Chapter 2 – Income from House Property

Section 22: Charging Section of House Property

Rental Income (Annual Value) of House Property is taxable under the head House Property if the
following two conditions are satisfied:

1. There should be House Property*

2. Assessee should be the OWNER of such House Property

* House Property means Building and Land appurtenant to such building (commercial as well as
residential building).

Name of Assessee ………… P.Y. 2022-23 A.Y. 2023-24

Computation of Income from House Property

Particulars Self Let Out Deemed to be

Occupied Property Let Out
Property (2) Property
Municipal Value - xxx xxx
Fair Rent - xxx xxx
Whichever is Higher - xxx xxx
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 Standard Rent - xxx xxx
Expected Rent (Lower of Higher of Municipal Value or - xxx xxx
Fair Rent and Standard Rent)
Actual Rent - xxx -
Gross Annual Value (GAV) (Higher of Expected Rent - xxx xxx
and Actual Rent)
Less: Municipal Taxes Paid - xxx xxx
Net Annual Value (NAV) - xxx xxx
Less: Deductions u/s 24 - xxx xxx
(i) 24(a) 30% of NAV - xxx xxx
(ii) 24(b) Interest on Loan xx/- xxx xxx
Income from House Property (xx)/- xxx xxx

1. Municipal Value – It means value of property as per Municipality Record.

2. Fair Rent – It means rent of similar property in the same locality. It is also known as Reasonable
Rent, or Reasonable Letting Value.
3. Standard Rent – It means rent as per Rent Control Act. It is the maximum amount of rent that
can be legally recovered by the OWNER from tenant.
4. Actual Rent = Rent Received + Rent Receivable – Unrealised Rent
5. Municipal Taxes
a. It means taxes which are recovered by Municipality, Local Authority, Gram Panchayat,
etc.
b. It is also known as House Tax, Local Tax, Property Tax, etc.
c. It is allowed on payment basis (pay kiya toh allowed hai; outstanding hai toh not
allowed; jab bhi pay karoge, tab ho jaayega)
d. It is allowed only if it is paid by the OWNER; if it is paid by TENANT, then not allowed.
e. If it is given in percentage form, then it should be calculated on Municipal Value.

Question 1 – ICAI SM – Illustration 1

Jayashree owns five houses in India, all of which are let-out. Compute the GAV of each house from the
information given below –

Particulars House I House II House III House IV House V

(₹) (₹) (₹) (₹) (₹)
Municipal Value 80,000 55,000 65,000 24,000 80,000
Fair Rent 90,000 60,000 65,000 25,000 75,000
Standard Rent N.A. 75,000 58,000 N.A. 78,000
Actual Rent Received/ Receivable 72,000 72,000 60,000 30,000 72,000

Solution

Computation of GAV of each house owned by Jayashree

Particulars House I House II House III House IV House V
(i) Municipal Value 80,000 55,000 65,000 24,000 80,000
(ii) Fair Rent 90,000 60,000 65,000 25,000 75,000
(iii) Higher of (i) and (ii) 90,000 60,000 65,000 25,000 80,000
(iv) Standard Rent N.A. 75,000 58,000 N.A. 78,000
(v) Expected Rent [Lower of (iii) and (iv)] 90,000 60,000 58,000 25,000 78,000

CA NISHANT KUMAR 2
 (vi) Actual Rent Received/Receivable 72,000 72,000 60,000 30,000 72,000
GAV [Higher of (v) and (vi)] 90,000 72,000 60,000 30,000 78,000

Question 2

Mr. Nandan owns five houses in Delhi. Compute the NAV of each house from the information given
below:

Particulars House I House II House III House IV House V

(₹) (₹) (₹) (₹) (₹)
Municipal Value 1,20,000 2,40,000 1,10,000 90,000 75,000
Fair Rent 1,50,000 2,40,000 1,14,000 84,000 80,000
Standard Rent 1,08,000 N.A. 1,40,000 N.A. 78,000
Actual Rent Received/ Receivable 1,80,000 2,10,000 1,20,000 1,08,000 72,000
Municipal Taxes 10% 12% 15% 8% 12%

Solution

Computation of NAV of each house owned by Mr. Nandan

Particulars House I House II House III House IV House V
(i) Municipal Value 1,20,000 2,40,000 1,10,000 90,000 75,000
(ii) Fair Rent 1,50,000 2,40,000 1,14,000 84,000 80,000
(iii) Higher of (i) and (ii) 1,50,000 2,40,000 1,14,000 90,000 80,000
(iv) Standard Rent 1,08,000 N.A. 1,40,000 N.A. 78,000
(v) Expected Rent [Lower of (iii)
and (iv)] 1,08,000 2,40,000 1,14,000 90,000 78,000
(vi) Actual Rent Received/
Receivable 1,80,000 2,10,000 1,20,000 1,08,000 72,000
GAV [Higher of (v)and(vi)] 1,80,000 2,40,000 1,20,000 1,08,000 78,000
Less: Municipal Taxes 12,000 28,800 16,500 7,200 9,000
NAV 1,68,000 2,11,200 1,03,500 1,00,800 69,000

6. Interest on Loan –
a. Interest on Loan is allowed as deduction if loan is taken for the purpose of House
Property, i.e., purchase, construction, repair, or renovation.
b. Loan may be taken from Banks, Financial Institutions, friends, family, etc.
c. Interest is allowed on due basis. (Pay kiya toh allowed hai; outstanding bhi allowed
hai)
d. Interest on Interest (Penal Interest) is not allowed as deduction.
e. If any fresh loan taken for repayment of earlier loan and earlier loan was taken for the
purpose of House Property, then interest on fresh loan is allowed as deduction.
f. Any interest paid/payable outside India shall not be allowed as deduction if TDS is not
deducted on such interest.
g. Limit

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 7. Other Expenses
a. Repair & Maintenance Not Allowed because 30%
b. Insurance Expenses of NAV is allowed
c. Electricity & Water Charges
d. Parking Charges
e. Society Charges, etc.
8. Actual Rent = Rent Received + Rent Receivable – Unrealised Rent*
*Unrealised Rent means rent which is not recovered by owner from tenant. It is like Bad Debts
of Bank. It is deductible only if following 4 conditions of Rule 4 are satisfied:
a. Tenancy should be bona-fide
b. Tenant should have vacated that House Property
c. Such tenant should not occupy any other house property of same assessee.
d. Reasonable steps should have been taken for recovery of unrealised rent.

Question 3 – ICAI SM – Illustration 4

Anirudh has a property whose municipal valuation is ₹1,30,000 p.a. The fair rent is ₹1,10,000 p.a. and
the standard rent fixed by the Rent Control Act is ₹1,20,000 p.a. The property was let out for a rent of
₹11,000 p.m. throughout the previous year. Unrealised rent was ₹11,000 and all conditions prescribed
by Rule 4 are satisfied. He paid municipal taxes @10% of municipal valuation. Interest on borrowed
capital was ₹40,000 for the year. Compute the income from house property of Anirudh for A.Y. 2023-
24.

Solution

Computation of Income from House Property of Anirudh for A.Y. 2023-24

Particulars Amount
(i) Municipal Value 1,30,000
(ii) Fair Rent 1,10,000
(iii) Higher of (i) and (ii) 1,30,000
(iv) Standard Rent 1,20,000
(v) Expected Rent [Lower of (iii) and (iv)] 1,20,000
(vi) Actual Rent Received/Receivable (W.N. 1) 1,21,000
GAV [Higher of (v) and (vi)] 1,21,000
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 Less: Municipal Taxes 13,000
NAV 1,08,000
Less: Deductions u/s 24
Less: 30% of NAV 32,400
Less: Interest on Loan 40,000 72,400
Income from House Property 35,600

W.N. 1 - Actual Rent Received/Receivable

Particulars ₹
Rent Received (₹11,000 × 11) 1,21,000
Add: Rent Receivable (₹11,000 × 1) 11,000
1,32,000
Less: Unrealised Rent 11,000
Actual Rent Received/Receivable 1,21,000

9. Pre-Construction Period Interest/Pre-Acquisition Period Interest

It means interest before the year in which construction was completed. It is allowed in 5 equal
instalments from the year in which construction was completed.

Question 4

Mr. Hari took a loan from ICICI Bank on 01-12-2019 of ₹12,00,000 @10%. Construction got completed
on 14-02-2023. Compute interest for P.Y. 2022-23 (A.Y. 2023-24).

Solution

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2019-20 (10% × ₹12,00,000 × 4/12) 40,000
2020-21 (10% × ₹12,00,000) 1,20,000
2021-22 (10% × ₹12,00,000) 1,20,000
2,80,000
Pre-Construction Interest to be allowed every year (₹2,80,000 ÷ 5) 56,000
Add: Interest for P.Y. 2022-23 (10% × ₹12,00,000) 1,20,000
Interest to be allowed in P.Y. 2022-23 1,76,000

Question 5

Sneha had taken a loan of ₹7,00,000 for construction of property on 01-10-2021. Interest was payable
@ 12% p.a. The construction was completed on 30-06-2022. No principal repayment has been made
up to 31-03-2023. Compute the interest allowable as deduction u/s 24 for the A.Y. 2023-24.

Solution

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2021-22 (12% × ₹7,00,000 × 6/12) 42,000
Pre-Construction Interest to be allowed every year (₹42,000 ÷ 5) 8,400
Add: Interest for P.Y. 2022-23 (12% × ₹7,00,000) 84,000
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 Interest to be allowed in P.Y. 2022-23 92,400

Question 6

Loan taken for construction of House ₹10,00,000 on 01-06-2016 @ 12% p.a. Loan repaid on 01-04-
2019 ₹4,00,000. Construction completed on 01-03-2021. Compute interest on loan deduction for A.Y.
2023-24.

Solution

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2016-17 (12% × ₹10,00,000 × 10/12) 1,00,000
2017-18 (12% × ₹10,00,000) 1,20,000
2018-19 (12% × ₹10,00,000) 1,20,000
2019-20 {12% × (₹10,00,000 – ₹4,00,000)} 72,000
4,12,000
Pre-Construction Interest to be allowed every year (₹4,12,000 ÷ 5) 82,400
Add: Interest for P.Y. 2022-23 (12% × ₹6,00,000) 72,000
Interest to be allowed in P.Y. 2022-23 1,54,400

Question 7

Mr. Jai has taken a loan from SBI on 01-06-2018 for ₹20,00,000 @ 6%. He made following repayments
of Principal amount:

01-04-2019 4,00,000
01-10-2020 2,00,000
01-12-2021 1,50,000
01-04-2022 2,50,000
Construction completed on 14-02-2022. Compute interest allowable for P.Y. 2022-23 (A.Y. 2023-24).

Solution

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2018-19 (6% × ₹20,00,000 × 10/12) 1,00,000
2019-20 {6% × (₹20,00,000 – ₹4,00,000)} 96,000
2020-21 {(6% × ₹16,00,000 × 6/12) + (6% × ₹14,00,000 × 6/12)} 90,000
2,86,000
Pre-Construction Interest to be allowed every year (₹2,86,000 ÷ 5) 57,200
Add: Interest for P.Y. 2022-23 (6% × ₹10,00,000) 60,000
Interest to be allowed in P.Y. 2022-23 1,17,200

Question 8

Mr. Hari has taken a loan from Axis Bank for construction of House Property on 01-12-2019 of
₹42,00,000 @ 7%. He paid Principal amount as follows:

CA NISHANT KUMAR 6
 01-04-2020 7,00,000
01-10-2020 4,00,000
01-02-2022 5,00,000
01-07-2022 7,00,000
Construction completed on 10-12-2022. Compute Interest for P.Y. 2022-23 (A.Y. 2023-24).

Solution

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2019-20 (7% × ₹42,00,000 × 4/12) 98,000
2020-21 {(7% × ₹35,00,000 × 6/12) + (7% × ₹31,00,000 × 6/12)} 2,31,000
2021-22 {(7% × ₹31,00,000 × 10/12) + (7% × ₹26,00,000 × 2/12)} 2,11,167
5,40,167
Pre-Construction Interest to be allowed every year (₹5,40,167 ÷ 5) 1,08,033
Add: Interest for P.Y. 2022-23 {(7% × ₹26,00,000 × 3/12) + (7% × ₹19,00,000 × 9/12)} 1,45,250
Interest to be allowed in P.Y. 2022-23 2,53,283

Question 9

NISH10 has one house property at Tagore Town in Prayagraj. He stays with his family in the house.
The rent of similar property in the neighborhood is ₹25,000 p.m. The municipal valuation is ₹23,000
p.m. Municipal Taxes paid is ₹8,000. The house was constructed in the year 2017 with a loan of
₹20,00,000 taken from SBI Housing Finance Ltd. The construction was completed on 30.11.2018. The
accumulated interest up to 31.3.2018 is ₹1,50,000. During the previous year 2022-23, NISH10 paid
₹2,08,000 which included ₹1,74,000 as interest. There was no principal repayment prior to this date.
Compute NISH10’s income from house property for A.Y. 2023-24.

Solution

Computation of Income from House Property of NISH10 for A.Y. 2023-24

Particulars Amount
NAV -
Less: Deductions u/s 24
Less: 30% of NAV -
Less: Interest on Loan (W.N. 1) 2,00,000 2,00,000
Income from House Property (2,00,000)

W.N. 1 - Calculation of Interest on Loan

Particulars ₹
Pre-Construction Interest (Refer Note) 30,000
Post Construction Interest 1,74,000
2,04,000
Restricted to 2,00,000

Since the construction was completed in F.Y. 2018-19, interest accrued upto 31-03-2018, i.e.,
₹1,50,000 is Pre-Construction interest. It'll be allowed in 5 equal instalments from the year in which
the construction was completed. Therefore, Interest to be allowed every year = ₹1,50,000 ÷ 5 =
₹30,000
CA NISHANT KUMAR 7
Concept of Vacancy
If the house property has been vacant for some months in a year, then the GAV is calculated as follows:

1. If Actual Rent + Vacancy Rent ≥ Expected Rent, then GAV = Actual Rent
2. If Actual Rent + Vacancy Rent < Expected Rent, then GAV = Expected Rent

Question 10

Expected Rent = ₹3,00,000. Rent p.m. = ₹30,000. Vacancy = 3 months. Find GAV.

Solution

Actual Rent = ₹30,000 × 9 = ₹2,70,000

Vacancy Rent = ₹30,000 × 3 = ₹90,000

AR + VR = ₹2,70,000 + ₹90,000 = ₹3,60,000

Since this is greater than Expected Rent, GAV = Actual Rent = ₹2,70,000

Question 11

Expected Rent = ₹3,00,000. Rent p.m. = ₹20,000. Vacancy = 1 months. Find GAV.

Solution

Actual Rent = ₹20,000 × 11 = ₹2,20,000

Vacancy Rent = ₹20,000 × 1 = ₹20,000

AR + VR = ₹2,20,000 + ₹20,000 = ₹2,40,000

Since this is less than Expected Rent, GAV = Expected Rent = ₹3,00,000

Question 12

Expected Rent = ₹3,00,000. Rent p.m. = ₹25,000. Vacancy = 4 months. Find GAV.

Solution

Actual Rent = ₹25,000 × 8 = ₹2,00,000

Vacancy Rent = ₹25,000 × 4 = ₹1,00,000

AR + VR = ₹2,00,000 + ₹1,00,000 = ₹3,00,000

Since this is equal to Expected Rent, GAV = Actual Rent = ₹2,00,000

Partly Let Out Property (Area Wise)

If some area of house property is let out and remaining area is self-occupied, then the let-out portion
is treated as LOP, and self-occupied portion is treated as SOP. In this case, Municipal Value, Fair Rent,

CA NISHANT KUMAR 8
Standard Rent, Municipal Taxes, Interest on Loan should be divided between SOP and LOP on area
basis. Actual rent should never be divided, as it is always for LOP.

Interest on Loan

Let Out Property Self-Occupied Property

Full Interest Allowed Maximum ₹30,000/₹2,00,000 Allowed

Question 13 – ICAI SM – Illustration 9

Prem owns a house in Madras. During the previous year 2022-23, 2/3rd portion of the house was self-
occupied and 1/3rd portion was let out for residential purposes at a rent of ₹8,000 p.m. Municipal
value of the property is ₹3,00,000 p.a., fair rent is ₹2,70,000 p.a. and standard rent is ₹3,30,000. He
paid municipal taxes @ 10% of municipal value during the year. A loan of ₹25,00,000 was taken by
him during the year 2018 for acquiring the property. Interest on loan paid during the previous year
2022-23 was ₹1,20,000. Compute Prem’s income from house property for the A.Y. 2023-24.

Solution

Computation of Income from House Property of Prem for A.Y. 2023-24

Particulars SOP (2/3) LOP (1/3)
(i) Municipal Value - 1,00,000
(ii) Fair Rent - 90,000
(iii) Higher of (i) and (ii) - 1,00,000
(iv) Standard Rent - 1,10,000
(v) Expected Rent [Lower of (iii) and (iv)] - 1,00,000
(vi) Actual Rent Received/Receivable - 96,000
GAV [Higher of (v) and (vi)] - 1,00,000
Less: Municipal Taxes - 10,000
NAV - 90,000
Less: Deductions u/s 24 -
Less: 30% of NAV - 27,000
Less: Interest on Loan 80,000 40,000
Income from House Property (80,000) 23,000
.
Net Income from House Property (57,000)

Question 14 – ICAI SM – Question 2

Mr. X owns one residential house in Mumbai. The house is having two identical units. First unit of the
house is self-occupied by Mr. X and another unit is rented for ₹8,000 p.m. The rented unit was vacant
for 2 months during the year. The particulars of the house for the previous year 2022-23 are as under:

Standard Rent ₹1,62,000 p.a.

Municipal Valuation ₹1,90,000 p.a.
Fair Rent ₹1,85,000 p.a.
Municipal Tax (paid by Mr. X) 15% of Municipal Value
Light and water charges ₹500 p.m.

CA NISHANT KUMAR 9
 Interest on borrowed capital ₹1,500 p.m.
Lease money ₹1,200 p.a.
Insurance charges ₹3,000 p.a.
Repairs ₹12,000 p.a.
Compute income from house property of Mr. X for the A.Y. 2023-24.

Solution

Computation of Income from House Property of Mr. X for A.Y. 2023-24

Particulars SOP LOP
(i) Municipal Value - 95,000
(ii) Fair Rent - 92,500
(iii) Higher of (i) and (ii) - 95,000
(iv) Standard Rent - 81,000
(v) Expected Rent [Lower of (iii) and (iv)] - 81,000
(vi) Actual Rent Received/Receivable (W.N. 1) - 80,000
GAV (W.N. 1) - 80,000
Less: Municipal Taxes - 14,250
NAV - 65,750
Less: Deductions u/s 24 -
Less: 30% of NAV - 19,725
Less: Interest on Loan 9,000 9,000
Income from House Property (9,000) 37,025
.
Net Income from House Property 28,025

W.N. 1 - Calculation of GAV

Particulars ₹
Expected Rent 81,000

Actual Rent 80,000

Vacancy Rent 16,000

AR + VR 96,000

GAV (Since AR + VR > ER, GAV = AR) 80,000

Partly Let Out Property (Time Wise)

If property is let out for some period and self-occupied for remaining period, then such property is
treated as Let Out Property only. If property is let out even for one day, it’ll be treated as LOP only.

Question 15 – ICAI SM – Illustration 7

Smt. Rajalakshmi owns a house property at Adyar in Chennai. The municipal value of the property is
₹5,00,000, fair rent is ₹4,20,000 and standard rent is ₹4,80,000. The property was let-out for ₹50,000
p.m. up to December, 2022. Thereafter, the tenant vacated the property and Smt. Rajalakshmi used
the house for self-occupation. Rent for the months of November and December, 2022 could not be
realised in spite of the owner’s efforts. All the conditions prescribed under Rule 4 are satisfied. She
paid municipal taxes @ 12% during the year. She had paid interest of ₹25,000 during the year for

CA NISHANT KUMAR 10
amount borrowed for repairs for the house property. Compute her income from house property for
the A.Y. 2023-24.

Solution

Computation of Income from House Property of Smt. Rajalakshmi for A.Y. 2023-24
Particulars LOP
(i) Municipal Value 5,00,000
(ii) Fair Rent 4,20,000
(iii) Higher of (i) and (ii) 5,00,000
(iv) Standard Rent 4,80,000
(v) Expected Rent [Lower of (iii) and (iv)] 4,80,000
(vi) Actual Rent Received/Receivable (W.N. 1) 3,50,000
GAV [Higher of (v) and (vi)] 4,80,000
Less: Municipal Taxes 60,000
NAV 4,20,000
Less: Deductions u/s 24
Less: 30% of NAV 1,26,000
Less: Interest on Loan 25,000
Income from House Property 2,69,000
.
Net Income from House Property 2,69,000

W.N. 1 - Calculation of Actual Rent

Particulars ₹
Rent Received 3,50,000
Add: Rent Receivable 1,00,000
4,50,000
Less: Unrealised Rent 1,00,000
Actual Rent 3,50,000

Question 16 – ICAI SM – Illustration 5

Ganesh has a property whose municipal valuation is ₹2,50,000 p.a. The fair rent is ₹2,00,000 p.a. and
the standard rent fixed by the Rent Control Act is ₹2,10,000 p.a. The property was let out for a rent of
₹20,000 p.m. However, the tenant vacated the property on 31.1.2023. Unrealised rent was ₹20,000
and all conditions prescribed by Rule 4 are satisfied. He paid municipal taxes @8% of municipal
valuation. Interest on borrowed capital was ₹65,000 for the year. Compute the income from house
property of Ganesh for A.Y. 2023-24.

Solution

Computation of Income from House Property of Ganesh for A.Y. 2023-24

Particulars ₹
(i) Municipal Value 2,50,000
(ii) Fair Rent 2,00,000
(iii) Higher of (i) and (ii) 2,50,000
(iv) Standard Rent 2,10,000
(v) Expected Rent [Lower of (iii) and (iv)] 2,10,000
(vi) Actual Rent Received/Receivable (W.N. 1) 1,80,000
GAV (W.N. 1) 1,80,000
CA NISHANT KUMAR 11
 Less: Municipal Taxes 20,000
NAV 1,60,000
Less: Deductions u/s 24
Less: 30% of NAV 48,000
Less: Interest on Loan 65,000
Income from House Property 47,000
.
Net Income from House Property 47,000

W.N. 1 - Calculation of GAV

Particulars ₹
Expected Rent 2,10,000
.
Actual Rent 1,80,000
Vacancy Rent 40,000
.
AR + VR 2,20,000
.
GAV (Since AR + VR > ER, GAV = AR) 1,80,000

When Assessee Owns More Than 2 SOPs

Suppose the Assessee owns three House Properties – H1, H2, H3. In such a case, two of them will be
treated as SOPs and the third one will be treated as DLOP. In this situation, you’ll have to solve the
question 3 times:

1. taking H1 as DLOP and H2 and H3 as SOP

2. taking H2 as DLOP and H1 and H3 as SOP
3. taking H3 as DLOP and H1 and H2 as SOP

You’ll go with that case in which your total income from house property is minimum.

Question 17 – ICAI SM – Illustration 8

Ganesh has three houses, all of which are self-occupied. The particulars of the houses for the P.Y.
2022-23 are as under:

Particulars House I House II House III

Municipal Value p.a. ₹3,00,000 ₹3,60,000 ₹3,30,000
Fair Rent p.a. ₹3,75,000 ₹2,75,000 ₹3,80,000
Standard Rent ₹3,50,000 ₹3,70,000 ₹3,75,000
Date of completion/purchase 31.3.1999 31.3.2002 01.4.2015
Municipal Taxes paid during the year 12% 8% 6%
Interest on money borrowed for repair of property during - 55,000 -
the current year
Interest for current year on money borrowed in April, 2015 1,75,000
for purchase of property
Compute Ganesh’s income from house property for A.Y. 2023-24 and suggest which house should be
opted by Ganesh to be assessed as self-occupied so that his tax liability is minimum.

Solution

CA NISHANT KUMAR 12
 Computation of Income from House Property of Ganesh for A.Y. 2023-24
Particulars HP 1 HP 2 HP 3
(i) Municipal Value 3,00,000 3,60,000 3,30,000
(ii) Fair Rent 3,75,000 2,75,000 3,80,000
(iii) Higher of (i) and (ii) 3,75,000 3,60,000 3,80,000
(iv) Standard Rent 3,50,000 3,70,000 3,75,000
(v) Expected Rent [Lower of (iii) and (iv)] 3,50,000 3,60,000 3,75,000
(vi) Actual Rent Received/Receivable - - -
GAV [Higher of (v) and (vi)] 3,50,000 3,60,000 3,75,000
Less: Municipal Taxes 36,000 28,800 19,800
NAV 3,14,000 3,31,200 3,55,200
Less: Deductions u/s 24
Less: 30% of NAV 94,200 99,360 1,06,560
Less: Interest on Loan - 55,000 1,75,000
Income from House Property 2,19,800 1,76,840 73,640

Ganesh can opt to treat any two of the above house properties as self-occupied.

Option 1 - HP1 and HP2 Self Occupied; HP3 Deemed Let Out
Particulars ₹
House Property I (Self Occupied) -
House Property II (Self Occupied) (30,000)
(Since the loan was taken for repairs, the interest is restricted to ₹30,000)
House Property 3 73,640
Income from House Property 43,640

Option 2 - HP1 and HP3 Self Occupied; HP2 Deemed Let Out
Particulars ₹
House Property I (Self Occupied) -
House Property II 1,76,840
House Property 3 (Self Occupied) (1,75,000)
Income from House Property 1,840

Option 3 - HP2 and HP3 Self Occupied; HP1 Deemed Let Out
Particulars ₹
House Property I 2,19,800
House Property II (Self Occupied) (30,000)
(Since the loan was taken for repairs, the interest is restricted to ₹30,000)
House Property 3 (Self Occupied) (1,75,000)
(2,05,000)
Restricted to (2,00,000)
Income from House Property 19,800

Since the income from House Property is minimum in option 2, Ganesh should treat House Property
1 and House Property 3 as Self Occupied, and House Property 2 as deemed to be let out.

Question 18 – RTP May, 2020

CA NISHANT KUMAR 13
Mrs. Daya, a resident of India, owns a house property at Panipat in Haryana. The Municipal value of
the property is ₹8,50,000, Fair Rent of the property is ₹7,30,000 and Standard Rent is ₹8,20,000 per
annum.

The property was let out for ₹85,000 per month for the period April 2022 to December 2022.

Thereafter, the tenant vacated the property and Mrs. Daya used the house for self-occupation. Rent
for the months of November and December 2022 could not be realized from the tenant. Mrs. Daya
has not instituted any legal proceedings for the recovery of unpaid rent.

She paid municipal taxes @ 12% during the year and paid interest of ₹50,000 during the year for
amount borrowed towards repairs of the house property.

You are required to compute her income from house property for the A.Y. 2023-24.

Solution

Computation of Income from House Property of Mrs. Daya for A.Y. 2023-24
Particulars ₹
(i) Municipal Value 8,50,000
(ii) Fair Rent 7,30,000
(iii) Higher of (i) and (ii) 8,50,000
(iv) Standard Rent 8,20,000
(v) Expected Rent [Lower of (iii) and (iv)] 8,20,000
(vi) Actual Rent Received/Receivable (W.N. 1) 7,65,000
GAV [Higher of (v) and (vi)] 8,20,000
Less: Municipal Taxes 1,02,000
NAV 7,18,000
Less: Deductions u/s 24
Less: 30% of NAV 2,15,400
Less: Interest on Loan 50,000
Income from House Property 4,52,600

Working Notes

1. Actual Rent = Rent Received + Receivable – Unrealised Rent

Therefore, Actual Rent = ₹85,000 × 9 = ₹7,65,000
Unrealised rent for two months will not be deducted because it is given that Mrs. Daya has
not instituted any legal proceedings for the recovery of unpaid rent, hence the condition of
Rule 4 is not satisfied.

Concept of Co-Ownership (Joint Ownership)

It means property is owned by more than one owner. In this case, Income from House Property is
calculated normally and thereafter it should be divided between co-owners in their ownership ratio.

CA NISHANT KUMAR 14
 LOP/DLOP No Limit

Interest on Loan
Limit:
SOP ₹30,000/₹2,00,000
 No. of Co-Owners

Question 19 – ICAI SM – Question 1

Mr. Raman is a co-owner of a house property alongwith his brother holding equal share in the
property.

Particulars ₹
Municipal value of the property 1,60,000
Fair rent 1,50,000
Standard rent under the Rent Control Act 1,70,000
Rent received 15,000 p.m.
The loan for the construction of this property is jointly taken and the interest charged by the bank is
₹25,000, out of which ₹21,000 has been paid. Interest on the unpaid interest is ₹450. To repay this
loan, Raman and his brother have taken a fresh loan and interest charged on this loan is ₹5,000. The
municipal taxes of ₹5,100 have been paid by the tenant.

Compute the income from this property chargeable in the hands of Mr. Raman for the A.Y. 2023-24.

Solution

Computation of Income from House Property for A.Y. 2023-24

Particulars ₹
(i) Municipal Value 1,60,000
(ii) Fair Rent 1,50,000
(iii) Higher of (i) and (ii) 1,60,000
(iv) Standard Rent 1,70,000
(v) Expected Rent [Lower of (iii) and (iv)] 1,60,000
(vi) Actual Rent Received/Receivable 1,80,000
GAV [Higher of (v) and (vi)] 1,80,000
Less: Municipal Taxes -
NAV 1,80,000
Less: Deductions u/s 24
Less: 30% of NAV 54,000
Less: Interest on Loan 30,000
Income from House Property 96,000
.
Share of Co-owner 1 48,000
Share of Co-owner 2 48,000
Notes:

1. Interest on Loan: Interest on Loan is allowed on due basis, therefore, the entire ₹25,000 will
be allowed as deduction even though the interest paid is ₹21,000.
2. Interest on Interest (Penal Interest) is not allowed as deduction.

CA NISHANT KUMAR 15
 3. If any fresh loan is taken for repayment of earlier loan and earlier loan was taken for the
purpose of House Property, then interest on fresh loan is allowed as deduction. In the present
case, interest on fresh loan of ₹5,000 is also allowed as deduction.
4. Municipal taxes paid by the OWNER are allowed as deduction. In the present case, the
municipal taxes have been paid by the tenant, hence NOT allowed.

Question 20 – ICAI SM – Question 5

Two brothers Arun and Bimal are co-owners of a house property with equal share. The property was
constructed during the financial year 1998-1999. The property consists of eight identical units and is
situated at Cochin.

During the financial year 2022-23, each co-owner occupied one unit for residence and the balance of
six units were let out at a rent of ₹12,000 per month per unit. The municipal value of the house
property is ₹9,00,000 and the municipal taxes are 20% of municipal value, which were paid during the
year. The other expenses were as follows:

Particulars ₹
Repairs 40,000
Insurance Premium (paid) 15,000
Interest payable on loan taken for construction of house 3,00,00
One of the let-out units remained vacant for four months during the year.

Arun could not occupy his unit for six months as he was transferred to Chennai. He does not own any
other house.

The other income of Mr. Arun and Mr. Bimal are ₹2,90,000 and ₹1,80,000, respectively, for the
financial year 2022-23.

Compute the income under the head ‘Income from House Property’ and the total income of two
brothers for the assessment year 2023-24.

Solution

Computation of Total Income

Particulars Arun Bimal
Income from House Property (W.N. 1) 95,850 95,850
Other Income 2,90,000 1,80,000
Total Income 3,85,850 2,75,850

W. N. 1 - Computation of Income from House Property for A.Y. 2023-24

Particulars SOP (25%) LOP (75%)
(i) Municipal Value - 6,75,000
(ii) Fair Rent - -
(iii) Higher of (i) and (ii) - 6,75,000
(iv) Standard Rent - -
(v) Expected Rent [Lower of (iii) and (iv)] - 6,75,000
(vi) Actual Rent Received/Receivable (Note 2) - 8,16,000
GAV (Note 3) - 8,16,000
Less: Municipal Taxes - 1,35,000
NAV - 6,81,000
CA NISHANT KUMAR 16
 Less: Deductions u/s 24
Less: 30% of NAV - 2,04,300
Less: Interest on Loan (Note 1) 60,000 2,25,000
Income from House Property (60,000) 2,51,700
.
Net Income from House Property 1,91,700
.
Share of Arun (1/2) 95,850
Share of Bimal (1/2) 95,850
Notes:

1. Interest on Loan = ₹3,00,000

Attributable to SOP = 25% × ₹3,00,000 = ₹75,000
However, since the loan was taken before 01-04-1999, deduction of only ₹30,000 will be
allowed. Also, since there are two owners, total deduction will be ₹30,000 × 2 = ₹60,000.
Attributable to LOP = 75% × ₹3,00,000 = ₹2,25,000
2. Actual Rent

Particulars ₹
Rent Received
5 units × ₹12,000 p.m. × 12 months 7,20,000
1 unit × ₹12,000 p.m. × 8 months 96,000 8,16,000
Add: Rent Receivable -
8,16,000
Less: Unrealised Rent -
Actual Rent 8,16,000
3. Vacancy

Particulars ₹
Expected Rent 6,75,000
.
Actual Rent (Note 2) 8,16,000
Vacancy Rent (1 unit × ₹12,000 p.m. × 4 months) 48,000
.
AR + VR 8,64,000
.
GAV (Since AR + VR > ER, GAV = AR) 8,16,000

Question 21 – November, 2003

A and B construct their houses on a piece of land purchased by them at New Delhi. The built-up area
of each house was 1,000 sq. ft. (ground floor and an equal area on the first floor). A starts construction
on 01-04-2021 and completes on 01-04-2022. B starts the construction on 01-04-2021 and completes
the construction on 30-06-2022. A occupied the entire house on 01-04-2022. B occupied the ground
floor on 01-07-2022 and let out the first floor for a rent of ₹15,000 per month. However, the tenant
vacated the house on 31-12-2022 and B occupied the entire house during the period 01-01-2023 to
31-03-2023. Following are the other information:

1. Fair rental value of each unit (ground floor/first floor) ₹1,00,000 per year
2. Municipal value of each unit (ground floor/first floor) ₹72,000 per year
3. Municipal taxes paid by A ₹8,000

CA NISHANT KUMAR 17
 Municipal taxes paid by B ₹8,000
4. Repair and Maintenance charges paid by A ₹28,000
Repair and Maintenance charges paid by B ₹30,000
A has availed a housing loan of ₹20 lakhs @ 12% p.a. on 01-04-2021. B has availed a housing loan of
₹12 lakhs @ 10% p.a. on 01-07-2021. No repayment was made by either of them till 31-03-2023.
Compute income from house property for A and B for the previous year 2022-23.

Solution

Computation of IFHP for A for A.Y. 2023-24

Particulars SOP
NAV -
Less: Deductions u/s 24
Less: 30% of NAV -
Less: Interest on Loan (Note 1) 2,00,000
Income from House Property (2,00,000)

Computation of Income from House Property of B for A.Y. 2023-24

Particulars SOP (50%) LOP (50%)
(i) Municipal Value - 54,000
(ii) Fair Rent - 75,000
(iii) Higher of (i) and (ii) - 75,000
(iv) Standard Rent - -
(v) Expected Rent [Lower of (iii) and (iv)] - 75,000
(vi) Actual Rent Received/Receivable - 90,000
GAV [Higher of (v) and (vi)] - 90,000
Less: Municipal Taxes (Note 4) - 4,000
NAV - 86,000
Less: Deductions u/s 24
Less: 30% of NAV - 25,800
Less: Interest on Loan (Note 3) 69,000 69,000
Income from House Property (69,000) (8,800)
.
Net Income from House Property (77,800)

Notes:

1. Interest on Loan

Particulars ₹
Interest for 2021-22 (12% × ₹20,00,000) 2,40,000
.
Since the construction got completed on 01-04-2022, i.e., P.Y. 2022-23, the
interest for the P.Y. 2021-22 will be considered as Pre-construction period
interest. Therefore, ₹2,40,000 ÷ 5 = ₹48,000 will be allowed every year for the
next 5 years.
.
Interest for 2022-23 (12% × ₹20,00,000) 2,40,000
Add: Pre-construction period interest 48,000
2,88,000
.
CA NISHANT KUMAR 18
 Restricted to 2,00,000
2. There is no vacancy in this house of B. As soon as the tenant left, B occupied the first floor
also. In case of timewise partly let out property, even if the property is let out for a single day,
it is considered to be let out for the entire year. Therefore, since first floor was let out from
July to December, it will be considered to be let out for the entire period.
3. Interest on Loan

Particulars ₹
Interest for 2021-22 (10% × ₹12,00,000 × 9/12) 90,000

Since the construction got completed on 30-06-2022, i.e., P.Y. 2022-23, the
interest for the P.Y. 2021-22 will be considered as Pre-construction period
interest. Therefore, ₹90,000 ÷ 5 = ₹18,000 will be allowed every year for the
next 5 years.

Interest for 2022-23 (10% × ₹12,00,000) 1,20,000

Add: Pre-construction period interest 18,000
1,38,000
.
Appropriated towards SOP (50%) 69,000
Appropriated towards LOP (50%) 69,000
4. Municipal Taxes – Municipal Taxes are not allowed for SOP. Therefore, only the portion
attributed to LOP will be allowed, i.e., 50%. Therefore, amount allowed = 50% × ₹8,000 =
₹4,000. Since Municipal Taxes are allowed on paid basis, month-wise apportionment is not
required.

Arrears of Rent
It means rent under dispute.

Section 25A: Recovery of Unrealised Rent or Arrears of Rent

Recovery is taxable in the year in which it is recovered under the head Income from House Property,
whether the assessee is the owner of the property or not in that financial year. Any expenditure
incurred for recovery shall be ignored.

Question 22 – ICAI SM – Illustration 10

Mr. Anand sold his residential house property in March, 2022.

In June, 2022, he recovered rent of ₹10,000 from Mr. Gaurav, to whom he had let out his house for
two years from April 2016 to March 2018. He could not realise two months’ rent of ₹20,000 from him
and to that extent his actual rent was reduced while computing income from house property for A.Y.
2018-19.

Further, he had let out his property from April, 2018 to February, 2022 to Mr. Satish. In April, 2020,
he had increased the rent from ₹12,000 to ₹15,000 per month and the same was a subject matter of
dispute. In September, 2022, the matter was finally settled, and Mr. Anand received ₹69,000 as arrears
of rent for the period April, 2020 to February, 2022.

Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr. Anand, and
is so, in which year?

CA NISHANT KUMAR 19
Solution

Unrealised rent and arrears of rent is recovered by Mr. Anand in P.Y. 2022-23. As per section 25A, it is
taxable in the year of recovery, i.e., P.Y. 2022-23 even though Mr. Anand is not the owner of house
property in the year of recovery. Standard deduction of 30% is allowed while calculating income from
house property.

Computation of Income from House Property

Particulars ₹
Unrealised Rent 10,000
Arrears of Rent 69,000
79,000
Less: Deduction @ 30% 23,700
Income from House Property 55,300

Concept of Composite Rent (Rent of House Property + Rent of Other

Assets)

Composite Rent
Agreement is not
Agreement is Separable
separable

Rent of House Total Rent is taxable

Rent of Other Assets
Property under PGBP/IFOS

Taxable under Income Taxable under

from House Property PGBP/IFOS

Note: If let out of property is not possible without other assets, then total rent is taxable under the
head PGBP/IFOS, whether agreement is separable or not.

House Property Held as Stock in Trade (Builder)

1. Income from Sale of House Property → Taxable under the head PGBP
2. Income from Let Out of House Property → Taxable under the head IFHP

Amendment

Where the House Property is held as Stock-in-Trade and not let out during the Previous Year, then
NAV shall be treated as NIL for the period of 2 years from the end of F.Y. in which construction is
completed.

Example: DLF Builder completed construction of 1 House Property on 16-07-2022. In this case, if such
HP is NOT let out, then NAV of such HP shall be treated as NIL till 31-03-2025. From P.Y. 2025-26, this
HP shall be treated as DLOP, and income shall be taxable under IFHP.

CA NISHANT KUMAR 20
Section 27: Deemed Ownership
1. If any individual transfers House Property to his/her spouse without consideration or for
inadequate consideration, then such individual is treated as deemed owner of such House
Property.
Exception: Transfer in connection of live apart.
2. If any individual transfers any house property to minor child without consideration or for
inadequate consideration, then such individual is treated as deemed owner.
Exception: Transfer to minor married daughter.
3. Holder of Impartible Estate: It means property which is not legally divisible. The main holder
of Impartible Estate is treated as Deemed Owner.
4. Member of co-operative society: In case of co-operative society, shareholders/members are
treated as deemed owners of property.
5. In case of immovable property, if possession is acquired in part performance of a contract,
then assessee is treated as deemed owner from the date on which he obtained possession.
6. If any house property is acquired under long term lease (12 years or more), then acquirer is
treated as deemed owner.

Question 23

Answer the following:

1. Mr. Rajesh transfers a property of market value ₹38,00,000 to his wife out of natural love and
affection. The income from such property is ₹2,00,000. How will the property income be
taxed?
2. Mr. Amit gifts a property valuing ₹10,00,000 to his minor child. The annual income from such
property is ₹2,00,000. How will the property income be taxed?
3. What will your answer be, if in the above case Mr. Amit has gifted the house property to his
minor married daughter?
4. Mr. Anuj gives his house property to Mr. Dinesh on lease for 20 years. However, the lease is
to be renewed by Mr. Dinesh every year. How will the property income be taxed?
5. What will your answer be if in the above case Mr. Anuj gives his house property on lease to
Mr. Dinesh for 2 years and Mr. Dinesh can get the lease renewed for another 2 years on
payment of a specified sum and so on for indefinite period?

Solution

1. In this case, Mr. Rajesh has transferred his house property to his wife in natural love and
affection, i.e., otherwise than for adequate consideration. Therefore, he will be the deemed
owner of such property and hence income of ₹2,00,000 will be assessed in the hands of Mr.
Rajesh as “Income from House Property”.
2. Here, Mr. Amit has gifted the property to his minor child, i.e., without any adequate
consideration. Thus, Mr. Amit shall be the deemed owner of such property and the income of
₹2,00,000 from the said property shall be taxable in his hands.
3. In case, an individual transfers the property without adequate consideration to his minor
married daughter, then he shall not be treated as deemed owner in respect of such property
as per Section 27. Hence, the income from such property will be taxed in the hands of the
minor married daughter.
4. In this case, the lease is for 20 years, i.e., for more than 12 years, but the same is to be renewed
every year by Mr. Dinesh, i.e., for a period of not more than one year. Thus, Mr. Dinesh is not

CA NISHANT KUMAR 21
 treated as the deemed owner of such property and income from such property will be taxable
for Mr. Anuj.
5. Here, the lease is for 2 years but Mr. Dinesh can renew it after every 2 years for indefinite
period, which implies that the lease can be for more than 12 years. Thus, Mr. Dinesh will be
the deemed owner of such property and income therefrom will be taxable in his hands.

Question 24 – ICAI SM – Question 4

Mrs. Rohini Ravi, a citizen of the USA, is a resident and ordinarily resident in India during the financial
year 2022-23. She owns a house property at Los Angeles, USA, which is used as her residence. The
annual value of the house is $20,000. The value of one USD ($) may be taken as ₹75.

She took ownership and possession of a flat in Chennai on 1.7.2022, which is used for self-occupation,
while she is in India. The flat was used by her for 7 months only during the year ended 31.3.2023. The
municipal valuation is ₹3,84,000 p.a. and the fair rent is ₹4,20,000 p.a. She paid the following to
Corporation of Chennai:

Property Tax ₹16,200

Sewerage Tax ₹1,800
She had taken a loan from Standard Chartered Bank in June, 2020 for purchasing this flat. Interest on
loan was as under:

Particulars ₹
Period prior to 1.4.2022 49,200
1.4.2022 to 30.6.2022 50,800
1.7.2022 to 31.3.2023 1,31,300
She had a house property in Bangalore, which was sold in March, 2019. In respect of this house, she
received arrears of rent of ₹60,000 in March, 2023. This amount has not been charged to tax earlier.

Compute the income chargeable from house property of Mrs. Rohini Ravi for the assessment year
2023-24.

Solution

Since Mrs. Rohini is Resident and Ordinarily Resident, her global income is taxable in India

Calculation of Income from House Property of Mrs. Rohini for the A.Y. 2023-24
Particulars ₹
(i) House at Los Angeles (USA) (Self Occupied Property)
Net Annual Value -
Less: Deduction u/s 24 -
Income from House Property -

(ii) House at Chennai (Self Occupied Property)

Net Annual Value -
Less: Deductions u/s 24
Less: Standard Deduction @ 30% -
Less: Interest on Loan (W.N. 1) 1,91,940 1,91,940
Income from House Property (1,91,940)

(iii) Recovery of Arrears Rent at Bangalore

Rent Received 60,000
Less: Standard Deduction @ 30% 18,000

CA NISHANT KUMAR 22
 Income from House Property 42,000

Net Income from House Property (1,49,940)

W.N. 1 - Interest on Loan

Particulars ₹
Pre-Acquisition Period Interest 49,200
.
Interest to be allowed every year (₹49,200 ÷ 5) 9,840
Post-Acquisition Period Interest 1,82,100
Total Interest for A.Y. 2023-24 1,91,940

Question 25 – ICAI SM – Illustration 2

Rajesh, a British national, is a resident and ordinarily resident in India during the P.Y. 2022-23. He owns
a house in London, which he has let out at £10,000 p.m. The municipal taxes paid to the Municipal
Corporation of London is £8,000 during the P.Y. 2022-23. The value of one £ in Indian rupee to be
taken at ₹95. Compute Rajesh’s Net Annual Value of the property for the A.Y. 2023-24.

Solution

For the P.Y. 2022-23, Mr. Rajesh, a British national, is resident and ordinarily resident in India.
Therefore, income received by him by way of rent of the house property located in London is to be
included in the total income in India. Municipal taxes paid in London is be to allowed as deduction
from the gross annual value.

Computation of Income from House Property

Particulars ₹
Actual Rent (GAV) (10,000 × 12 × 95) 1,14,00,000
Less: Municipal Taxes Paid (8,000 × 95) 7,60,000
Net Annual Value 1,06,40,000

Question 26 – ICAI SM – Illustration 3

Mr. Manas owns two house properties one at Bombay, wherein his family resides and the other at
Delhi, which is unoccupied. He lives in Chandigarh for his employment purposes in a rented house. For

acquisition of house property at Bombay, he has taken a loan of ₹30 lakh @ 10% p.a. on 1.4.2021. He
has not repaid any amount so far. In respect of house property at Delhi, he has taken a loan of ₹5 lakh
@ 11% p.a. on 1.10.2021 towards repairs. Compute the deduction which would be available to him
under section 24(b) for A.Y.2023-24 in respect of interest payable on such loan.

Solution

Calculation of Interest on Loan

Particulars Actual
I Interest on Loan for Bombay Property
(For Construction)
30,00,000 × 10% 3,00,000
Restricted to 2,00,000

CA NISHANT KUMAR 23
 II Interest on Loan for Delhi Property
(For Repair)
5,00,000 × 11% 55,000
Restricted to 30,000

Total Interest 2,30,000

Restricted to 2,00,000

Question 27 – ICAI SM – Illustration 11

Ms. Aparna co-owns a residential house property in Calcutta along with her sister Ms. Dimple, where
her sister’s family resides. Both of them have equal share in the property and the same is used by
them for self-occupation. Interest is payable in respect of loan of ₹50,00,000 @ 10% taken on 1.4.2021
for acquisition of such property. In addition, Ms. Aparna owns a flat in Pune in which she and her
parents reside. She has taken a loan of ₹3,00,000 @ 12% on 1.10.2021 for repairs of this flat. Compute
the deduction which would be available to Ms. Aparna and Ms. Dimple under section 24(b) for
A.Y.2023-24.

Solution

Calculation of Interest on Loan available to Ms. Aparna for A.Y. 2023-24

Particulars Actual
I Interest on Loan for Calcutta Property
(For Construction)
50,00,000 × 10% 5,00,000
Aparna's Share (50%) 2,50,000
Restricted to 2,00,000

II Interest on Loan for Pune Property

(For Repair)
3,00,000 × 12% 36,000
Restricted to 30,000

Total Interest 2,30,000

Restricted to 2,00,000

Calculation of Interest on Loan available to Ms. Dimple for A.Y. 2023-24

Particulars Actual
I Interest on Loan for Calcutta Property
(For Construction)
50,00,000 × 10% 5,00,000
Dimple's Share (50%) 2,50,000
Restricted to 2,00,000

Question 28 – RTP May, 2021

Mr. Roxx, a citizen of the Country Y, is a resident but not ordinarily resident in India during the financial
year 2022-23. He owns two house properties in Country Y, one is used as his residence. Another house

CA NISHANT KUMAR 24
property is rented for a monthly rent of $18,000. Fair rent of the house property is $20,000. The value
of one CYD ($) may be taken as ₹78.

He took ownership and possession of a flat in Delhi on 1.10.2022, which is used for self-occupation,
while he is in India. The flat was used by him for 3 months at the time when he visited India during the
previous year 2022-23. The municipal valuation is ₹4,58,000 p.a. and the fair rent is ₹3,60,000 p.a. He
paid property tax of ₹13,800 and ₹2,800 as Sewerage tax to Municipal Corporation of Delhi.

He had taken a loan of ₹18,00,000 @ 9.5% from HDFC Bank on 1st August, 2020 for purchasing this
flat. No amount is repaid by him till 31.3.2023.

He also had a house property in Bangalore which is let out on a monthly rent of ₹40,000. The fair rent
of which is ₹4,58,000 p.a. and Municipal value of ₹3,58,000 p.a. and Standard Rent of ₹4,20,000 p.a.
He had taken a loan of ₹25,00,000 @ 10% from one of his friends, residing in Country Y for this house.
Municipal tax of ₹5,400 is paid by him in respect of this house during the previous year 2022-23.

Compute the income chargeable from house property of Mr. Roxx for the assessment year 2023-24.

Solution

Since Mr. Roxx is Resident but Not Ordinarily Resident in India (R-NOR), so only Indian Income from
House Property is taxable for him.

Computation of Income from House Property

Particulars Delhi (SOP) Bangalore (LOP)
(i) Municipal Value - 3,58,000
(ii) Fair Rent - 4,58,000
(iii) Higher of (i) and (ii) - 4,58,000
(iv) Standard Rent - 4,20,000
(v) Expected Rent [Lower of (iii) and (iv)] - 4,58,000
(vi) Actual Rent Received/Receivable - 4,80,000
GAV [Higher of (v) and (vi)] - 4,80,000
Less: Municipal Taxes - 5,400
NAV - 4,74,600
Less: Deductions u/s 24
Less: 30% of NAV - 1,42,380
Less: Interest on Loan (Note 1) 2,00,000 2,50,000
Income from House Property (2,00,000) 82,220
.
Net Income from House Property (1,17,780)

W.N. 1 - Interest on Loan

Particulars ₹
Pre-Acquisition Period Interest
P.Y. 2020-21 (9.5% × ₹18,00,000 × 8/12) 1,14,000
P.Y. 2021-22 (9.5% × ₹18,00,000) 1,71,000
Total 2,85,000
.
Allowable Every Year (₹2,85,000 ÷ 5) 57,000
.
P.Y. 2022-23 (9.5% × ₹18,00,000) 1,71,000
Add: Pre-Acquisition Period Interest 57,000

CA NISHANT KUMAR 25
 Total 2,28,000
.
Restricted to 2,00,000

Question 29 – ICAI SM – Question 3

Mr. Vikas owns a house property whose Municipal Value, Fair Rent and Standard Rent are ₹96,000,
₹1,26,000 and ₹1,08,000 (per annum), respectively.

During the Financial Year 2022-23, one-third of the portion of the house was let out for residential
purpose at a monthly rent of ₹5,000. The remaining two-third portion was self-occupied by him.
Municipal tax @ 11 % of municipal value was paid during the year.

The construction of the house began in June, 2015 and was completed on 31-5-2018. Vikas took a loan
of ₹1,00,000 on 1-7-2015 for the construction of building. He paid interest on loan @ 12% per annum
and every month such interest was paid.

Compute income from house property of Mr. Vikas for the Assessment Year 2023-24

Solution

Computation of Income from House Property for A.Y. 2023-24

Particulars SOP (2/3) LOP (1/3)
(i) Municipal Value - 32,000
(ii) Fair Rent - 42,000
(iii) Higher of (i) and (ii) - 42,000
(iv) Standard Rent - 36,000
(v) Expected Rent [Lower of (iii) and (iv)] - 36,000
(vi) Actual Rent Received/Receivable - 60,000
GAV [Higher of (v) and (vi)] - 60,000
Less: Municipal Taxes - 3,520
NAV - 56,480
Less: Deductions u/s 24
Less: 30% of NAV - 16,944
Less: Interest on Loan (Note 1) 12,400 6,200
Income from House Property (12,400) 33,336
.
Net Income from House Property 20,936

W.N. 1 - Interest on Loan

Particulars ₹
Pre-Acquisition Period Interest
P.Y. 2015-16 (12% × ₹1,00,000 × 9/12) 9,000
P.Y. 2016-17 (12% × ₹1,00,000) 12,000
P.Y. 2017-18 (12% × ₹1,00,000) 12,000
Total 33,000
.
Allowable Every Year (₹33,000 ÷ 5) 6,600
.
P.Y. 2022-23 (12% × ₹1,00,000) 12,000
Add: Pre-Acquisition Period Interest 6,600

CA NISHANT KUMAR 26
 Total 18,600
.
For LOP (1/3) 6,200
For SOP (2/3) 12,400

Question 30 – ICAI SM – Illustration 6

Poorna has one house property at Indira Nagar in Bangalore. She stays with her family in the house.
The rent of similar property in the neighbourhood is ₹25,000 p.m. The municipal valuation is ₹2,80,000
p.a. Municipal taxes paid is ₹8,000. The house construction began in April 2016 with a loan of
₹20,00,000 taken from SBI Housing Finance Ltd. @ 9% p.a. on 1.4.2016. The construction was
completed on 30.11.2018. The accumulated interest up to 31.3.2018 is ₹3,60,000. On 31.3.2023,
Poorna paid ₹2,40,000 which included ₹1,80,000 as interest. There was no principal repayment prior
to this date. Compute Poorna’s income from house property for A.Y. 2023-24.

Solution

Computation of Income from House Property of Poorna for A.Y. 2023-24

Particulars Amount
NAV -
Less: Deductions u/s 24
Less: 30% of NAV -
Less: Interest on Loan (W.N. 1) 2,00,000 2,00,000
Income from House Property (2,00,000)

Calculation of Interest to be Allowed in P.Y. 2022-23

Particulars ₹
Pre-Construction Interest:
2016-17 (9% × ₹20,00,000) 1,80,000
2017-18 (9% × ₹20,00,000) 1,80,000
3,60,000
Pre-Construction Interest to be allowed every year (₹3,60,000 ÷ 5) 72,000
Add: Interest for P.Y. 2022-23 1,80,000
Interest to be allowed in P.Y. 2022-23 2,52,000
.
Restricted to 2,00,000

CA NISHANT KUMAR 27