INCOME TAX

INCOME FROM HOUSE PROPERTY

IMPORTANCE -5/5

SECTION 22-27 of Income Tax Act, 1961 deals with HOUSE PROPERTY
House property includes Houses, Shops, Offices, Godowns, etc,. (Except Land)
The owner of the house property is taxable as under
Sec 22 – Charging Section
Sec 23 – Let Out Property
Any house property given on rent is taxable as let out property(LOP)
calculation is as follows
Particular Amt
Gross annual value (GAV) a
Less: municipal tax or property tax (b)
(Paid by the owner during the year)
Net annual value (NAV) =a - b
Less standard deduction u/s 24A <<adhoc>> 30% of NAV (c)
Less: Interest on Borrowings u/s 24B (paid/ payable) (d)
IFHP Computed =a-b-c-d

Computation of Gross Annual Value: Gross Annual Value is Higher of Actual Rent AR Or Expected Rent
ER
ACTUAL RENT EXPECTED RENT
Always calculated for 12 months <<Municipality Figures Standard>>
Rent actually received or receivable is called actual i.e. Municipal Value or Fair Value whichever is
rent higher subject to ceiling of standard Rent
Actual rent eg: MV- 10 Lakhs
Less: Unrealised Rent (UR) FR – 15 LAKHS
Actual Rent 2 (AR2) SR – 9 LAKHS
Less: Vacancy Loss (VL) Thus, ER is 9 Lakhs
Final AR(GAV) Under ER, there is no deduction for UR OR VL

ER to be ignored after VL is deducted

UNREALISED RENT: (Similar to Bad debts) can be deducted to RULE 4 conditions are meet
<< Legally Vacate Our Building >>
 1) Legal action against the tenant
2) Tenant asked to vacate the property
3) Other house property, of the owner should not be rented to the same tenant
4) Should be a Bonafide Agreement (legal agreement)
#VACANCY LOSS: (VL) Is lost due to vacancy in house property i.e., Wen house property is not let out or
self-occupied
VL can be deducted only if <<AR2 WINS>> i.e, AR2> ER

DEDUCTION UND3ER IFHP

There are only 3 deduction in IFHP
i. MUNICIPAL TAXES: (Property tax) Deduction will be given only if PAID during the year
i.e. Till 31st march by the owner. No deductions is paid by the tenant unless it is reimbursed.
Deduction even for alias or advanced municipal tax will be paid.
ii. STANDARD DEDUCTION U/S 24A << ADHOC>> Slap 30% deduction of nav will be
given irrespective of the amount actually spent. All 30% deduction no further reduction for
any expenses example insurance, ground rent, collection charges, etc,. would be given.
iii. Interest deduction U/S 24B <<BORROWINGS >>
a. Interest deduction on accurate basis (if paid or payable)
b. Loan can be taken from any source (eg: Family, Bank, etc,.)
c. There could be multiple loans or fresh loans
d. No deduction for interest on interest or penalties
e. Interest deduction = 1st part[Current year interest allowed fully] + 2nd part [Pre-
construction Interest / 5] (Refer pg 10 in note book for eg..)