employee in that case the tax so
paid by the employer is treated as exempt in the hands of the employee.

Section 10(19) of Income Tax Act – Family pension received by family members of
armed forces including paramilitary forces.

The above are some of the exemptions under income tax, which comes under section
10 which is different from deduction, as under deduction it comes under section 80 A

DEDUCTION: (Section80)

In case of deductions it covered under section 80 but it is not in the case of exemption,
as exemption it was covered under 10
Some of the deductions allowed from the gross total income are laid down in sections
80A to 80U falling under chapter VI A of income tax

Section 80C - Deductions on Investments. You can claim a deduction of Rs 1.5 lakh
your total income under section 80C. In simple terms, you can reduce up to Rs 1,
50,000 from your total taxable income, and it is available for individuals and HUFs.

Section 80E – Interest on Education Loan.

Deduction for Interest on Education Loan for Higher Studies. 80E deduction is
available for a maximum of 8 years (beginning the year in which the interest starts
getting repaid) or till the entire interest is repaid, whichever is earlier. There is no
restriction on the amount that can be claimed

Section 80D – Medical Insurance.

Deduction for the premium paid for Medical Insurance. You (as an individual or
HUF) can claim a deduction of Rs.25, 000 under section 80D on insurance for self,
spouse and dependent children. An additional deduction for insurance of parents is
available up to Rs 25,000, if they are less than 60 years of age. If the parents are aged
above 60, the deduction amount is Rs 50,000,

50
Section 80DD – Disabled Dependent

Deduction for Rehabilitation of Handicapped Dependent Relative. Section

80DD deduction is available to a resident individual or a HUF and is available on:

Where disability is 40% or more but less than 80% – fixed deduction of Rs 75,000.

Where there is severe disability (disability is 80% or more) – fixed deduction of Rs 1,

25,000. To claim this deduction a certificate of disability is required from prescribed
medical authority.

Section 80U – Physical Disability

Deduction for Person suffering from Physical Disability. A deduction of Rs.75, 000 is
available to a resident individual who suffers from a physical disability (including
blindness) or mental retardation. In case of severe disability, one can claim a
deduction of Rs 1, 25,000.

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 2. ALLOWABLE

EXEMPTION: (FOR ALL PERSON)

 Another important difference between exemption and deduction is whether

it is allowable to a specific person or to all persons. As in case of
exemption it is allowable to all person irrespective of whether he/she is
disable or not

 In case of exemptions, the exemptions is given in various way, an

individual can get exemptions from items included in salaries like gratuity,
leave travel concession, encashment of leave salary.

 Exemptions are given to given to all person, irrespective to fulfill various

conditions that are laid down in deductions

 Hence, the main difference between exemptions and deductions is that

deductions are allowed to specific person, and in case of exemptions it is
allowed to every person without any conditions.

For example, exemptions in case gratuity of salaried person is allowed to every

employees irrespective to fulfill certain conditions.

Exemptions therefore are allowable for all person, irrespective of various

conditions to be satisfied, as we can see in deductions a individual has to fulfill
various conditions and it is allowable for a specific person , for example to get a
deduction under section 80(U) is available to a resident individual who suffers
from a physical disability, and it is given when a individual is suffering from
above specific conditions and whereas in case of exemption it is given to all

52
 irrespective of various condition, for example exemptions like leave travel
concessions is given to all employee irrespective of various conditions. Hence
exemptions is allowable to all person, whereas in deductions various conditions
are to be fulfill. In the world of taxation, the word ‘exemption’ means exclusion.
So, if a particular income is exempt from tax, it will not be included in the total
revenue for tax purposes. This reduces the total taxable income of a taxpayer. All
exemptions are dealt with under Section 10 of the Income Tax Act.

While certain incomes such as agricultural income are completely exempt from
taxation, there are other incomes that are partially exempted from tax. This means
only the portion of income that exceeds the exemption is subject to tax.

DEDUCTIONS: (SPECIFIC PERSON)

 As in case of deductions, to get deduction a person is need to fulfill certain

conditions which is maintained in the act, which is explained as

 If a person wants a deductions under [S.80U] “HANDICAPPED RESIDENT

INDIVIDUAL” than he must be an individual, He must be resident of India,
he must be suffering from not less than 40 percent of disability

 If a person wants a deductions under [S.80D] “MEDICAL INSURANCE

PREMIUM” than he must to take insurance by any mode other than cash

 If a person wants a deductions under [S.80E] “ INTERST ON LOAN FOR

HIGHER EDUCATION “ than he must take a loan from any financial
institution, the loan must be taken for purpose of pursuing higher education,
the loan must be taken for his own higher educations

 The main difference between exemptions and deductions is that deductions are
allowed to specific person, and in case of exemptions it is allowed to every
person without any conditions.

53
Hence for any deduction individual has to be a specific person, but in case of
exemptions it is given to all person
Tax exemption applies to all taxpayers in the country. For instance, the amount paid
to a salaried employee as HRA is not taxable. However, tax deduction applies only to
those who qualify for the specific criteria. For instance, Section 80D of the Income
Tax Act can be used to claim deductions on premiums paid for medical insurance
policies.
Even though Income Tax is a mandatory responsibility to be paid by every citizen,
based on his or her paying capacity, age, and gender, taxpayers can obtain relief
through the various provisions to reduce their overall tax financial obligation, the
main difference between exemptions and deductions is that deductions are allowed to
specific person, and in case of exemptions it is allowed to every person without any
conditions.

Understanding the difference between exemption and deduction in income tax can
help in making smarter decisions before the annual tax planning process commences.
the main difference between exemptions and deductions is that deductions are
allowed to specific person, and in case of exemptions it is allowed to every person
without any conditions. Tax deduction refers to the amount of money that is reduced
from your total taxable income. The final tax payable is calculated depending on the
balance ‘taxable income’. Tax deductions aim to promote the culture of savings and
investments among the general public.

However, it is good to know that tax deduction is only allowed on specific

investments or expenses incurred by the taxpayer. This includes medical fees,
transportation charges, donations made to charities, investments made in specific
avenues such as Equity Linked Saving Scheme funds (ELSS), Public Provident Fund
(PPF) and National Pension Scheme (NPS). The Income Tax Act sections between
80C and 80U deal with all the deductions available to taxpayers.

54
 3 .INCLUDED OR NOT

EXEMPTION
Income which is exempt under section 10 should not be included while
computing the total income.
This is key difference between exemption and deduction, because while computing
total income, in case of deduction the income is first included and then the amount is
deducted, and in case of exemption any income which is exempt under section 10 will
not be included while computing the total income.
For example As per section 10(1), agricultural income earned by the taxpayer in India
is exempt from tax, while computing income under income tax , such income from
agriculture should not be included while computing the total income of individual ,
but in case in deductions the amount of income is first added in the total income of
individual and then deducted from it to arrive at the net income , but in case of
exemptions , the exempted income is not considered part of total income, the whole
amount is an exemption for the taxpayer

Exemption means exclusion, i.e. if certain income is exempt from tax then it will not
contribute to the total income of a person. In deduction, the amount is first included in
the income of the taxpayer and then the deduction is allowed as per the rules, i.e. in
full or part or when certain conditions are satisfied. An exemption, on the other hand,
is the income which is not charged to tax.

While deduction is a part of Gross Total Income (GTI), but any person can avail its
benefit based on application. Conversely, the exemption is not a part of GTI. All the
exemptions under section 10 will not be a part of gross total income, but it is not in
the case of deductions, in deductions it is a part of gross total income.

55
DEDUCTIONS

Chapter-VI (80C to 80U) of the Income Tax Act, 1961 deals with deductions.
Deduction means the amount that will be subtracted from the gross amount. As
per Income Tax Act, deductions are the payments or investments made by the
assessee through which a specific amount or percentage is reduced from their gross
total income to arrive at total taxable income. If GTI is nil, then no deduction is
allowable, or the amount of deduction cannot exceed GTI i.e. deduction is allowable
only to the extent of gross total income.

In deduction, the amount is first included in the income of the taxpayer and then
the deduction is allowed as per the rules, i.e. in full or part or when certain
conditions are satisfied. An exemption, on the other hand, is the income which is not
charged to tax. While deduction is a part of Gross Total Income (GTI), but any person
can avail its benefit based on application. Conversely, the exemption is not a part of
GTI. The amount of deduction is first included in the gross income and then deducted
from it to arrive at the net income, but in case exemption the exempted income is not
considered as a part of total income, the whole amount is an exemption for the
taxpayer. As per Income Tax Act, deductions are the payments or investments made
by the assessee through which a specific amount or percentage is reduced from their
gross total income to arrive at total taxable income. If GTI is nil, then no deduction is
allowable, or the amount of deduction cannot exceed GTI i.e. deduction is allowable
only to the extent of gross total income.

56
 4. CONDITIONAL

EXEMPTION

The most vital distinguish between exemptions and deductions is whether it is

conditional or not. Exemptions is unconditional, deduction is conditional, i.e. it is
allowed only to those who qualify the eligibility criteria. In exemption, there is no
special conditions to fulfill, as it is required in deductions. The deduction is
conditional, i.e. it is allowed only to those who qualify the eligibility criteria.
Conversely, the exemption is unconditional. In the list of exempted incomes, certain
incomes are completely exempt from tax like agricultural income. But certain
incomes are partly exempt from tax, in which exemption is given up to the specified
limit. The exceeding part of partly exempted income will be subject to tax and
considered while computing the gross total income.

DEDUCTIONS
Deductions is conditional, deductions is given to a person who is qualified to
fulfill certain condition, it is allowed only to those who qualify the eligibility
criteria. For example for individual to get a deductions under section 80U
following conditions are to fulfill. The taxpayer is an individual and resident in
India. The taxpayer shall have a certificate issued by the medical authority. He
suffers 40% or more than 40% of any disability

In deduction, certain conditions are required to be fulfill as above example

explains. This is the main differences between exemptions and deductions of
income. Various conditions are required to be fulfill to get benefit of deductions,
as it is not in the case exemptions.

57
 5. OBJECTIVE

EXEMPTION
The main objective of exemption is to boost that particular section in which tax is
exempted. The main objective of exemption is to boost and encourage particular
section of country. While the exemption is to help the weaker section of society. The
main difference between exemption and deductions is deduction is to encourage
savings and investments in certain instruments while the exemption is to help the
weaker section of society, exemptions are used to help the weaker sections of the
society to grow and prosper. By providing exemptions, the government is trying to
give an equal opportunity to boost that segment. The main concept of the exempted
income is not considered as a part of total income, the whole amount is an exemption
for the taxpayer, hence the main objective of exemption is to encourage and boost the
weaker section of the society. The main objectives of both deductions and exemption
is different but both safeguard the interest of the weaker section of the society.

DEDUCTIONS
The main objective of deductions is to promote savings and investments of the
general public. Deduction is mainly used by the government to promote savings to
increase investments in certain areas, for which the income of the assessee is reduced
to that extent. In order to provide relief to the assessee from payment of taxes, the tax
law has certain provisions for deduction and exemptions, which decreases the overall
tax liability. In deduction, the amount is first included in the income of the taxpayer
and then the deduction is allowed as per the rules, i.e. in full or part or when certain
conditions are satisfied. The key differences between exemption and deduction is that
objective of providing deduction is to encourage savings and investments in certain
instruments while the exemption is to help the weaker section of society.

58
 6. BASIC DIFFERENCES

EXEMPTION
Exemption means exclusion, i.e. if certain income is exempt from tax then it will not
contribute to the total income of a person. Tax exemption is the monetary exemption
of persons, people, property, income, or transactions from taxes that would otherwise
be levied on them. Tax-exempt status can provide complete relief from taxes, reduced
rates, or tax on only a portion of items. Tax exemption generally refers to a statutory
exception to a general rule rather than the mere absence of taxation in particular
circumstances, otherwise known as an exclusion. Tax exemption also refers to
removal from taxation of a particular item rather than a deduction.

DEDUCTIONS
Deduction means inclusion. Deduction means subtraction i.e. an amount that is eligible
to reduce taxable income. Income Tax Deductions are allowed by the Income Tax Act
as an instrument for tax saving and reducing the liability to pay tax. Act provides a list
of deductions.

Indian Income Tax Act, 1961 provides various income tax deductions. The income tax
deductions can be reduced from the gross taxable income while filing the income tax
return. These deductions help in tax saving and reducing the tax liability of a person.
The income tax is imposed on the total income as per the income tax slab rates after
claiming the income tax deductions. A tax deduction is a deduction that lowers a
person's tax liability by lowering his taxable income. Deductions are typically expenses
that the taxpayer incurs during the year that can be applied against or subtracted from
his gross income in order to figure out how much tax is owed

59
 Chapter -2
Research Methodology
Research is not only concerned to the revision of the facts and building up to date
knowledge but discover new facts involved through the process of dynamic changes in
the society Methodology is the systematic, theoretical analysis of the methods applied
to a field of study. It comprises the theoretical analysis of the body of methods and
principles associated with a branch of knowledge. Typically, it encompasses concepts
such as paradigm, theoretical model, phases and quantitative or qualitative techniques.

Research Design
Research design is a framework or blueprint for conducting the marketing research
projects. It explains the procedure necessary for obtaining the information needed to
structure or solve research problem. The present research design was the combine of
tabular and exploratory in addition of some verified and quantified by conclusive
research. The form of conclusive research design adopted for the study.
The Objective of tabular and exploratory research is to explore or search through a
problem or situation with Tabular Presentation to provide insight and understanding
Descriptive studies involve collection of data through structured design and survey
method is followed in order to get the needed information. It is typically based on
representative sample which was used to description and define the behaviour of the
respondents.

Research Methodology
The Researcher adopted convenient sampling techniques for the selection of study area.
A sample of 50 respondents was taken well Structured questionnaire was used for
collecting primary data by survey method. The study is designed to gather descriptive
information for conducting study in more practical manner. For testing hypothesis and
interpreting relationship analytical study is used. Therefore the study makes use of
quantitative research approach.

Objective of the study

Income from house property (objective)

60
After going through this lesson, you will be able to understand:
 The meaning of House Property
 Who is Treated as Owner of House Property
 The treatment of rental income from properties of different circumstances
 Determination of the annual value of a House Property
 The expenses deductible from rental/ nominal income from House Property
 Special treatment given to self-occupied House Property
 Treatment of income/loss from House Property

Income from others sources (objective)

 The meaning and the item included in income from other sources
 Which is item are deductible in income from other sources
 The item which are excluded from others sources
 List of items exempted under income from other sources
 Special items which are not deductible.

Distinguish between deductions and exemptions (objective)

 Basic meaning of both deduction and exemption
 Special treatment of deduction in case of specific person
 Exemptions which are given to all irrespective of conditions to satisfy.

Scope of the Study

Income from House Property

The Income Tax Act of India classifies income in five heads of which “Income from
House Property” is one of them. It comprises of income earned by a person through
the property(s) owned by him/her. When one sells/transfers his Property and earns
profit, it is taxable under Capital Gain in the year of transfer. Our article On Selling
a House, Capital Loss on Sale of House discusses Capital gain in detail. Three
conditions are to be satisfied for property income to be taxable under this head.

61
Income from others sources
Understanding the head of Income from Other Sources is residuary in nature. It includes
incomes which are not taxable in other heads of income.
Income from Other Sources is one of the heads of income chargeable to tax under the
Income tax Act. 1961. Any income that is not covered in the other four heads of income
is taxable under income from other sources, because of this, it is known as residuary
head of income. All the incomes excluded from salary, capital gains, house property or
business & profession (PGBP) are included in IFOS, except those which are exempt
under the Income Tax Act.

Distinguish between deduction and exemptions

Tax deduction refers to the amount of money that is reduced from your total taxable
income. The final tax payable is calculated depending on the balance ‘taxable
income’. Tax deductions aim to promote the culture of savings and investments
among the general public.However, it is good to know that tax deduction is only
allowed on specific investments or expenses incurred by the taxpayer.

In the world of taxation, the word ‘exemption’ means exclusion. So, if a particular
income is exempt from tax, it will not be included in the total revenue for tax
purposes. This reduces the total taxable income of a taxpayer. All exemptions are
dealt with under Section 10 of the Income Tax Act. While certain incomes such as
agricultural income are completely exempt from taxation, there are other incomes that
are partially exempted from tax

Significance of the Study

Income from house property

The determination of ‘Annual Value’ is important in the context of taxation of income

from House Property because though the tax under the head ‘Income from house
property’ is tax on income, yet it is not in that sense a tax on income but upon inherent
capacity of such property to yield income and for this ‘annual value’ is the yardstick.
The inherent capacity has been defined as the sum for which the property might
reasonably be expected to be let from year to-year. It is not necessary, that the property
should be actually let. It is also not necessary that the reasonable return from property

62
should be equal to the actual rent realized when the property is, in fact, let out. Where
the actual rent received is more than the reasonable return, it has been specifically
provided that the actual rent will be the annual value. Where, however, the actual rent
is less than the reasonable rent (e.g. in case where the tenancy is affected by
manipulation, emergency, close relationship or such other consideration), the latter will
be annual value.
The municipal value of the property, the cost of construction, the standard rent if any
under the Rent Control Act, the rent of similar properties in the same locality are
relevant factors for the determination of the annual value. However, if a property is let
and was vacant during any part or whole of the year and due to such vacancy, the rent
received is less than the notional rent, such lesser amount shall be the Annual Value.

Income from other sources

Income from other sources is one of the five heads of income that the Income Tax Act,
1961 broadly classifies income under. This category includes earnings which can't be
accounted for under any of the other heads of income viz. Income from Salary, Income
from House Property, Profits and Gains from Business or Profession and Income from
Capital Gains.
All taxable income under this head is calculated according to the accounting method
the assessee follows viz. accrual or cash basis. The exceptions to this are dividend and
interest income i.e. whatever the accounting method, assessees will have to declare and
pay income tax on dividend and interest earned during the previous year.

Distinguish between deduction and exemptions

Income Tax is a compulsory obligation which is levied on every citizen, based on their
paying capacity, age, and gender. In order to provide relief to the assessee from payment
of taxes, the tax law has certain provisions for deduction and exemptions, which
decreases the overall tax liability. In deduction, the amount is first included in the
income of the taxpayer and then the deduction is allowed as per the rules, i.e. in full or
part or when certain conditions are satisfied. An exemption, on the other hand, is the
income which is not charged to tax.

63
While deduction is a part of Gross Total Income (GTI), but any person can avail its
benefit based on application. Conversely, the exemption is not a part of GTI. The article
provided below explains the substantial differences between deduction and exemption.

Research Method

There are two basic research methods Qualitative and Quantitative research. Qualitative
research provides insight and understanding of the problem setting In this study
Qualitative research was used with a goal of getting insight into the effect of eliminating
and reducing the wastage of material.
The Qualitative research method involving the collection of variety of empirical papers,
literature and knowing personal experience of the users.
Quantitative Research seeks to quantify the data and typically, applies some forms of
stastical analysis. In this research, more emphasis is laid on Quantitative data.

Sampling techniques
The researcher adopted convenient sampling method. In this sampling Questionnaire
was distributed to individual by making forms. To understand the problems a selected
research was done by the researcher based on the knowledge and personal judgment.

Sample Size
The sample in the study was restricted to 50 respondents keeping in the mind the
objectives and constraints.

Data Collection Method

To fulfil the specific objectives both Primary and Secondary sources were used to
collect the data. Primary data is the core methodology used by the researcher to conduct
the research.
A structured questionnaire was the main tool for collecting the primary data. There was
Primary and secondary data Collection from respondents to understood the problem of
wastage in material.
Relevant and Variable data was collected from various Secondary data for reports,
journals and research papers etc, Updated information was gathered from authentic
website.

64
Chapter -3

Review of Literature

 Review of literature for Income from house property

 Kuang Wei-da

This paper develops a partial equilibrium model of housing flow market and
investigates the relationship of property tax and housing price in the two typical
scenarios of perfect monopoly and perfect competition. The model documents
that the imposition and elevation of property tax will cause the housing price
decline in whatever cases of market structure. The greater the degree of
monopoly is, the higher the housing price will be, and the greater impact of
property tax on housing price will become. Using the housing market data of 33
large and medium cities in China from 1996 through 2007, I find that 1%
increase of property tax will give rise to 0.02% decline of housing price. The
influence of market structure upon housing price, however, is greater than that
of property tax. 1% increase of Lerner index will generate 0.13% augment of
housing price. The interplay of property tax and market structure will lead to the
housing price increase. 1% increase of the product of property tax and market
structure will generate 0.01% increase of housing price. Accordingly, the
property tax can not curb the inflated housing price effectively in China, albeit
the imposition of property tax will depress the housing price.
Cifang Wu

Property taxes can increase local fiscal revenue and adjust the allocation of
resources. In China, it is adopted to control the soaring housing prices over the
past decade. While property taxes have been expected as effective tools to
regulate housing price, there is no concrete understanding of the influence of
property taxes on housing price. In this paper, we distinguish the concept of
property taxes in China from other countries, and explore the effects of property
taxes on housing price and the possible mechanisms. In reviewing the Chinese
literature on property taxes, we found the definitions of property taxes have been
distorted and included a series of real estate related taxes from all different
stages of real estate development. In most recent practices in China, especially

65
 after the adoption of property tax in Shanghai and Chongqing since 2011,
property taxes specifically refer to the tax levied in the retention stage, not those
in the development and transfer stages. This is more comparable to the
definitions of property taxes in other countries such as the U.S. So far, estimates
of the impact of property taxes on housing price has been inconsistent due to
the different research perspectives, including from the perspective of local
public spending, tax shifting, cost-benefit and public anticipation.

 Review of literature for Income from other sources

This paper reviews the literature on the effects of income from others
sources in India focusing on their issues. First, it considers various criteria
of whether the income is income from other sources or not, sometimes the
items is whether to taxed or not under income from others sources Second,
various other issue also occur in income from other sources are whether to
treat the item to be taxable or exempt under income tax act.

66
 Chapter -4
Data Analysis and Interpretation

Data analysis also known as analysis of data or data analytics’ it is a process of

inspecting, cleansing, transforming and modeling data with the goal of discovering
useful information, suggestion and supporting decision making.
The responses are collected from respondents through forms and examined for
completeness in all manners. Later the data was entered and coded in MS- Excel and
relevant pie-chart was taken for data analysis.
Below is the interpretation of responses received:-

(For Income from House Property)

1.10 An incomplete, a ruined or demolished house cannot be termed as house
property?

Yes No

85% 15%

Table 1.10

15%

Yes
No

85%

Chart 1.10

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Interpretation:- It is indeed from Table 1.1 and Chart 1.10 that out of 50 respondent
survey 85%i.e. 43 people agree that incomplete, a ruined or demolished house cannot
be termed as house property and 15%i.e. 7 people disagree that incomplete, a ruined or
demolished house cannot be termed as house property.

1.20 Can Annual Value (Net Annual Value) be negative?

Yes No

55% 45%

Table 1.20

45% Yes

55% No

Chart 1.20

Interpretation:- It is indeed from Table 1.20and Chart 1.20 that out of 50 respondent
survey 55%i.e. 28 people agree that Annual Value (Net Annual Value) be negative and
45%i.e. 22 people disagree that Annual Value (Net Annual Value) be negative.

1.30 Is it necessary that the Municipal tax paid by owner should be deducted from
Gross annual value?

Yes No

68
 76% 24%

Table 1.30

24%

Yes
No

76%

Chart 1.30

Interpretation:- It is indeed from Table 1.30 and Chart 1.30 that out of 50 respondent
survey 76%i.e. 38 people agree that Is it necessary that the Municipal tax paid by owner
should be deducted from Gross annual value and 24%i.e. 12 people disagree that Is it
necessary that the Municipal tax paid by owner should be deducted from Gross annual
value.

(For Income from others sources)

1.40 What if dividend from Indian company is taxable and would it effect the
annual taxation of a individual?

Yes No

86% 14%

Table 1.40

69
 .

14%

Yes
No

86%

Chart 1.40

Interpretation:- It is indeed from Table 1.40 and Chart 1.40 that out of 50 respondent
survey 86%i.e. 43 people agree that if dividend from Indian company would be tax will
have extra tax burden on individual.

1.50 Is exemption in income from other sources help in reduction of tax?

Yes No

69% 31%

Table 1.50

31%
Yes
No

69%

70
 Chart 1.50

Interpretation:- It is indeed from Table 1.50 explain 69% of the respondents agrees
that exemption help to reduce tax burden in income other sources.

(Distinguish between deductions and exemptions)

1.60 Should margin of deduction for specific person should be increased?

Yes No

72% 28%

Table 1.60

28%

Yes
No

72%

Chart 1.60

Interpretation:- From above table and chart of 1.60 , 72% of the respondent has agreed
that the margin of deductions should be increased.

1.70 Is Deductions and exemptions help to reduce tax burden of the assesse?

Yes No

80% 20%

Table 1.70

71
 .

20%

Yes
No

80%

Chart 1.70

Interpretation: From chart 1.70 and table 1.70 , about 80% of the respondent agrees
that deduction and exemption helps to reduce tax liability of assessee.

1.80 If the assessee satisfies the conditions that he is entitled to deduction in all
cases?
Yes No

67% 33%

Table 1.80

33%
Yes
No

67%

Chart 1.80

72
Interpretation: From the above table and chart, the respondent agrees about 67%
that when assesse satisfies the conditions, they are allowed deductions, and about 33%
of them are not agreed on that.

73
 Chapter -5
Conclusion and Suggestion

Conclusion

Income from house property

From income from house property we came to know the income which is generated
by mean of house, as the house may be of various type like self-occupied, let out
property.
Studies from this topic let us know the tax which is going to be levied from income
from house property. Section 22 of the income tax act, therefore, makes provision for
taxation of annual value of a property owned by the assesse, consisting of any
building or land appurtenant thereto, under the head income from house property. The
tax which is imposed under this provision is actually a tax on the annual value of
house property and is not any tax on that property itself. In a nutshell, it is always a
better option to get complete knowledge of the taxes and proper assessment of
incomes. With this article you can get a proactive approach to plan strategically where
and how to invest in properties to gain maximum returns and charged minimum taxes.
While owning properties the individual must keep in mind the number of properties
bought, the ways in which the home loans be taken. On should also consider joint
ownership to divide get deductions in the best way. This editorial will serve you as a
complete direction to swing your house property investment in the best possible
manner with various ways to cut down the taxes you have to pay.

Income from other sources

Under income from other sources we came to know which income falls under income
other sources, basically any income which does not falls in income from house
property, salary, capital gain falls in income from other sources.

Every taxpayer must understand that whether income from other sources is exempt or
taxable. Moreover, he must disclose it in the income tax returns to avoid any kind of
trouble or penal consequences, every taxpayer must know the income that falls under
income from other sources and must properly disclose it under income from other
sources. Every taxpayer must know the income which is deductible or not.

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The taxpayer may properly disclose they income from sources, so that they can be
saved from any kind of action or penal consequences.

Distinguish between deductions and exemptions

From the studies conducted on exemption and deduction we came to know various
steps taken by government to boost and generate saving habit among the people.
Income Tax is a compulsory obligation which is levied on every citizen, based on
their paying capacity, age, and gender. In order to provide relief to the assessee from
payment of taxes, the tax law has certain provisions for deduction and exemptions,
which decreases the overall tax liability. In deduction, the amount is first included in
the income of the taxpayer and then the deduction is allowed as per the rules, i.e. in
full or part or when certain conditions are satisfied. An exemption, on the other hand,
is the income which is not charged to tax.

Suggestions

Various techniques should be used like questionnaire, session, so that we can know how
much people are aware about it. We can also get suggestions through people from their
responses so we can make the proper changes accordingly to get a positive and better
result next time.

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 Bibliography

Income from house property

http://rccmindore.com/wp-content/uploads/2015/06/Income-Tax-Procedure-
PracticeU-12345-RB.pdf

http://incometaxmanagement.com/Pages/Tax-Ready-Reckoner/GTI/House-
Property/content-Income-Under-the-Head-House-Property.html

https://www.incometaxindia.gov.in/Documents/Students/Learning/Income%20from%
20House%20Property%20(Practical).pdf

http://elearning.nokomis.in/uploaddocuments/Advance%20Direct%20&%20Indirect
%20Tax/Chapter%20%E2%80%93%205%20INCOME%20FROM%20HOUSE%20P
ROPERTY%20(SECTION%2022%20TO%2027)/PPT/Chapter%205.pdf

Income from other sources

https://www.taxmann.com/bookstore/bookshop/bookfiles/contentchapter7problemand
solution.pdf

https://www.taxmann.com/bookstore/bookshop/bookfiles/contentchapter722jan.pdf

Distinguish between deductions and exemptions

https://cleartax.in › Income Tax

https://www.zeebiz.com › Personal Finance News

https://www.relakhs.com › income-tax-exemption-vs-tax-deduction

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 ANNEXURE

For Income from house property

Q.1) Is income from house property can be negative?
Ans - 1) Yes 2) No

Q.2) Does owner includes legal owner, beneficial owner and deemed owner?
Ans: - 1) Yes 2) No.

Q.3) Does standard deduction of 30% help to cover entire expenses on the house
property?
Ans - 1) Yes a 2) No

Q.4) Can Annual Value (Net Annual Value) be negative?

Ans: - 1) Yes 2) No.

Q.5) Can there be any loss under the head income from house property?
Ans: - 1) Yes 2) No.

Q.6) If, unrealised rent is deducted or not deducted then, is there any changes in Gross
Annual Value?
Ans: - 1) Yes 2) No.

Q.7) Is it necessary that the Municipal tax paid by owner should be deducted from Gross
annual value?
Ans: - 1) Yes 2) No.

Q.8) An incomplete, a ruined or demolished house cannot be termed as house property?

Ans: - 1) Yes 2) No.

For Income from other sources

Q.1) Income from others sources included any income from any other heads of
income?
Ans: - 1) Yes 2) No.

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Q.2) Income from dividend from domestic company is taxed entirely?
Ans: - 1) Yes 2) No.

Q.3) Exemption in income from others sources helps to reduce taxable income?
Ans: - 1) Yes 2) No.

Q.4) Exemption in income from other sources like agriculture is always exempt in every
situation?
Ans: - 1) Yes 2) No.

Q.5) Items which is not included in any other heads comes under income from other
sources?
Ans: - 1) Yes 2) No.

Q.6) Dividend from foreign company is taxable under income from others sources?
Ans: - 1) Yes 2) No.

Q.7) Does interest on debenture on domestic company is taxed under income from
other sources?
Ans: - 1) Yes 2) No.

Q.8)Does income from vacant land is treated as agriculture income under income
from other sources?
Ans: - 1) Yes 2) No.

For distinguish between deduction and exemptions

Q.1) Is the term deduction and exemption is same?
Ans: - 1) Yes 2) No.

Q.2) Does deduction under section 80 are available to every person?

Ans: - 1) Yes 2) No.

Q.3) Deduction under section 80 is unconditional?

Ans: - 1) Yes 2) No.

Q.4) Deduction are not included in income at time of computation of taxable income?
Ans: - 1) Yes 2) No.

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Q.5) Is deduction under section 80U is given to disability below 30%?
Ans: - 1) Yes 2) No.

Q.6) Exemption under section 10 is given to specific person?

Ans: - 1) Yes 2) No.

Q.7) Does exemption under section 10 is unconditional under income tax act?
Ans: - 1) Yes 2) No.

Q.8)Does both exemption and deduction help to reduce tax burden of the assessee?
Ans: - 1) Yes 2) No.

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