Income

from
House
Property
Dr. Nikhil Chandra Shil FCMA, CGMA, CPFA
Associate Professor, Dept. of Business Admin.
East West University
 Heads of Income
Income from Salary

Income from Interest on

Securities
7 heads of Income from House Property
income
Income from Agriculture

Under section 20 of Income from Business and

Income Tax Ordinance, Profession
1984 Income from Capital Gain

Income from Other Sources

Scope of Income
Annual value of any property, whether used for commercial or residential purposes,
consisting of any building, furniture, fixture, fittings etc. or lands appurtenant
thereto, of which the assessee is the owner excluding such portions of the property
as the assessee-owner may occupy for the purpose of his business or profession
(24(1))

If the house property is owned by two or more persons and if their respective
shares are definite and ascertainable, then only proportionate income from such a
property will be considered as income from house property of the assessee (24(2)).

Where an assessee-owner of a house property receives any advance from the

tenant which is not adjustable against the rent payable, the amount so received
shall be deemed to be the income of the assessee for the income year in which it is
received. Provided that at the option of the assessee such amount may be
allocated, for the assessment purpose in equal proportion to the year of receipt
and four years next following. Moreover, if such amount or part thereof is
refunded by the assessee in a subsequent income year, the refunded amount shall
be deducted in computing the income of the assessee in respect of that income
year (19(22))
Scope of Income
Where an assessee-owner of a house property receives any amount exceeding taka
2 lakh other than bank transfer from the tenant which is adjustable against the
rent receivable, the amount shall be deemed to be the “Income from house
property” of the assessee for the income year in which it is received. Provided that
where such amount is received through bank transfer, the amount shall be adjusted
within five years after the year of receipt or the period of agreement whichever is
lower, if after the expiry of the aforesaid period such amount or any part thereof
remains unadjusted, the amount remained so unadjusted shall be deemed to be
the “Income from house property” of the assessee in the income year in which such
amount remains unadjusted (19(22A))

Where an assessee, in the course of any proceedings under this Ordinance, is found
to have any sum or part thereof allowed or deducted but not spent in accordance
with the provision of clause (h) of sub-section (1) of section 25 of this Ordinance
(allowable repair and maintenance expense), such unspent sum or part thereof
shall be deemed to be the income of such assessee for that income year classifiable
under the head “Income from house property” (19(30))
Non-assessable Income

Religious or
charitable
purpose
Used for
Vacancy agricultural
purpose

Non- For 10 years if

Self-occupied constructed
portion assessable during the terms
Income in specified area
Income from House Property – Rental Status
House Property

Let Out Self Occupied

Fully Partly Residential Agricultural

Taxable Proportionately Non-Assessable

A house property will be termed ‘self-
Residential Commercial occupied’ when the owner or his/her family
members use it for residential purpose. A
house could be self-occupied even when it was
not occupied throughout the year due to
owner’s employment at another place. Also, if
Repair & Repair &
a person owns a house but lives with parents,
Maintenance Maintenance it may be termed as ‘self-occupied’ if it was
Expense - 25% Expense - 30% not rented out. A vacant house property is
of annual value of annual value considered as self-occupied for the purpose of
Income Tax.
Annual Value
According to Section 2(3)(a) of the ITO, 1984 ‘annual value’ shall be deemed to be in relation
to any property let out –
(i) the sum for which property might reasonably be expected to let from year to year and
any amount received by letting out furniture, fixture, fittings etc.; or
(ii) where the annual rent in respect thereof is in excess of the sum referred to in
paragraph (i), the amount of the annual rent.
Computation of Annual Value
Annual Rent (No. of flats × rent per flat per month × 12) ***
(+) Tax Deducted at Sources @ 5% ***
(+) Owner’s bill paid by tenant ***
(-) Tenant’s bill paid by owner ***
Annual Rent (adjusted) ***
Municipal Value (proportionate) ***
Whichever is higher ***
Note: Municipal Value is the value as determined by the Municipal authorities for levying
Municipal taxes on house property. In absence of fair rent (the rent which a similar property
can fetch in the same or similar locality, if it is let out for a year) municipal vale is used as a
proxy.
Allowable Deductions (u/s 25)
Heads of Expense Remarks
Land development tax or rent
Insurance premium
Interest on mortgage loan
Annual charge not being a capital charge
Ground rent
Interest on borrowed capital
Interest on borrowing during construction In three equal proportionate installments for
subsequent first three years
Repair and maintenance one-fourth (25%) of the annual value for
residential purpose, thirty per cent (30%) of
the annual value for commercial purpose
Vacancy allowance Proportionate annual value for vacant
months
Uncollectible rent
Tax Deducted at Sources
Where, the Government or any authority, corporation or body, including its units,
the activities or the principal activities of which are authorized by any Act,
Ordinance, order or instrument having the force of law in Bangladesh or any
company as defined in clause (20) of Section 2, or any banking company or any
co-operative bank established by or under any law for the time being in force or
any non-governmental organization run or supported by any foreign donation or
assistance or any university or medical college or dental college or engineering
college or any college or school, or hospital or clinic or diagnostic centre is a
tenant in respect of a house property, the tenant shall deduct from the house
rent paid or payable as advance tax at the rate of 5%.

But such amount of tax is subject to refund if income of the owner is not liable to
pay tax or if amount of advance tax is more than the owner’s total tax liability.

No such deduction is required when the owner holds certificate stating that there
is no assessable income against this assessee.
Maintenance of Separate Bank Account
Where any person having ownership or possession of any property, whether
used for commercial or residential purposes, receives any sum or aggregate of
sums exceeding Tk. 25,000/- (twenty five thousand) per month in respect of any
rent of such house property or its unit, such person shall maintain a bank
account in any scheduled bank for the purpose of depositing rent of the house
property or its unit and deposit such rent or any advance received or receivable
from such house property or its unit in such bank account.
Where the person having ownership or possession mentioned in sub-rule (1) has
one or more tenants and receives the sum or aggregate of sums exceeding taka
25,000/- (twenty five thousand) per month, he may maintain a separate register
and record regarding particulars of the tenant or tenants and the sum or sums
received.
Penalty for Non-compliance of this provision by the house owner (individual,
firm, company or any other organization):
Higher of 50% of income tax payable amount for house property income or Tk.
5,000.
Specimen
Income from House Property (Section 24 – 25): Tk. Tk.
Annual Rent XX
Add: Owner’s expenses paid by the tenant XX
TDS (If deducted from income from house property) XX
Less: Tenant’s expenses paid by the owner (XX)
Annual Rent (Adjusted) XX
Municipal Value (Proportionate) XX
Annual Value: Higher of annual rent and municipal value XX
Receipt of Advance u/s 19(22) XX
Unspent amount of allowable repair and maintenance expense XX
Less: admissible expenses: XX
1. Land development tax XX
2. Insurance Premium XX
3. Interest on Mortgage Loan XX
4. Annual tax [Municipal or local authority tax] XX
5. Interest on Borrowed Capital XX
6. Ground Rent XX
7. Repair & Maintenance Expenses XX
[Collection charge, sewerage bill, salary of guard, liftmen, caretaker]
[Admissible limit: Resident house: 25% & Commercial house: 30%]
8. Vacancy Allowance XX
9. Uncollectible Rent XX
10. Refund of Advance XX XX
Total Income XX
Problem 1

Mr. Jaman has a house at Mohakhali C/A with an area of 4,800 square feet. He let
out this house to a computer firm at an annual rent of Tk. 600,000. The municipal
value per square feet at Mohakhali C/A is Tk. 120.

Expenses that were incurred during the income year includes:

•Repair expense Tk. 190,000;
•City Corporation tax Tk. 15,000;
•Fire insurance premium Tk. 9,000;
•Night guard’s salary Tk. 7,000; and
•Installation of electricity line Tk. 25,000.

During the year Mr. Jaman paid installment of loan to HBFC Tk. 67,500 (principal
amount is Tk. 64,000). According to the agreement the owner bears the water
and gas bill of the tenant which amounted to Tk. 20,000 for the year.
Compute income from house property for the income year ended 30th June 2020.
Solution 1
Mr. Jaman
Income year: 2019– 2020; Assessment year: 2020 – 2021
Calculation of Total Income

Tk. Tk.
Income from House Property (Section – 24):
Rental value 600,000
Less: Tenants expenses paid by owner 20,000
Actual Rental value 580,000
Municipal Value (4,800 × 120) 576,000
Annual Value (higher one) 580,000
Less: Admissible expenses:
Repair & Maintenance (580,000 × 30%) 174,000
City corporation tax 15,000
Fire insurance premium 9,000
Interest on borrowed Fund 3,500 201,500
Total Income 378,500
Problem 2
Mr. Adib is the owner of three houses at Dhanmondi, Dhaka; Agrabad, Chittagong; and
Thakurpara, Comilla. Details of these houses are given below:
Details Dhanmondi Agrabad Thakurpara
Number of storied 3 1 2
Number of flats in each floor 2 1 4
Rental status Fully let out Self Occupied Partly let out
Municipal value (annual) Tk. 900,000 Tk. 120,000 Tk. 700,000
Rental value (each flat per month) 12,000 - 7,000
Expenses incurred:
Repair and maintenance 240,000 25,000 165,000
Insurance premium (quarterly) 2,000 - 1,500
Salary of guard 15,000 5,000 7,000
Ground rent 2,000 3,000 -
Local government tax (per month) 1,200 600 500
Interest on borrowed fund 5,000 - 4,000
In Dhanmondi, Dhaka one flat remain vacant for two months period and in Thakurpara,
Comilla two flats are occupied by his sons who are fully dependent on him. House at
Dhanmondi has been let out for residential purpose while house at Thakurpara has been
let out to a commercial firm. Compute Mr. Adib’s income from house property for the
income year ended 30th June 2020.
 Tk. Tk. Tk.
Income from House property (Section – 24):
House at Dhanmondi:
Actual Rental value (12,000 × 12 × 6) 864,000
Municipal Value 900,000
Annual Value (higher one) 900,000
Less: Admissible expenses:
Repair & maintenance (900,000 × 25%) 225,000
Fire Insurance Premium (2,000 × 4) 8,000
Ground rent 2,000
Local Govt. Tax (1,200 × 12) 14,400
Interest on borrowed Fund 5,000
Vacancy allowance [(900,000 ÷ 6) × 2/12] 25,000 279,400 620,600

House at Thakurpara:
Actual rental Value (7,000 × 6 × 12) 504,000
Municipal Value (700,000 × 6 ÷ 8) 525,000
Annual value (higher one) 525,000
Less: Admissible expenses:
Repair & Maintenance (525,000 × 30%) 157,500
Insurance premium [(1,500 × 4) × 6/8] 4,500
Local govt. Tax [(500 × 12) × 6 ÷ 8] 4,500
Interest on borrowed fund [4000 × 6 ÷ 8] 3,000 169,500 355,500
Total 976,100
Problem 3
Mr. Abedin is the owner of a four-storied building at Mirpur. In the each floor of the
building there are two flats. Mr. Abedin resides with his family in one flat of the 2nd floor
and in another flat of the same floor is used as residence by his elder son who is fully
dependent on him. All other flats were let out for residential purpose at a monthly rent of
Tk. 10,000 per flat. During the year, the owner has borne the water and gas bill of a tenant
amounted to Tk. 30,000 and one of the tenants has borne repair expense of Tk. 10,000.
The municipal value of the house is Tk. 960,000. Advance received Tk. 100,000 cash during
the year and refund of advance was Tk. 40,000. Expenses related to the property for the
year were: Repair expenses Tk. 190,000; City Corporation tax Tk. 22,000; Insurance
premium Tk. 16,000; Caretaker and Night guard salary Tk. 24,000; Painting cost of the
building Tk. 15,000; Land revenue paid Tk. 2,000; Mortgage interest paid Tk. 4,000; Legal
expense Tk. 6,000; Alteration cost for ground floor Tk. 30,000; Installation of generator Tk.
50,000; and Fuel cost of generator Tk. 20,000. During the year one of the tenants in the
ground floor left the house without paying rent for one month. Mr. Abedin even after
taking necessary legal action fails to collect this rent. Besides that the same flat was vacant
for two months during the year. Compute income from house property for the income
year ended 30th June 2020.
Solution 3
Income from House property (Section - 24): Tk. Tk.
Annual Value:
Rent received (10,000 × 6 × 12) 720,000
Add: Owner’s exp. paid by tenant 10,000
730,000
Less: Tenant’s exp. paid by owner 30,000
Actual rental value 700,000
Municipal value (9,60,000 × 6 ÷ 8) 720,000
Annual value (higher one) 720,000
Advance Received 100,000
Less: Admissible expenses: 820,000
Repair & maintenance (720,000 × 25%) 180,000
City corporation tax (22,000 × 6 ÷ 8) 16,500
Insurance premium (16,000 × 6 ÷ 8) 12,000
Land revenue paid (2,000 × 6 ÷ 8) 1,500
Mortgage interest paid (4,000 × 6 ÷ 8) 3,000
Uncollectible rent [(7,20,000 ÷ 6) × 1/ 12] 10,000
Vacancy all. [(7,20,000 ÷ 6) × 2/ 12] 20,000
Refund of advance 40,000 283,000
Total 537,000
Problem 4

Mr. Jalal Ahmed is the owner of a two-storied building at Gulshan. Mr. Ahmed
resides with his family in one floor and another floor has been let out to a
government authority at a monthly rent of Tk. 30,000. The government
authority deducts tax at source at prescribed rate (5%) before paying the rent
to him. The municipal value of the house is Tk. 725,000. Expenses incurred for
that house during the year were: Repair expenses Tk. 110,000; City Corporation
tax Tk. 22,000; Insurance premium Tk. 16,000; Caretaker and Night guard salary
Tk. 24,000; Purchase of diesel for generator Tk. 12,000; Legal expense Tk.
10,000; Land revenue paid Tk. 2,000; Interest paid to HBFC Tk. 6,000; and
Alteration cost for ground floor Tk. 30,000. Besides, the let out floor was vacant
for two months during the year. Compute income from house property for the
year ended 30.06.20.
Solution 4
Mr. Jalal Ahmed
Income year: 2019 – 2020; Assessment year: 2020 – 2021
Calculation of Total Income
Income from House property (Section – 24): Tk. Tk.
Rental value (28,500 × 12 ) 342,000
Add: TDS [3,42,000 × 5 ÷ (100 – 5)] 18,000
Actual rental value 360,000
Municipal value (7,25,000 × 1 ÷ 2) 362,500
Annual value (higher one) 362,500
Less: Admissible expenses:
Repair & maintenance (362,500 × 30%) 108,750
City corporation tax (22,000 × 1 ÷ 2) 11,000
Insurance premium (16,000 × 1 ÷ 2) 8,000
Land revenue paid (2,000 × 1 ÷ 2) 1,000
Interest paid to HBFC (6,000 × 1 ÷ 2) 3,000
Vacancy allowance (362,500 × 2 ÷ 12) 60,417 192,167
Total 170,333
Problem 5
Mr. Taleb has a two storied building at Motijheel C/A. He has started the
construction of the house on 1st July, 2017 and completed the construction on
30th June, 2019. After the construction, he let out the full building to a branch of
Prime bank at a monthly rent of Tk. 200,000 effective from 1st July, 2019. He has
also taken Tk. 2,000,000 as advance from Prime Bank. The municipal value of the
house is Tk. 2,500,000.

Expenses incurred in the income year 2019 – 2020 for that house were:
•Repair expense Tk. 400,000;
•City Corporation tax Tk. 30,000;
•Fire insurance premium Tk. 18,000; and
•Installation of IPS Tk. 50,000.

Mr. Taleb borrowed Tk. 2,000,000 from Prime Bank Motijheel Branch @ 6%
interest on 1st July, 2017. Per year installment of the loan is Tk. 300,000 (total
interest expense during the construction period of 2 years Tk. 240,000; assuming
simple interest).

Compute income from house property for the income year.

Solution 5
Mr. Taleb
Income year: 2019 – 2020; Assessment year: 2020 – 2021
Tk. Tk.
Income from House Property (Section – 24):
Actual rental value:
Rental value (190,000 × 12) 2,280,000
Add: TDS [2,280,000 × 5 ÷ (100 – 5)] 120,000
Actual Rental value 2,400,000
Municipal Value 2,500,000
Annual Value (higher one) 2,500,000
Receipt of Advance [2,000,000 ÷ 5] 400,000
Unspent repair exp. u/s 19(30) [750,000 – 400,000] 350,000
3,250,000
Less: Admissible expenses:
Repair & Maintenance (2,500,000 × 30%) 750,000
City corporation tax 30,000
Fire insurance premium 18,000
Int. on loan for construction period (240,000 ÷ 3) 80,000
Interest on loan for current income year 120,000
998,000
Total 2,252,000