INCOME INCOME FROM FROM HOUSE HOUSE PROPERTYPROPERTY

(1)

INCOME INCOME

FROM FROM HOUSE HOUSE

PROPERTY PROPERTY

by: yogeshwar by: yogeshwar

malhotra

(2)

Meaning:

Meaning: U/s 22, annual U/s 22, annual

rental value of any building rental value of any building

or land appurtenant or land appurtenant

thereto which is owned by thereto which is owned by

the assessee is taxable the assessee is taxable

under the head “Income under the head “Income

From House Property”.

(3)

The following conditions should be The following conditions should be

satisfied:

1.1. There must be a building or land appurtenant There must be a building or land appurtenant thereto like parking place, front yard or back thereto like parking place, front yard or back

yard.

2.2. The building must be owned by the assessee. The building must be owned by the assessee.

It should be the building not the land.

(4)

Owner

Owner: It is the legal owner of the house property : It is the legal owner of the house property who is chargeable to to tax.

who is chargeable to to tax.

However in case of joint ownership , Disputed However in case of joint ownership , Disputed ownership, Deemed ownership , where legal ownership, Deemed ownership , where legal

owners cannot be ascertained the ownership will be owners cannot be ascertained the ownership will be

based upon certain assumptions.

(5)

Joint Ownership:

Joint Ownership: If the property is owned by If the property is owned by joint owners then the rental income received joint owners then the rental income received will be taxable on the basis of share in which will be taxable on the basis of share in which

the property is owned by the joint owners.

However, if nothing is mentioned then it will However, if nothing is mentioned then it will

be treated as equal share.

Disputed Ownership:

Disputed Ownership: If there is dispute If there is dispute

regarding the ownership of the property then regarding the ownership of the property then income will be taxable in hands of recepient of income will be taxable in hands of recepient of

rent i.e. tax will be paid by that person who rent i.e. tax will be paid by that person who

has actually received rent of that property.

(6)

Deemed Owner

The holder of impartible estate.

An individual, who transfer house property

otherwise than for adequate consideration to his or her spouse or to his minor child .

A member of co-operative society, company or other association of persons.

A person who comes to have control over the

property as per the provisions of sec. 53 A of The Transfer Of Property Act.

A person who is having control over the property as referred in clause f of sec. 269UA (i.e. taking a property on lease for not lesser than 12 years.

(7)

Provisions of sec. 53 A of The Provisions of sec. 53 A of The

Transfer Of Property Act.

 The Buyer will be treated as deemed owner The Buyer will be treated as deemed owner if the following conditions are satisfied:

if the following conditions are satisfied:

1.1. The agreement of sale is in writing.The agreement of sale is in writing.

2.2. Full payment has been made by buyer to Full payment has been made by buyer to seller.

seller.

3.3. Full possession has been given to the buyer.Full possession has been given to the buyer.

(8)

Calculation Of Gross Annual Calculation Of Gross Annual

Value Value

1. Municipal Rental Value xxx

2. Fair Rental Value xxx

3. Whichever is Higher xxx

4. Standard Rent (if applicable) xxx

5. Expected Rent (lower of 3or4) (A) xxx 5. Expected Rent (lower of 3or4) (A) xxx 6. Annual Rent for 12 months xxx 6. Annual Rent for 12 months xxx Less: Unrelised Rent Less: Unrelised Rent xxxxxx (B) xxx

(B) xxx Less: Loss due to vacancy

Less: Loss due to vacancy xxxxxx (C)

(C) xxxxxx

(9)

Calculation Of Gross Annual Value Calculation Of Gross Annual Value

► (C) will be compared with (A). There can (C) will be compared with (A). There can be two situations:

be two situations:

1.1. If (C) is higher then (C) will be gross If (C) is higher then (C) will be gross annual value.

annual value.

2.2. If (C) is lower then (B) will be compared If (C) is lower then (B) will be compared with (A). Higher of (A) and (B) will be

with (A). Higher of (A) and (B) will be computed. Loss due to vacancy will be computed. Loss due to vacancy will be

deducted from this higher value and the deducted from this higher value and the

balance will be gross annual value.

(10)

Municipal Rental Value:

Municipal Rental Value: The local authority The local authority makes

makes a periodical survey of all the buildings in a periodical survey of all the buildings in its jurisdiction for collecting municipal taxes.

its jurisdiction for collecting municipal taxes.

Fair Rental Value:

Fair Rental Value: Fair rental value of the Fair rental value of the property can be determined on the basis of a property can be determined on the basis of a rent fetched by a similar property in the same or rent fetched by a similar property in the same or

similar locality.

Standard Rental Value:

Standard Rental Value: Standard rent is the Standard rent is the maximum rent which a person can legally maximum rent which a person can legally recover from his tenant under a Rent Control recover from his tenant under a Rent Control

Act.Act.

(11)

Calculation of Income under the head Calculation of Income under the head

“Income From House Property

“Income From House Property””

Gross Annual Value xxx

Less: Municipal Taxes (Actually xxx paid by the owner

Net Annual Value xxx Less: Deduction u/s 24

(A) Deduction for repair xxx and collection

(30% of N.A.V.) (B) Interest

-For current year xxx

-For Pre-construction period xxx xxx xxx Income From House Property xxx

(12)

Deduction u/s 24:

Only 30% of N.A.V. is deducted as Only 30% of N.A.V. is deducted as

expenditure for repair and collection expenditure for repair and collection

because it is standard deduction no because it is standard deduction no other expenditure is deducted. This other expenditure is deducted. This

amount is allowed as expenditure even amount is allowed as expenditure even

if there is no actual expenditure on if there is no actual expenditure on

repair and collection charges.

(13)

Conditions for claiming loss due to unrealised rent:

1. The tenancy is bonafide.

2. The defaulting has vacated, or steps has been taken to compel him to vacant the property.

3. The defaulting tenant is not in occupation of any other property of the assessee.

4. The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings will be useless.

(14)

Deduction of the interest from Net Deduction of the interest from Net

Annual Value.

 For current year.For current year.

 For preconstruction PeriodFor preconstruction Period

Interest will be deducted even if it is Interest will be deducted even if it is not actually paid during the previous year i.e.

not actually paid during the previous year i.e.

interest is deducted on the accrual basis.

..

(15)

Pre-construction period Pre-construction period

interest.

Pre-construction is the period starting from the date Pre-construction is the period starting from the date

of loan and ending on 31

of loan and ending on 31^st^st march preceding to date march preceding to date of completion of construction. However if the loan of completion of construction. However if the loan has been repaid before completion of construction has been repaid before completion of construction

i.e. 31

i.e. 31^st^st march prior to the date of completion then march prior to the date of completion then the pre-construction period will end on date of the pre-construction period will end on date of

repayment of loan.

Whole of the interest for the preconstruction period Whole of the interest for the preconstruction period will be divided in to five parts and will be allowed as will be divided in to five parts and will be allowed as deduction in 5 previous years starting from the year deduction in 5 previous years starting from the year

in which the construction has been completed.

(16)

Property not covered under the head

“Income From House Property”

Property used for own business is not covered under the head “Income From House Property”.

(17)

Property self occupied for own Property self occupied for own

residential purposes.

 Gross Annual Value will be nil only interest Gross Annual Value will be nil only interest will be allowed as deduction but subject to will be allowed as deduction but subject to

certain limits.

(18)

Limits for interest on self occupied property for own Limits for interest on self occupied property for own residential purposes:

residential purposes:

1.1. If loan has been taken before 1 April, 1999 for purchase, construction, repair, reconstruction, If loan has been taken before 1 April, 1999 for purchase, construction, repair, reconstruction, renewal etc. of a house property then maximum interest allowed will be Rs. 30000

renewal etc. of a house property then maximum interest allowed will be Rs. 30000

2.

2. If loan has been taken on or after 1 April, 1999 for purchase or construction of house property then If loan has been taken on or after 1 April, 1999 for purchase or construction of house property then maximum interest allowed will be Rs. 150000

maximum interest allowed will be Rs. 150000

3.3. If loan has been taken on or after 1 April,1999 for repair, renewal or reconstruction of house If loan has been taken on or after 1 April,1999 for repair, renewal or reconstruction of house property then maximum interest allowed will be Rs. 30000 only.

property then maximum interest allowed will be Rs. 30000 only.

4.

4. If two loans has been taken for the property i.e. one before 1 April,1999 and one after 1 April,1999 If two loans has been taken for the property i.e. one before 1 April,1999 and one after 1 April,1999 then the calculation will be made as under:

then the calculation will be made as under:

(a)(a) Loan before 1 April,1999: Loan before 1 April,1999:

Actual Interest xxx Actual Interest xxx Maximum Rs.30000 30000 Maximum Rs.30000 30000 Whichever is less xxx Whichever is less xxx

(b)

(b) Loan on or after 1 April,1999:Loan on or after 1 April,1999:

Actual Interest xxx Actual Interest xxx Maximum Rs.150000 150000 Maximum Rs.150000 150000 Whichever is less Whichever is less xxx xxx

xxxxxx

or or

Rs.150000Rs.150000

Whichever is less Whichever is less

(19)

If assessee has more than one house If assessee has more than one house

property:

If assessee has more than one residential If assessee has more than one residential

property for his own residence in that case property for his own residence in that case

assessee has the choice to treat anyone assessee has the choice to treat anyone

house as self occupied residential house in house as self occupied residential house in

which gross annual value will be nil and which gross annual value will be nil and

there can be maximum loss of Rs.30000 0r there can be maximum loss of Rs.30000 0r

Rs.150000 Rs.150000

All other self occupied residential house All other self occupied residential house

will be treated as deemed to be let out and will be treated as deemed to be let out and

gross annual value will be computed by gross annual value will be computed by

comparison of fair rental value, municipal comparison of fair rental value, municipal

rental value and standard rent.

That option will be selected where the total That option will be selected where the total

income is minimum.

(20)

Recovery of unrealised rent in any next Recovery of unrealised rent in any next year. If any unrealised rent of previous year. If any unrealised rent of previous year is recovered in any subsequent year year is recovered in any subsequent year

then it will be treated as under:

1. If any unrealised rent was allowed as deduction in assessment year 1. If any unrealised rent was allowed as deduction in assessment year

2001-02 or in any earlier year then if unrealised rent is recovered in 2001-02 or in any earlier year then if unrealised rent is recovered in current assessment year i.e. 2008-09 then taxable amount is as

current assessment year i.e. 2008-09 then taxable amount is as under:

under:

Taxable amount = Amount recovered- Amount not allowed as Taxable amount = Amount recovered- Amount not allowed as deduction in any previous year.

deduction in any previous year.

2. If unrealised rent relates to any assessment after 2001-02, then that 2. If unrealised rent relates to any assessment after 2001-02, then that unrealised rent is recovered in current assessment year i.e. 2008-09 unrealised rent is recovered in current assessment year i.e. 2008-09 then the taxable amount will be calculated as under:

then the taxable amount will be calculated as under:

(A) New calculations will be made for that assessment year in which (A) New calculations will be made for that assessment year in which the rent was realised as if the rent was recovered in the same year.

the rent was realised as if the rent was recovered in the same year.

(B) It will be compared with the gross annual value computed for that (B) It will be compared with the gross annual value computed for that year before recovery of unrealised rent.

year before recovery of unrealised rent.

(C) The difference between two gross annual values will be taxable (C) The difference between two gross annual values will be taxable amt. due to recovery of unrealised rent.

amt. due to recovery of unrealised rent.

(21)

Taxation of arrears of rent in the Taxation of arrears of rent in the

year of receipt:

► The taxpayer is the owner of any property The taxpayer is the owner of any property

consisting of any building of lands appurtenant consisting of any building of lands appurtenant

thereto which has been let to a tenant.

► He has received any amount, by way of arrears of He has received any amount, by way of arrears of rent from such property, not charged to income tax rent from such property, not charged to income tax

for any previous year.

► The amount so received shall deemed to be the The amount so received shall deemed to be the income chargeable under the head “Income From income chargeable under the head “Income From

House Property”.

► It is taxable even if the assessee is not the owner It is taxable even if the assessee is not the owner of that property in the year in which he has

of that property in the year in which he has received arrears of rent.

received arrears of rent.

(22)

If a part of the property is self If a part of the property is self occupied and other part is let out:

occupied and other part is let out:

In that case both the properties will be In that case both the properties will be

treated separately and income from treated separately and income from house property will be calculated for house property will be calculated for

both the properties separately.

(23)

In case of newly purchased property or sold during the year:

If property has been purchased during the year or construction has been completed

during the year, all the values i.e. municipal rental value, fair rental value, standard rental value will be reduced propotionetely according to the period for which the property is owned by the assessee.

(24)

If the property is let out for a part of year and is self If the property is let out for a part of year and is self

or own residence:

occupied fIf the property is let out for a part of year occupied fIf the property is let out for a part of year

and is self occupied for own residence for the and is self occupied for own residence for the remaining part of the year i.e. some benefit is remaining part of the year i.e. some benefit is

derived from the property during its vacancy in that derived from the property during its vacancy in that

case fair rental value, municipal rental value, case fair rental value, municipal rental value,

standard rent will be taken for 12 months.

Whereas actual rent will be taken only for the Whereas actual rent will be taken only for the period for which the actual rent is received and no period for which the actual rent is received and no

vacancy will be allowed to be deducted because vacancy will be allowed to be deducted because

some benefit has been derived out during the some benefit has been derived out during the

period of vacancy.

(25)

Property remained vacant:

If a property is let out for a period of If a property is let out for a period of

the year and it remained vacant some the year and it remained vacant some

period of the year in that case vacancy period of the year in that case vacancy

allowance will allowed to be deducted allowance will allowed to be deducted

for annual rent for 12 months if no for annual rent for 12 months if no

benefit is derived from that property benefit is derived from that property

during its vacancy.