HEADS OF INCOME

INCOME FROM HOUSE PROPERTY

Dr. Sugandh Rawal, DSPSR
INCOME FROM HOUSE
PROPERTY
 Charging Section S. 22
Annual Value of any property consisting of any
building or land appurtenant (belonging)
thereto of which, the assessee is the owner is
chargeable to tax under the head “Income from
House Property”

Dr. Sugandh Rawal, DSPSR

INCOME FROM HOUSE
PROPERTY
 following three conditions:
 property consists of buildings or lands
appurtenant thereto (belonging to)
 the assessee should be the owner of the property
 the property should not be used by th owner for
his own business

Dr. Sugandh Rawal, DSPSR

 Owner includes legal as well as deemed owner
 Deemed owner as per section 27 includes
Owner (transferor) would be deemed owner:
 Transfer to a spouse or child without consideration:
 Transfer to spouse without an agreement to live apart or to a
minor, not a married daughter
 Holder of an impartible estate
 Property held by a member of a co-operative society / company /
AOP
 A person who has acquired a property under power of attorney
Section 53A – Given a scenario where, under a contract for transfer of
immovable property, the buyer has made the required payments, and has taken
possession of the property even though the transfer deed or conveyance hasn’t
been registered.
 Person acquired a right on a property under lease less than 12
years
Dr. Sugandh Rawal, DSPSR
 Exempted property
 income from farm house (u/s 2(1A) (10(1))
 annual value of any one palace of an ex-ruler Se.
10(19A)
 property income of a local authority (10( 20)
 property income of an approved scientific research
association (10(21)
 property income of an educational institution
(10(20C)

Dr. Sugandh Rawal, DSPSR

INCOME FROM HOUSE
PROPERTY
 Exempted property
property income of a trade union (10(24)
 house property held for charitable purpose (11)
 property income of a political party (13A)
property used for own business or profession (22)
 one self-occupied property Sec 23(2)

Dr. Sugandh Rawal, DSPSR

 Composite Rent
In certain cases, the owner charges rent from the
tenant not only on account of rent for the house
property but also on account of service charges for
various facilities provided with the house. Such rent is
known as composite rent. The said composite rent
can fall under 2 categories:
(a) Composite rent on account of rent for the
property and service charges for various facilities
provided along with the house like lift, gas, water,
electricity, watch and ward, air conditioning etc. In
this case such composite rent should be split

Dr. Sugandh Rawal, DSPSR

Composite Rent
up and the portion of rent attributable to the letting
of the premises shall be assessable as “Income
from house property”. The other portion of the
composite rent received for rendering services shall
be assessable as “Income from other sources”.

Dr. Sugandh Rawal, DSPSR

Composite Rent
 (b) Composite rent on account of rent for the property
and the hire charges of machinery, plant or furniture
belonging to the owner. In this case if the letting of the
property is separable from the letting of the other
assets, then the portion of the rent attributable to the
letting of the premises shall be assessable as “ Income
from house property” and the other portion of the
composite rent for letting other assets shall be
assessable either as “business income” or as “other
sources”.
 On the other hand, if the letting of the property is
inseparable from the letting of other assets like
machinery, furniture, the entire income would be
taxable as “business income” or as “other sources”.

Dr. Sugandh Rawal, DSPSR

Computation of Annual Value
 computation of income from house property depends
on the type of property
 let out House property
 self -occupied property
let out property remain vacant
 partly let out and partly self occupied
 deemed to be let out
 property owned by co-owners

Dr. Sugandh Rawal, DSPSR

Determination of Income from House
Property
Gross Annual Value *******
Less: Municipal Taxes (paid in PY) *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rent (sec 25B) (unrealised rent recovered)
less: 30% of arrears *******
Income from House Property *********

Dr. Sugandh Rawal, DSPSR

Income of house property
GAV (gross annual value)= higher value of ER
and AR
ER (expected rent)
MUNICIPAL VALUE MV
FAIR RENT FR
MV or FR…higher would be considered subject to max. of SR

…..
STANDARD RENT (IF APPLICABLE) UNDER RENT
CONTROL ACT

AR (actual rent)
Dr. Sugandh Rawal, DSPSR
Computation of Annual Value of Let –out
 Annual value is the estimated value of Income expected if the
property is rented.
 Annual value is the
 reasonable letting Value / Expected rent ( ER )or
 Actual Rent (AR) of the property which ever is higher.
 ER
 is the Municipal value 20K or Fair rent 32K which ever is higher va;lue choose
 Higher value…35K
 restricted to Standard rent ….33k…
 a per Rent Control Act
 ER= 33K

 GAV……AR 3000p.m or ER 33K

 AR….36K…annual…
 ER…..33K
 GAV…..36k

Dr. Sugandh Rawal, DSPSR

Computation of Annual Value of
 reasonable letting value / ERis:
Let –out
reasonable letting value / ERis:
 Municipal value MV or
 Fair rent FR
Which ever greater restricted to Standard rentSR

 Municipal Valuation is the ratable value fixed by the municipality for charging municipal tax .
 Fair rent is the rent fetched by a similar accommodation in the same or similar locality
 Standard rent is the maximum rent which a person can legally recover from his tenant under the Rent
Control Act.

Dr. Sugandh Rawal, DSPSR

COMPUTATION OF ACTUAL RENT

ACTUAL RENT AR
 Actual rent is applicable only to let out houses. Actual
rent is rent received or receivable. Actual rent is the rent of
the previous year for which the property was available for
letting out. The unrealized rent, if it fulfills the conditions, is
allowed to deduct from actual rent receivable
Actual Rent = Actual rent received or receivable
– allowable unrealised rent/loss due to vacancy

Dr. Sugandh Rawal, DSPSR

Lossdue to vacancy
The property remained vacant for some time period, it will be deducted
from the annual rent and the figure come to be the actual rent receivable.
Unrealized rent
The rent which has not been recover from the tenant. It is also deducted from
GAV.
The following conditions must satisfied: rule 4
 His tenancy is bonafide
 The steps has been taken to recover the rent
 Steps has been taken to compel him to vacate the property
 3000pm……10 month let out …2 months vacant out of 12 months
 36000-6000 (vacancy)=30000
 AR 30000 (rulke 4 condition not satisfied and unrealised rent will not be
deducted)…tenant 2 month rent not recvd…..(6000)
 30000-6000 (unrealized rent..rule 4 condition satisfied)= AR 24000

Dr. Sugandh Rawal, DSPSR

Deduct Municipal Taxes
From the annual Value deduct
Municipal Taxes levied by any local
authority in respect of the house
property.
This tax is deductible only if it is
actually paid by the owner and only to
the extent it is paid during the year
2019-20…pay MT…..2018, 2017,
2016, …pay deducted…..
Dr. Sugandh Rawal, DSPSR
Deduction u/s 24
Standard deduction
 Interest on borrowed

Dr. Sugandh Rawal, DSPSR

Deduction u/s 24
Standard deduction
 Interest on borrowed

Dr. Sugandh Rawal, DSPSR

Standard deduction
No deduction can be claimed by an
assessee other than mentioned in section
24. Standard deduction is allowed
irrespective of expenses incurred by the
assessee
 30 % of the adjusted annual value
is deductible irrespective of expenses
incurred by the taxpayer
Dr. Sugandh Rawal, DSPSR
Interest on Borrowed Capital
Interest on Borrowed capital is allowed as deduction if
capital is borrowed for the purpose of purchase, construction,
repair, renewal or reconstruction of the property
It is deductible on accrual basis. It can be deductible as
yearly, it is deductible even if it is not actually paid during
the previous year
No deduction for any brokerage or any expenses for

arranging the loan is allowed

 interest of a fresh loan taken for the repayment of the
earlier loan is allowed as deduction

Dr. Sugandh Rawal, DSPSR

Interest Payable for pre-construction
period
If interest on Borrowed capital is paid prior to the
acquisition or completion of construction, the interest paid
during that period is allowed as deduction in five equal
instalments . But if such amount is allowed as deduction
under any other provision earlier the amt. so deducted is
not allowed as deduction under this provision

Dr. Sugandh Rawal, DSPSR

 (a) Where the property is acquired or constructed
with capital borrowed on or after 01/04/1999 and
such acquisition or construction is completed within
5 years of the end of the financial year in which the
capital was borrowed: Actual interest payable
subject to maximum of Rs 2,00,000 if relevant
certificate is obtained*
Interest Deduction in respect of one
self-occupied house where annual
value is Nil
Dr. Sugandh Rawal, DSPSR
 (b) In any other case, i.e. borrowed for repairs or
renewal or conditions mentioned in clause (a) are
not satisfied: Actual interest payable subject to
a maximum of Rs 30,000

Interest Deduction in respect of one

self-occupied house where annual
value is Nil
Dr. Sugandh Rawal, DSPSR
Sec 25AA : Recovery of Arrears of Rent or Unrealised Rent
(1) The amount of arrears of rent received from a tenant or
unrealized rent realised subsequently from a tenant,by an
assessee shall be deemed to be the income from house property
in respect of the financial year in which such rent is received or
realised, and shall be included in the total income of the
assessee under the head “Income from house property”,
whether the assessee is the owner of the property or not in that
financial year.
(2) A sum equal to 30% of the arrears of rent or the
unrealised rent referred to in sub-section (1) shall be allowed as
deduction.
Dr. Sugandh Rawal, DSPSR

Determination of Income from House
Property
Gross Annual Value *******
Less: Municipal Taxes *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rentsec 25B (unrealised rent recovered)
less: 30% of arrears *******
Income from House Property *********

Dr. Sugandh Rawal, DSPSR

Illustration 1
R owns a property in Delhi. From the particulars given below compute the income from house property for the assessment
year 2020-21. (in Rs.)
 Municipal Value: 240000


Fair rent: 292000 GAV= compare ER and
AR higher

336000
 MV or FR higher
 2, 92000
 must be restricted to SR

 Standard rent: 280000

 Expected rent: 2,80,000 ER

 Actual rent : 28000 p.m*12= 336000

Dr. Sugandh Rawal, DSPSR

 Municipal taxes :20% of municipal value 240000
 Municipal taxes paid during the year: 50% of tax levied
 GAV= compare ER and AR higher
GAV=336000
 MT= (24000)
 NAV= 312000
 30% of NAV= (93600)
 Interest on loan (PY)=(120000) loan is not repaid
o 5th instalment= (18000)
o Ans 80400

Dr. Sugandh Rawal, DSPSR

 Expenses on repairs: 40000
 Insurance premium: 10000
R borrowed a sum of Rs. 12,00,000@10% p.a. on 1.7. 2016 and the construction of property was completed on 28.2. 2018.
2019-20 (income and expenses) AY 2020-21
Interest from
July 2016- 31 march 2017= 90000Rs paid to lender

act deduction of int on loan from the year in which construction will be
As per income tax

completed
2017-18= (1,20,000+90000/5) deduction
2018-19= 1,20,000+90000/5) deduction
2019-20 = 1,20,000+90000/5) deduction
2020-21 = 1,20,000+90000/5) deduction
2021-22 = 1,20,000+90000/5) deduction

Dr. Sugandh Rawal, DSPSR

ILL. 1 a
R borrowed a sum of Rs. 12,00,000@10% p.a. on 1.7. 2016 and the
construction of property was completed on 28.2. 2019.(2018-19)
2019-20 (income and expenses) AY 2020-21
Interest from
July 2016- 31 march 2017= 90000 Rs paid to lender
1 april 2017- 31 march 2018= 1,20000Rs paid to lender

As per income tax act deduction of int on loan from the year in which construction will be completed 2018-19

2018-19= (1,20,000+210000/5) deduction

2019-20 = (1,20,000+210000/5) deduction
2020-21 = (1,20,000+210000/5) deduction
2021-22 = (1,20,000+210000/5) deduction
2022-23= (1,20,000+210000/5) deduction

Dr. Sugandh Rawal, DSPSR

Illustration 2
Three brothers A,B,C having equal share are co-owners of
a house property consisting of six identical units. Each of
them occupies one for his residence and the other three are
let out at Rs.5000 p.m per unit
M.V: Rs. 300000
Municipal taxes: 40% of Municipal value, paid during the
year
Interest payable on construction: 120000
this property was constructed on 31.5.1997. each of them
occupies one unit .
Calculate total income of three brothers for AY 2018-19
Dr. Sugandh Rawal, DSPSR
A, B,C…..3 self occupied
3 let out units

Dr. Sugandh Rawal, DSPSR