INCOME FROM HOUSE PROPERTY

Course
Material
MBA II YR
SEM -1
CHARGEABILITY
Any income from the house property & land apparent there
to. However the dueling house adjacent to the firm will be
exempted as the agricultural income.
Who is taxable-
Real owner
Deemed Owner
Transfer of House to spouse (except with an agreement to live
appart)/ minor child except a married daughter without proper
consideration- the transferor.
Holder of an Inpartiable Property of HUF- Karta will be Taxable
Members of Co-operative Society.
Tenant having tenancy right more than 12 years



CHARGEABILITY
Residential Property is not taxable. Only one property can be exempted
in case of ownership of more than one Property.
Rent from vacant land and from hiring of building along with the
machinery will be taxable under Other source.
The rent from business of renting of House property will be taxable
under house Property.
House partly self occupied & partly rented needed to considered as
separate premises.
House kept as mortgage in the money laundering business will also be
taxable under H.P.
Residents having Income from Foreign Estates are taxable .
Non Residents having Income from Foreign Estates are taxable only
when received in India.
Composite rent when not separable for benefits provided will be taxable
under H.P. (Separable- facilities- Other Sources, house- H.P.)
PROPERTY INCOMES EXEMPT
FROM TAX
Income from a farm house [section 2(1A) (c) and section 10(1)].
Property of an ex-ruler [section 10(19A)].
Property income of a local authority [section 10(20)].
Property income of an approved scientific research association
[section 10(21)].
Property income of an educational institution and hospital [section
10(23C)].
Property income of a registered trade union [section 10(24)].
Income from property held for charitable purposes [section 11].
Property income of a political party [section 13A].
Income from property used for own business or profession [section
22].
COMPUTATION OF INCOME UNDER H.P.
A. Fair Market Value (FMV) XXX
B. Municipal Value XXX
C. Take the Higher XXX
D. Standard Rent XXX
E. Take the Lower (ERV)(Expected Rental Value XXX
F. Actual Rent- Unrealized rent XXX
G. Take the Higher (Gross Annual Value) XXX
Less: Municipal Taxes XXX
Net Annual Value XXX
Less: Deductions under Section 24 XXX
Statutory Deduction (30% of NAV) XXX
Interest on Borrowed Capital XXX
Income From House Property XXX
UNREALIZED RENT
Conditions for non Taxability
1. Bonafide tenancy
2. The Defaulting tenant has vacated the House.
3. He is not in possession of any other house property of the
owner
4. Legal Proceedings has been commenced for the recovery
of the unrealized rent.
Unrealized Rent Realized subsequently will be Taxable in the year in
which it will be realized.
VACANCY RENT
The Vacancy rent is allowed as deduction in the case
Actual rent is lesser than the ERV.
Calculation-
A. Fair Market Value (FMV) XXX
B. Municipal Value XXX
C. Take the Higher XXX
D. Standard Rent XXX
E. Take the Lower (ERV)(Expected Rental Value XXX
ERV for Non vacancy period
F. Actual Rent for Non vacancy period - Unrealized rent XXX
G. Take the Higher (Gross Annual Value) XXX
DEDUCTIONS UNDER SEC 24
Statutory deduction: 30 % of NAV irrespective of the
repair & maintenance Expenses.
INTEREST ON HOUSING LOAN
In case the property is let out, the entire amount of
interest accrued during the year is deductible. The
borrowals may be for construction/acquisition or
repairs/renewals.
A fresh loan may be raised exclusively to repay the
original loan taken for purchase/ construction etc., of
the property. In such a case also, the interest on the
fresh loan will be allowable.
Interest payable on interest will not be allowed.
INTEREST ON HOUSING LOAN
Brokerage or commission paid to arrange a loan for house
construction will not be allowed.
When interest is payable outside India, no deduction will be
allowed unless tax is deducted at source or someone in India is
treated as agent of the non-resident
Should be taken from Banks
The Deduction is only available to the borrower not to his
successors.
Non refundable loan from Provident fund will be allowed only on
the portion of owners contribution.
Purchase of house Property on Installments- The Interest can be
deductable only.



DEDUCTION IN CASE OF SELF
OCCUPIED HOUSE PROPERTY
The Property purchased Before 1999-2000
Pre Construction Interest(PCI)/5 < Rs30,000/-
Current year Interest < Rs30,000/-
The Property purchased After 1999-2000
{Pre Construction Interest(PCI) + Current year Interest }/5 <
Rs1,50,000/-
Both Should be limited to Rs1,50,000/- in case both the category
loans are taken by one assessee.
In case of self occupied house remain vacant and hence rented
and during that period the owner is staying in paid
accommodation at a place due to his occupation/ Business/
Employment and there is no other building in his possession or
ownership then the rent received will not be taxable. He must be
the owner of one house property only

IMPORTANT POINTS
Municipal tax- It is the liability of the tenant and therefore
if it is paid by the owner then he can avail deduction. How
ever we can go for tax planning with this regards. The
Municipal taxes are deductable on the basis of Payment
therefore should be dealt with cautiously. The arrear of
Municipal tax paid is also deductable.
Local tax including service tax is the liability of the owner
therefore is allowed to be deducted while calculating the
Actual rent if-
Born by Owner
On payment of tax
SET OFF & CARRY FORWARD OF
HOUSE PROPERTY LOSSES
Loss From one house Property Can be adjusted from the
profit from another house property.
The loss can also be carry forward to the next year.(can be
adjusted under the house property) irrespective of the
delay in filling.
The loss on house property can be Set off with the other
sources of Income.
TAX PLANNING IN HOUSE PROPERTY
Person having more than one self occupied house. Higher ERV
property should be considered to be self occupied.
Interest on loan is allowed only when TDS has been Deducted
Municipal tax should be paid before 31
st
march to get the
deduction
In case of deemed owner is a member of housing co operative
society , The interest on the outstanding installments can be
claimed as deduction
Transfer of HP-
To Parents, Sons Wife, Sons Minor Child without proper
consideration.
To Son/ Spouse with consideration.
Karta can transfer the property to his wife in case of HUF