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Income From House Property

CA Prashanth Reddy
25/05/2017 0 1
Section 22: Basis of Charge

Section 23: Computation of Annual Value Section 24: Deductions

Section 25 : Unrealised Rent/ Arrears of rent Section 26 : Co-owners

Section 27: Deemed ownership

BASIS OF CHARGE: U/S 22: Income from house property is chargeable to Income-tax under this head when the following conditions are satisfied:

  1. There should be building and land appurtenant thereto.
  2. Assessee must be the owner/deemed owner of that Building.
  3. The building must not be used by him for his own business or profession.

Deemed Owner: U/S 27:

A person is said to be the deemed owner, even otherwise he is not the owner of the building. Following are the persons treated as deemed owner of the Building:

  • Transfer to spouse or minor child: If the property is transferred to spouse or minor child (not married minor daughter) without adequate consideration.
  • Holder of an impartible estate: The property which cannot be separated as per family conventions or otherwise.
  • Property held by a member of co-operative society/company/ AOP.
  • Person who has acquired property under power of attorney transactions.
  • Person acquired a right in building under section 269 UA(f).
Income of the following property is not chargeable to tax:
  • Income from house property of Institutions for development of Khadi and Village Industrie
  • Income from house property of Khadi and Village Industries Board
  • Property income of Charitable trusts
  • Property income of registered trade unions
  • Property income of Political Parties
  • Income from Farmhouse
Annual Value:

It is the annual value which is liable to tax under this head of income.

Annual Value means the sum for which the property might reasonably be expected to be let from year to year. In determining the annual value, four factors are taken into consideration:

Municipal valuation: Valuation is made for the purposes of determining house tax

Fair rent: It is the rent which a similar property can fetch if given on rent in the open market.

Standard rent: Where the Rent Control Act applies, rent is fixed as per the Rent Control Act and the expected rent cannot exceed the standard rent.

Actual rent received or receivable

Computation Of Annual Value:

It requires the following steps: Determination of the Gross Annual Value

Determination of Net Annual value: Net annual value is determined after deduction of Municipal taxes borne and paid by the owner during the previous year.

Deductions under section24 are allowed from the net annual value so arrived.


Computation Of Income From Let Out House Property:

Where the property is let out, then the income from house property is calculated as under

GrossAnnual Value                                                                           xxxxxx

Less: Municipal Taxes (Paid and borne by the assessee )                xxxxx

Net Annual Value                                                                              xxxxxx

Less: Deductions under section 24:

Statutory Deduction ( 30% )                                         xxxxx

lnterestOn Borrowed capital                                         xxxxx

Income from House property                                       xxxxx

Interest is allowed up to an unlimited amount of paid on an accrual basis in case of let out property. Further interest is also allowed on pre-construction period in 5 equal instalments, commencing from the year in which construction is complete. Interest is allowed only where the amount is borrowed for the purposes of construction, purchase, repair, renewal etc.


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VIJAY | 09/04/2017

Thank you very much Sir

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