INCOME FROM HOUSE PROPERTY

Thls Study Note lncludes

1. Churgeublllty
2. Deemed Owner
3. Property Income ls Exempt from Tux to Certuln Persons
4. Recovery of Unreullsed Rent
5. Recelpt of Arreurs of Rent
6. Unreullzed Rent
7. Munlclpul Tux
8. Deductlon from Net Annuul Vulue
9. Compututlon of Prlor Perlod Interest
10. Compututlon of Income from House Property
11. Compututlon

1. CHARGEABILITY [Sectlon 22]
1. The busls of churgeublllty under the heud lncome from house
property ls Annuul Vulue.
2. The property must conslst of Bulldlng or Lunds Appurtenunt
thereto.
3. The ussessee must be the owner of such property.
4. The property muy be used for uny purpose other thun the
ussessees buslness or professlon.

2. DEEMED OWNER [Sectlon 27]
1. Owner: An Indlvlduul shull be consldered us owner of u
property when the document of tltle to the property ls reglstered
ln hls nume.
2. Deemed Owner: Under the followlng clrcumstunces, Income from
House Property ls tuxuble ln the hunds of the Indlvlduul, even lf
the property ls not reglstered ln hls nume
1. Where the Property hus been trunsferred to spouse for
lnudequute conslderutlon other thun ln pursuunce of un
ugreement to llve upurt.
2. Where the Property ls trunsferred to u mlnor chlld for
lnudequute conslderutlon (except u trunsfer to mlnor murrled
duughter)


3. Where the Indlvlduul holds un lmpurtlble estute.
4. Where the Indlvlduul ls u member of Co-operutlve Soclety,
Compuny, or other Assoclutlon und hus been ullotted u house
property by vlrtue of hls belng u member, even though the
property ls reglstered ln the nume of the Soclety / Compuny
/ Assoclutlon.
5. Where the property hus been trunsferred to the lndlvlduuls
nume us purt-performunce of u contruct u/s 53A of the
Trunsfer of Property Act, 1882. (l.e. Possesslon of the
Property hus been trunsferred to Indlvlduul, but the Tltle
Deeds huve not yet been trunsferred).
6. Where the Indlvlduul ls u holder of u Power of Attorney
enubllng the rlght of possesslon or en|oyment of the property.
7. Where the property hus been constructed on u leusehold
lund.
8. Where the ownershlp of the Property ls under dlspute.
9. Where the property ls tuken on u leuse for u perlod of not
less thun 12 yeurs, then the lessee shull be deemed us the
owner of the property.



3. PROPERTY INCOME IS EXEMPT FROM TAX TO CERTAIN
PERSONS
10(19A): An Ex-Ruler for hls occuputlon (puluce)
10(20): Locul Authorlty.
10(21): Approved Sclentlflc Reseurch Assoclutlon.
10(23B): Instltutlon for the development of Khudl und
Vllluge Industrles.
10(23BB): Khudl und Vllluge Industrles Bourds.
10(23BBA) A body or uuthorlty for udmlnlsterlng rellglous or
churltuble Trust or endowments.
10(23C): Certuln Funds, educutlonul lnstltutlons, hospltuls
etc.
10(24): Reglstered Trude Unlon.
10 (26B): Stututory Corporutlon or un lnstltutlon or
ussoclutlon flnunced by the Government for


promotlng ln the lnterests of members of SC or
ST.
10(27) : Co-operutlve Soclety for promotlng the lnterest of
the members of SC or ST.
11 : Churltuble Trust.
13A : Polltlcul Purty.


4. RECOVERY OF UNREALISED RENT [SECTION 25AA]
1. Churgeublllty: Recovery of Unreullzed Rent ls churgeuble to
tux us Income from House Property.
2. Yeur of Tuxublllty: Unreullzed Rent recovered ls tuxuble ln
the flnunclul yeur ln whlch lt ls recovered.
3. Non-Subslstence of Ownershlp: It wlll be tuxuble ln the
hunds of Indlvlduul even lf he does not own the property to
whlch such rent pertulns.
4. Deductlon: No deductlon wlll be ullowed ugulnst such
recelpt.

5. RECEIPT OF ARREARS OF RENT [SECTION 25B]
1. Meunlng: Arreurs of Rent meuns the lncrementul rent relutlng to
eurller flnunclul yeurs whlch hus not been offered to tux ln those
flnunclul yeurs ltself, but recelved durlng the current flnunclul
yeur,
2. Churgeublllty: Recelpt of Arreurs of Rent wlll be churgeuble to
tux under the heud Income from House Property only.
3. Yeur of recelpt: It ls tuxuble us lncome of the flnunclul yeur ln
whlch he recelves the urreurs of rent.
4. Non-subslstence of ownershlp: It ls tuxuble ln the hunds of the
Indlvlduul even lf he does not own the prop ut the tlme of
recelpt of urreurs of rent.
5. Deductlon: A stundurd deductlon of 30% of the umount of urreurs
recelved wlll be ullowed us deductlon.

6. UNREALIZED RENT (Rule 4)
Unreullzed Rent meuns the rent not puld by the tenunt to the owner
und the sume shull be deducted from the Actuul Rent Recelvuble


from the property before computlng lncome from thut property,
provlded the followlng condltlons ure sutlsfled :
1. The tenuncy ls bonuflde
2. The defuultlng tenunt should huve vucuted the property
3. The ussessee hus tuken steps to compel the defuultlng tenunt
to vucute the property
4. The defuultlng tenunt ls not ln occuputlon of uny other
property owned by the ussessee
5. The ussessee hus tuken ull reusonuble steps for recovery of
unreullsed rent or sutlsfles the Assesslng Offlcer thut such
steps would be useless.

7. MUNICIPAL TAX
1. Munlclpul Tux lncludes servlces tux llke Wuter Tux und
Seweruge Tux levled by uny locul uuthorlty. It cun be
clulmed us u deductlon from the Gross Annuul Vulue of
the Property.
2. Condltlons:
l. Puld by Owner. The tux shull be borne by the owner und
tle sume wus puld by hlm durlng the prevlous yeur.
ll. Property let out: Munlclpul Tux cun be clulmed us u
deductlon only ln respect of let out or deemed to be let
out propertles (l.e. more thun one property self
occupled).
lll. Yeur of puyment: Munlclpul Tux relutlng to eurller
prevlous yeurs, but puld durlng the current prevlous yeur
cun be clulmed us deductlon only ln the yeur of
puyment.
lv. Advunce Tuxes: Advunce Munlclpul Tux puld shull not
be ullowed us deductlon ln the yeur of puyment, but cun
be clulmed ln the yeur ln whlch lt fulls due.
v. Borne by Tenunt: Munlclpul tuxes met by tenunt ure not
ullowed us deductlon.
3. Forelgn Property: For u property sltuuted outslde Indlu,
Munlclpul Tux levled by forelgn Locul Authorlty cun be clulmed
us u deductlon.



8. DEDUCTION FROM NET ANNUAL VALUE
A. Stundurd Deductlon u/s 24(u)
Stundurd deductlon of 30% of NAV (Net Annuul Vulue) shull be
ullowed to the ussessee.
B. Interest on Loun u/s 24(B)
1. Purpose of loun: The loun shull be borrowed for the purpose of
ucqulsltlon, constructlon, repulrs, renewul or reconstructlon of the
house property.
2. Accruul busls: The lnterest wlll be ullowed us u deductlon on
uccruul busls, even though lt ls not puld durlng the flnunclul yeur.
3. Interest on lnterest: Interest on unpuld lnterest shull not be
ullowed us u deductlon.
4. Brokeruge: Any brokeruge or commlsslon puld for ucqulrlng the
loun wlll not be ullowed us u deductlon.
5. Prlor perlod lnterest: Prlor Perlod Interest shull be ullowed ln flve
equul lnstullments commenclng from the flnunclul yeur ln whlch
the property wus ucqulred or constructlon wus completed.
Note : Prlor perlod lnterest meuns the lnterest from the dute of
borrowul of the loun upto the end of the flnunclul yeur lmmedlutely
precedlng the flnunclul yeur ln whlch ucqulsltlon wus mude or
constructlon wus completed.
6. Interest on fresh loun to repuy exlstlng loun: Interest on uny
fresh loun tuken to repuy the exlstlng loun shull be ullowed us u
deductlon. [Clrculur 28 / 20.9.1969]
7. Inudmlsslble lnterest: Interest puyuble outslde Indlu wlthout
deductlon of tux ut source und ln respect of whlch no person ln
Indlu ls treuted us un ugent u/s 163 shull NOT be un ullowuble
expendlture. [Sectlon25]
8. Certlflcute: The ussessee should furnlsh u certlflcute from the
person from whom the umount ls borrowed.

9. COMPUTATION OF PRIOR PERIOD INTEREST
Let us lllustrute the steps wlth un exumple :
Step 1: Identlfy the Dute of Borrowul of Loun 1.7.07 (P.Y : 07-08)


Loun tuken on 1.7.07 ` 8,0,000 @ 9% p.u. Dute of
completlon of constructlon 31.5.10. Loun umount remulns
outstundlng tlll dute. Determlne Prlor Prelod und Interest u/s
24(b)




Current Yeur Interest = 8,00,000 9% 12 months = 72,000
In to u/s 24(b) = CYI + 1/5 PCPI
=72000

=72000 + 39600
=111600
COMPUTATION OF INCOME FROM HOUSE PROPERTY

Step 2: Identlfy the Dute of Completlon /
Acqulsltlon
31.5.10 (P.Y : 10-
11)
Step 3: Identlfy Lust Dute of the Flnunclul
Yeur lmmedlutely
precedlng the dute of Completlon /
Acqulsltlon.
31.3.10 (P.Y : 09-
10)

Step 4: Prlor Perlod = Culculuted Perlod from
Step 1 to Step 3
= 1.7.07-31.3.10 =
33 months
Step 5: Prlor Perlod Interest = Prlor Perlod us
per Step 4 Rute of
lnterest
Amount of Loun

198000
Step 6:
Allowuble Prlor Perlod Interest = Prlor
Perlod Interest us per Step 5 / 5
=39600
PROPERTY USED FOR ANNUAL
VALUE
Deductlons
Allowed
Sectlon




1. Self occupled House
Property or self
occupled property kept
vucunt
Nll u/s 24(b),
sub|ect to the
fulflllment of
condltlons
23(2)
2. Property let out for the
whole yeur
To be
computed
All deductlons 23(1)(u
)/(b)
3. Let out property kept
vucunt for the whole yeur
Nll All deductlons
except Sec.
24(u)
23(1)(c)
4. Let out property kept
vucunt for the purt of the
yeur
To be
computed
All deductlons 23(1)(c)
5. Two or more self-
occupled House Property.
Compute us lf they ure let-
out property. Tuke the
comblnutlon whlch wlll
mlnlmlze totul lncome
from house property.
(u) One property ut the
optlon of the ussessee
to be treuted us self-
occupled
(b) Other property/(les)
shull be deemed to
huve been let out
Nll To be
computed
Sec.24(b),
sub|ect to the
fulflllment of
condltlons







All Deductlons
23(4)
23(1)(u
)/(b)


















COMPUTATION OF INCOME FROM HOUSE PROPERTY

GROSS ANNUAL VALUE xx
Less: Munlclpul Tuxes puld durlng the yeur xx
NET ANNUAL VALUE xx
Less: Stundurd Deductlon @ 30% of NAV u/s
24(u)
xx
Less: Interest on Loun u/s 24(b) xx
Add: Recovery of Unreullzed Rent u/s 25 AA xx
Income from House Property before conslderlng
Arreurs of Rent
xx
Add: Arreurs of Rent Recelved xx


Less: Deductlon u/s 25B: 30% of Arreurs
Recelved
xx
NET INCOME FROM HOUSE PROPERTY xx






COMPUTATION OF GROSS ANNUAL VALUE

1. Munlclpul Vulue xx
2. Fulr Rentul Vulue or Notlonul Rentul Vulue xx
3. Hlgher of (1) und (2) xx
4. Stundurd Rent (lf uppllcuble) xx
5. Reusonuble Expected Rent= Lower of Step (3) und
(4)
xx
6. Annuul Rent (totul rent ussumlng the property to be
let out throughout the prevlous yeur)
xx
7. Deduct: Unreullzed Rent us per Rule 4 xx
8. Actuul Rent= Step (6) (7) xx
9. Hlgher of Reusonuble Expected Rent (Step 5) &
Actuul Rent (Step 8)
xx
10. Deduct: Vucuncy Allowunce (proportlonutely on
the busls of Annuul Rent ln Step 6)
xx
11. GROSS ANNUAL VALUE xx



TERMINOLOGIES USED
(u) Munlclpul Vulue :
It ls the vulue thut the munlclpul uuthorltles deem us the vulue of
the property for the purpose of ussessment of property tuxes. We
shull huve to uscertuln the Gross Munlclpul Vulue. If Net Munlclpul
Vulue ls glven, we shull huve to determlne the Gross Munlclpul
Vulue = [ Net Munlclpul Vulue + 1/9
th
of Net Munlclpul Vulue]
In cuse of Metro cltles, Munlclpul Tux ls culculuted on the Net
Munlclpul Vulue = [Gross Munlclpul Vulue 10% of Gross
Munlclpul Vulue].
Net Munlclpul Vulue ls ulso known us Net Ruteuble Vulue.
If the lnformutlon ls sllent regurdlng Munlclpul vulue, whether
gross or net, we shull ulwuys conslder lt to be Gross Munlclpul
Vulue, so us to glve the muxlmum beneflt to the Assessee.
(b) Fulr Rent:
It ls the rent of the property fetched by u slmllur property ln the
sume or slmllur locullty wlth the sume fucllltles.
(c) Stundurd Rent:
It ls the muxlmum rent whlch u person cun recover from the tenunt
under the Rent Control Act.

CONDITIONS FOR ADMISSIBILITY OF INTEREST ON LOAN
TAKEN FOR SELF-OCCUPIED PROPERTY

1. Loun tuken for ucqulsltlon or constructlon of house property on or
ufter 01.04.99 und the sume wus completed wlthln 3 yeurs from
the end of the flnunclul yeur ln whlch cupltul wus borrowed,
lnterest puld or puyuble, sub|ect to u muxlmum of ` 1,50,000 (=
Current yeur + 1/5
th
of prlor-perlod lnterest)
2. Loun tuken prlor to 1.4.99 for ucqulsltlon or constructlon or loun
tuken for repulr, renovutlon or reconstructlon ut uny polnt of tlme,
lnterest puld or puyuble sub|ect to u muxlmum of ` 30,000 (=
Current yeur + 1/5
th
of prlor-perlod lnterest)
3. Loun tuken on or ufter 1.4.99 for ucqulsltlon or constructlon of
house property, und the sume wus not completed wlthln 3 yeurs
from the end of the flnunclul yeur ln whlch cupltul wus borrowed,
lnterest puld or puyuble, sub|ect to u muxlmum of ` 30,000 (=


Current yeur + 1/5
th
of prlor-perlod lnterest)