CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

C HAPTER 6
H OUSE P ROPERTY
1 . IC AI S T U D Y M A T E R I A L Q U E S T I O N S

Concept Problem 1

Jayashree owns five houses in Chennai, all of which are let- out. Compute the expected rent and GAV of each
house from the information given below:

Particulars House I House II House III House IV House V

Municipal Value 80,000 55,000 65,000 24,000 75,000
Fair Rent 90,000 60,000 65,000 25,000 80,000
Standard Rent NA 75,000 58,000 NA 78,000
Actual Rent 72,000 72,000 60,000 30,000 72,000
Expected Rent
GAV

Solution

As per section 23(1), Gross Annual Value (GAV) is the higher of Expected rent and actual rent received.
Expected rent is higher of municipal value and fair rent but restricted to standard rent.

Particulars House I House II House III House IV House V

a) Municipal Value 80,000 55,000 65,000 24,000 75,000
b) Fair Rent 90,000 60,000 65,000 25,000 80,000
c) Higher of (a) and (b) 90,000 60,000 65,000 25,000 80,000
d) Standard Rent NA 75,000 58,000 NA 78,000
Lower of © and (d) 90,000 60,000 58,000 25,000 78,000
e) Expected Rent 90,000 60,000 58,000 25,000 78,000
f) Actual Rent 72,000 72,000 60,000 30,000 72,000
GAV (Higher of (e) and (f) 90,000 72,000 60,000 30,000 78,000

Concept Problem 2

Rajesh, a British national, is a resident and ordinarily resident in India during the P.Y. 2021-22. He owns a house in
London, which he has let out at £ 10,000 p.m. The municipal taxes paid to the Municipal Corporation of London is
£ 8,000 during the P.Y. 2021-22. The value of one £ in Indian rupee to be taken at INR 95. Compute Rajesh’s Net
Annual Value of the property for the A.Y. 2022-23.

Solution

For the P.Y. 2021-22, Mr. Rajesh, a British national, is resident and ordinarily resident in India. Therefore, income
received by him by way of rent of the house property located in London is to be included in the total income in India.
Municipal taxes paid in London is be to allowed as deduction from the gross annual value.

Computation of Net Annual Value of the property of Mr. Rajesh for A.Y.2022-23

Particulars Amount
Gross Annual Value (£ 10,000 × 12 × 95) 1,14,00,000

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Particulars Amount
Less: Municipal taxes paid (£ 8,000× 95) 7,60,000
Net Annual Value (NAV) 1,06,40,000

Concept Problem 3

Mr. Manas owns two house properties one at Bombay, wherein his family resides and the other at Delhi, which
is unoccupied. He lives in Chandigarh for his employment purposes in a rented house. For acquisition of house
property at Bombay, he has taken a loan of ₹ 30 lakh@10% p.a. on 1.4.2020. He has not repaid any amount so far.
In respect of house property at Delhi, he has taken a loan of ₹ 5 lakh @ 11% p.a. on 1.10.2020 towards repairs.
Compute the deduction which would be available to him under section 24(b) for A.Y.2022-23 in respect of interest
payable on such loan.

Solution

Mr. Manas can claim benefit of Nil Annual Value in respect of his house property at Bombay and Delhi, since no
benefit is derived by him from such properties, and he cannot occupy such properties due to reason of his
employment at Chandigarh, where he lives in a rented house.

Computation of deduction u/s 24(b) for A.Y.2022-23

Particulars Amount
I Interest on loan taken for acquisition of residential house property at Bombay
30,00,000 x 10% = ₹ 3,00,000 2,00,000
Restricted to ₹ 2,00,000
II Interest on loan taken for repair of residential house property at Delhi
₹ 5,00,000 x 11% = ₹ 55,000 30,000
Restricted to ₹ 30,000
Total interest 2,30,000
Deduction u/s 24(b) in respect of (I) and (II) above to be restricted to 2,00,000

Concept Problem 4

Anirudh has a property whose municipal valuation is INR 1,30,000 p.a. The fair rent is INR 1,10,000 p.a. and the
standard rent fixed by the Rent Control Act is INR 1,20,000 p.a. The property was let out for a rent of INR 11,000
p.m. throughout the previous year. Unrealised rent was INR 11,000 and all conditions prescribed by Rule 4 are
satisfied. He paid municipal taxes @ 10% of municipal valuation. Interest on borrowed capital was INR 40,000 for
the year. Compute the income from house property of Anirudh for A.Y. 2022-23.

Solution

Computation of Income from house property of Mr. Anirudh for A.Y.2022-23

Particulars Amount in INR

Computation of GAV
Step 1 Compute ER
ER = Higher of MV of INR 1,30,000 p.a. and FR of INR 1,10,000 p.a., 1,20,000
but restricted to SR of INR 1,20,000 p.a.
Step 2 Compute actual rent received/receivable
Actual rent received/receivable less unrealized rent as per Rule 4 = 1,21,000
INR 1,32,000 - INR 11,000
Step 3 Compare ER of INR 1,20,000 and Actual rent received/receivable of
INR 1,21,000.

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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Particulars Amount in INR

Step 4 GAV is the higher of ER and Actual rent received/receivable 1,21,000
Gross Annual Value (GAV) 1,21,000
Less: Municipal taxes (paid by the owner during the previous year) = 10% of 13,000
INR 1,30,000
Net Annual Value (NAV) 1,08,000
Less: Deductions under section 24
(a) 30% of NAV 32,400
(b) Interest on borrowed capital (actual without ceiling limit) 40,000
Income from house property 35,600

Note – Alternatively, if as per income-tax returns, unrealized rent is deducted from GAV, then GAV would be ₹
1,32,000, being higher of expected rent of INR 1,20,000 and actual rent of INR 1,32,000. Thereafter, unrealized
rent of INR 11,000 and municipal taxes of INR 13,000 would be deducted from GAV of INR 1,32,000 to arrive at
the NAV of INR 1,08,000.

Concept Problem 5

Ganesh has a property whose municipal valuation is ₹ 2,50,000 p.a. The fair rent is ₹ 2,00,000 p.a. and the
standard rent fixed by the Rent Control Act is ₹ 2,10,000 p.a. The property was let out for a rent of ₹ 20,000 p.m.
However, the tenant vacated the property on 31.1.2022. Unrealised rent was ₹ 20,000 and all conditions
prescribed by Rule 4 are satisfied. He paid municipal taxes @ 8% of municipal valuation. Interest on borrowed
capital was ₹ 65,000 for the year. Compute the income from house property of Ganesh for A.Y. 2022-23.

Solution

Computation of income from house property of Ganesh for A.Y. 2022-23

Particulars Amount in ₹
Computation of GAV
Step 1 Compute ER
Higher of MV of ₹ 2,50,000 p.a. & FR of ₹ 2,00,000 p.a., but restricted to SR of ₹ 2,10,000
2,10,000 p.a.
Step 2 Compute Actual rent received/ receivable
Actual rent received/ receivable for let out period less unrealized rent as per 1,80,000
Rule 4 = ₹ 2,00,000 – ₹ 20,000
Step 3 Compare ER & Actual rent received/receivable
Step 4 In this case the actual rent of ₹1,80,000 is lower than ER of ₹ 2,10,000
owing to vacancy, since, had the property not been vacant the actual rent would
have been ₹ 2,20,000 (₹ 1,80,000 + ₹ 40,000, being notional rent for February 1,80,000
and March 2020). Therefore, actual rent is the GAV.
Gross Annual Value (GAV) 1,80,000
Less: Municipal taxes (paid by the owner during the previous year) = 8% of ₹ 20,000
2,50,000
Net Annual Value (NAV) 1,60,000
Less: Deductions under section 24
(a) 30% of NAV = 30% of ₹ 1,60,000 48,000
(b) Interest on borrowed capital (actualwithout any ceiling limit) 65,000 1,13,000
Income from house property 47,000

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Note: Alternatively, if as per income-tax returns, unrealized rent is deducted fromGAV, then GAV would be
₹ 2,00,000, being the actual rent, since the actual rent is lower than the expected rent of ₹ 2,10,000 owing
to vacancy. Thereafter, unrealized rent of ₹ 20,000 and municipal taxes of ₹ 20,000 would be deducted
from GAV of ₹ 2,00,000 to arrive at the NAV of ₹ 1,60,000.

Concept Problem 6

Poorna has one house property at Indira Nagar in Bangalore. She stays with her family in the house. The rent of
similar property in the neighbourhood is INR 25,000. p.m. The municipal valuation is INR 2,80,000 p.a.
Municipal taxes paid is INR 8,000. The house construction began in April 2015 with a loan of INR 20,00,000
taken from SBI Housing Finance Ltd. @ 9% p.a. on 1.4.2015. The construction was completed on 30.11.2017. The
accumulated interest up to 31.3.2017 is INR 3,60,000. On 31.3.2022, Poorna paid INR 2,40,000 which included
INR 1,80,000 as interest. There was no principal repayment prior to this date. Compute Poorna’s income from
house property for A.Y. 2022-23.

Solution

Computation of income from house property of Smt. Poorna for A.Y.2022-23

Particulars Amount
Annual Value of one house used for self-occupation under section 23(2) Nil

Less: Deduction under section 24

Interest on borrowed capital 2,00,000
Interest on loan was taken for construction of house on or after 1.4.99 and
same was completed within the prescribed time - interest paid or payable
subject to a maximum of INR 2,00,000 (including apportioned pre-
construction interest) will be allowed as deduction.
In this case the total interest is INR 1,80,000+INR 72,000 (Being1/5 th of INR
3,60,000) = INR 2,52,000. However, the interest deduction is restricted to
INR 2,00,000.
Loss from house property -2,00,000

Concept Problem 7

Smt. Rajalakshmi owns a house property at Adyarin Chennai. The municipal value of the property is INR
5,00,000, fair rent is INR 4,20,000 and standard rent is INR 4,80,000. The property was let-out for INR 50,000
p.m. up to December 2021. Thereafter, the tenant vacated the property and Smt. Rajalakshmi used the house for
self-occupation. Rent for the months of November and December 2021 could not be realised in spite of the
owner’s efforts. All the conditions prescribed under Rule 4 are satisfied. She paid municipal taxes @ 12% during
the year. She had paid interest of INR 25,000 during the year for amount borrowed for repairs for the house
property. Compute her income from house property for the A.Y. 2022-23.

Solution

Computation of income from house property of Smt. Rajalakshmi for the A.Y.2022-23

Particulars Amount in INR

Computation of GAV
Step 1 Compute ER for the whole year
ER = Higher of MV of INR 5,00,000 and FR of INR 4,20,000, but 4,80,000
restricted to SR of INR 4,80,000
Step 2 Compute Actual rent received/receivable
Actual rent received/receivable for the period let out less unrealized 3,50,000
rent as per Rule 4 = (INR 50,000×9) - (INR 50,000×2) = INR
4,50,000 – INR 1,00,000

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
grand Mock Test. Must cover Income Tax Chalisa Handwritten Notes as well. 6.4 | Page
CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Particulars Amount in INR

Step 3 Compare ER for the whole year with the actual rent received/receivable
for the let-out period i.e. INR 4,80,000 and INR 3,50,000
Step 4 GAV is the higher of ER computed for the whole year and Actual rent 4,80,000
received/ receivable computed for the let-out period.
Gross Annual Value (GAV) 4,80,000
Less: Municipal taxes (paid by the owner during the PY) = 12% of INR 60,000
5,00,000
Net Annual Value (NAV) 4,20,000
Less: Deductions under section 24
(a) 30% of NAV = 30% of INR 4,20,000 1,26,000
(b) Interest on borrowed capital 25,000
Income from house property 2,69,000

Note – Alternatively, if as per income-tax returns, unrealized rent is deducted from GAV, then GAV would be INR
4,80,000, being higher of expected rent of INR 4,80,000 and actual rent of INR 4,50,000. Thereafter, unrealized
rent of INR 1,00,000 and municipal taxes of INR 60,000 would be deducted from GAV of INR 4,80,000 to arrive
at the NAV of INR 3,20,000. The deduction u/s 24(a) would be INR 96,000, being 30% of INR 3,20,000. The
income from house property would, therefore, be INR 1,99,000.

Concept Problem 8

Ganesh has three houses, all of which are self-occupied. The particulars of the houses for the P.Y. 2021-22 are as
under:

Particulars House I House II House III

Municipal valuation p.a. 3,00,000 3,60,000 3,30,000
Fair rent p.a. 3,75,000 2,75,000 3,80,000
Standard rent p.a. 3,50,000 3,70,000 3,75,000
Date of completion/purchase 31.3.1999 31.3.2002 01.4.2015
Municipal taxes paid during the year 12% 8% 6%
Interest on money borrowed for repair of property during - 55,000
the current year

Interest for current year on money borrowed in April 2015 1,75,000

for purchase of property

Compute Ganesh’s income from house property for A.Y.2022-23 and suggest which houses should be opted by
Ganesh to be assessed as self-occupied so that his tax liability is minimum.

Solution

Let us first calculate the income from each house property assuming that they are deemed to be let out.

Computation of income from house property of Ganesh for the A.Y. 2022-23

Amount in INR
Particulars House I House II House III
Gross Annual Value (GAV)
ER is the GAV of house property
ER = Higher of MV and FR, but restricted to SR 3,50,000 3,60,000 3,75,000

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Less: Municipal taxes (paid by the owner during the PY) 36,000 28,800 19,800
Net Annual Value (NAV) 3,14,000 3,31,200 3,55,200
Less Deductions under section 24
(a) 30% of NAV 94,200 99,360 1,06,560
(b) Interest on borrowed capital - 55,000 1,75,000
Income from house property 2,19,800 1,76,840 73,640

Ganesh can opt to treat any two of the above house properties as self-occupied.
OPTION 1 (House I and II– self-occupied and House III – deemed to be let out)

If House I and II are opted to be self-occupied, the income from house property shall be –

Particulars Amount in INR

House I (Self-occupied) Nil
House II (Self-occupied) (interest deduction restricted to INR 30,000) (30,000)
House III (Deemed to be let-out) 73,640
Income from house property 43,640

OPTION 2 (House I and III – self-occupied and House II – deemed to be let out)

If House I and III are opted to be self-occupied, the income from house property shall be –

Particulars Amount in INR

House I (Self-occupied) Nil
House II (Deemed to be let-out) 1,76,840
House III (Self-occupied) (1,75,000)
Income from house property 1,840

OPTION 3 (House II and III – self-occupied and House I – deemed to be let out)

If House II and III are opted to be self-occupied, the income from house property shall be –

Particulars Amount in INR

House I (Deemed to be let-out) 2,19,800
House II (Self-occupied) (interest deduction restricted to 30,000) (30,000)
House III (Self-occupied) (1,75,000)
(Total interest deduction restricted to INR 2,00,000) (2,00,000)
Income from house property 19,800

Since Option 2 is most beneficial, Ganesh should opt to treat House I and III as self-occupied and House II as
deemed to be let out. His income from house property would be INR 1,840 for the A.Y. 2022-23.

Concept Problem 9

Prem owns a house in Madras. During the previous year 2021-22, 2/3rdportion of the house was self-occupied and
1/3rd portion was let out for residential purposes at a rent of INR 8,000 p.m. Municipal value of the property is
INR 3,00,000 p.a., fair rent is INR 2,70,000 p.a. and standard rent is INR 3,30,000 p.a. He paid municipal taxes
@ 10% of municipal value during the year. A loan of INR 25,00,000 was taken by him during the year 2017 for
acquiring the property. Interest on loan paid during the previous year 2021-22 was INR 1,20,000. Compute
Prem’s income from house property for the A.Y. 2022-23.

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Solution

There are two units of the house. Unit I with 2/3 rdarea is used by Prem for self- occupation throughout the year
and no benefit is derived from that unit, hence it will be treated as self-occupied and its annual value will be Nil.
Unit 2 with 1/3rd area is let-out throughout the year and its annual value has to be determined as per section 23(1).

Computation of income from house property of Mr. Prem for A.Y.2022-23

Particulars Amount in INR

rd
Unit I (2/3 area – self-occupied)
Annual Value Nil
Less: Deduction under section 24(b) [2/3rd of INR 1,20,000] 80,000
Income from Unit I (self-occupied) (80,000)

Unit II (1/3rd area – let out)

Computation of GAV
Step I Compute ER
ER = Higher of MV and FR, restricted to SR However, in this 1,00,000
case, SR of INR 1,10,000 (1/3rdof INR 3,30,000) is more than
the higher of MV of INR 1,00,000 (1/3rdof INR 3,00,000) and
FR of INR 90,000 (1/3rdof INR 2,70,000). Hence the higher of
MV and FR is the ER. In this case, it is the MV.

Step 2 Compute actual rent received/ receivable [INR 8,000×12 = 96,000

INR 96,000]
Step 3 Compare ER and actual rent received/ receivable

Step 4 GAV is the higher of ER and actual rent received/receivable i.e. 1,00,000
higher of INR 1,00,000 and INR 96,000
Gross Annual Value (GAV) 1,00,000
Less: Municipal taxes paid by the owner during the previous year 10,000
rd
relating to let-out portion1/3 of (10% of INR3,00,000) = INR
30,000/3 = INR 10,000
Net Annual Value (NAV) 90,000
Less: Deductions under section 24
(a) 30% of NAV = 30% of INR 90,000 27,000
(b) Interest paid on borrowed capital (relating to let out 40,000 67,000
portion)1/3 rd of INR 1,20,000
Income from Unit II (let-out) 23,000
Loss under head “Income from house property” = INR (80,000) + INR 23,000 = INR (57,000)

Concept Problem 10

Mr. Anand sold his residential house property in March, 2021.

In June, 2021, he recovered rent of INR 10,000 from Mr. Gaurav, to whom he had let out his house for two years
from April 2015 to March 2017. He could not realize two months’ rent of 20,000 from him and to that extent his
actual rent was reduced while computing income from house property for AY 2017-18.

Further, he had let out his property from April, 2017 to February, 2021 to Mr. Satish. In April 2019, he had
increased the rent from INR 12,000 to INR 15,000 per month and the same was a subject matter of dispute. In

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

September 2021, the matter was finally settled and Mr. Anand received INR 69,000 as arrears of rent for the
period April 2019 to February 2021.

Would recovery of unrealized rent and arrears of rent be taxable in the hands of Mr. Anand? If so, in which year?

Solution

Since the unrealised rent was recovered in the P.Y.2021-22, the same would be taxable in the A.Y.2022-23 under
section 25A, irrespective of the fact that Mr. Anand was not the owner of the house in that year.

Further, the arrears of rent was also received in the P.Y.2021-22, and hence the same would be taxable in the
A.Y.2022-23 under section 25A, even though Mr. Anand was not the owner of the house in that year.

A deduction of 30% of unrealised rent recovered and arrears of rent would be allowed while computing income
from house property of Mr. Anand for A.Y.2022-23.

Particulars Amount
Unrealised rent recovered 10,000
Arrears of rent received 69,000
Total 79,000
Less: Deduction @ 30% 23,700
Income from house property 55,300

Concept Problem 11

Ms. Aparna co-owns a residential house property in Calcutta along with her sister Ms. Dimple, where her
sister’s family resides. Both of them have equal share in the property and the same is used by them for self-
occupation. Interest is payable in respect of loan of ₹ 50,00,000 @ 10% taken on 1.4.2020 for acquisition of
such property. In addition, Ms. Aparna owns a flat in Pune in which she and her parents reside. She has taken a
loan of ₹ 3,00,000 @ 12% on 1.10.2020 for repairs of this flat.

Compute the deduction which would be available to Ms. Aparna and Ms. Dimple u/s 24(b) for A.Y.2022-23.

Solution

Computation of deduction u/s 24(b) available to Ms. Aparna for A.Y.2022-23

Particulars Amount
I. Interest on loan taken for acquisition of residential house property at Calcutta
₹ 50,00,000 x 10% = ₹ 5,00,000
Ms. Aparna’s share = 50% of ₹ 5,00,000 = ₹ 2,50,000
Restricted to ₹ 2,00,000 2,00,000
II. Interest on loan taken for repair of flat at Pune
₹ 3,00,000 x 12% = ₹ 36,000
Restricted to ₹ 30,000 30,000
Total interest 2,30,000
Deduction u/s 24(b) in respect of (I) & (II) above tobe restricted to 2,00,000

Computation of deduction u/s 24(b) available to Ms. Dimple for A.Y.2022-23

Particulars Amount
Interest on loan taken for acquisition of residential property at Calcutta house
₹ 50,00,000 x 10% = ₹ 5,00,000

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

Ms. Dimple’s share = 50% of ₹ 5,00,000 = ₹ 2,50,000

Restricted to ₹ 2,00,000 2,00,000
Deduction under section 24(b) 2,00,000

Concept Problem 12

Mr. Raman is a co-owner of a house property along with his brother holding equal share in the property.

Municipal value of the property 1,60,000

Fair Rent 1,50,000

Standard Rent under the Rent Control Act 1,70,000

Rent received 15,000 p.m.

The loan for the construction of this property is taken jointly and the interest charged by the bank is INR 25,000
out which INR 21,000 have been paid. Interest on the unpaid interest is INR 450. To repay this loan, Raman and
his brother have taken a fresh loan and interest charged on this loan is INR 5,000.

The Municipal taxes of INR 5,100 have been paid by the tenant.

Compute the income from this property chargeable in the hands of Raman for AY 2022-23.

Solution

Computation of income from house property of Mr. Raman for A.Y. 2022-23

Particulars Amount
Gross Annual Value 1,80,000
(a) Municipal value of property 1,60,000
(b) Fair rent 1,50,000
(c) Higher of (a) and (b) 1,60,000
(d) Standard rent 1,70,000
(e) Annual Letting Value / Expected Rent [Lower of (c) and (d)] 1,60,000
(f) Actual rent [15,000 * 12] 1,80,000
Gross Annual Value [higher of (e) and (f)] 1,80,000
Less: Municipal taxes – paid by the tenant, hence not deductible Nil
Net Annual Value (NAV) 1,80,000
Less: Standard deduction 30% of NAV u/s 24(a) (54,000)
Less: Interest on housing loan u/s 24(b)
Interest on loan taken from bank (25,000)
Interest on fresh loan to repay old loan for this property (5,000)
Income under the head house property 96,000

50% share taxable in the hands of Raman 48,000

Notes:

1. Interest on housing loan is allowable as a deduction under section 24 on accrual basis. Further, interest on
fresh loan taken to repay old loan is also allowable as deduction. However, interest on unpaid interest is not
allowable as deduction under section 24.

2. Section 26 provides that where a house property is owned by two or more persons whose shares are definite
and ascertainable, the share of each such person in the income of house property, as computed in accordance

This Question Bank is meant for Nov 2022 exams and must be read with our Lectures (Regular or Fast Track) as many
additional concepts are covered in class. We do lots of written practice in class & Kishan Sir personally evaluates
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CA Kishan Kumar House Property Income Tax Divyastra – Nov 2022

with sections 22 to 25, shall be included in his respective total income. Therefore, 50% of the total income
from the house property is taxable in the hands of Mr. Raman since he is an equal owner of the property.

Concept Problem 13

Mr. X owns a residential house in Mumbai. The house is having two identical units. First unit of the house is self-
occupied by Mr. X and another unit is rented for INR 8,000 p.m. The rented unit was vacant for 2 months during
the year. The particulars of the house for the previous year 2021-22 are as under:

Standard rent INR 1,62,000 p.a.

Municipal valuation INR 1,90,000 p.a.

Fair rent INR 1,85,000 p.a.

Municipal tax paid by Mr. X 15% of the municipal valuation

Light and water charges INR 500 p.m.

Interest on borrowed capital INR 1,500 p.m.

Lease money INR 1,200 p.a.

Insurance charges INR 3,000 p.a.

Repairs INR 12,000 p.a.

Compute income from house property of Mr. X for the A.Y. 2022-23.

Solution

Computation of Income from house property for A.Y. 2022-23

Particulars Amount Amount

(A) Rented unit (50% of total area – See Note below)
Step I - Computation of Expected Rent
Municipal valuation (INR 1,90,000 x ½) 95,000
Fair rent (INR 1,85,000 x ½) 92,500
Standard rent (INR 1,62,000 x ½) 81,000
Expected Rent is higher of municipal valuation and fair rent, but restricted to 81,000
standard rent

Step II - Actual Rent

Rent receivable for the whole year (INR 8,000 x 12) 96,000
Step III – Computation of Gross Annual Value
Actual rent received owing to vacancy (INR 96,000 – INR 16,000) Since, 80,000
owing to vacancy, the actual rent received is lower than the Expected Rent, the
actual rent received is the Gross Annual Value
Gross Annual Value 80,000
Less: Municipal taxes (15% of INR 95,000) 14,250
Net Annual value 65,750
Less: Deductions under section 24 -
(i) 30% of net annual value 19,725
(ii) Interest on borrowed capital (INR 750 x 12) 9,000 28,725
Taxable income from let out portion 37,025

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Particulars Amount Amount

(B) Self-occupied unit (50% of total area – See Note below)
Annual value Nil
Less: Deduction under section 24 -
Interest on borrowed capital (INR 750 x 12) 9,000 9,000
Loss from self-occupied portion (9,000)
Income from house property 28,025

Note: No deduction will be allowed separately for light and water charges, lease money paid, insurance charges
and repairs.

Concept Problem 14

Mr. Vikas owns a house property whose Municipal Value, Fair Rent and Standard Rent are INR 96,000, INR
1,26,000 and INR 1,08,000 (per annum), respectively.

During the Financial Year 2021-22, one-third of the portion of the house was let out for residential purpose at a
monthly rent of INR 5,000. The remaining two-third portion was self-occupied by him. Municipal tax @ 11% of
municipal value was paid during the year.

The construction of the house began in June, 2014 and was completed on 31-5-2017. Vikas took a loan of INR
1,00,000 on 1-7-2014 for the construction of building.

He paid interest on loan @ 12% per annum and every month such interest was paid. Compute income from house
property of Mr. Vikas for the Assessment Year 2022-23.

Solution

Computation of income from house property of Mr. Vikas for the A.Y. 2022-23

Particulars Amount
Income from house property
I. Self-occupied portion (Two third)
Net Annual value Nil
Less: Deduction under section 24(b)
Interest on loan (See Note below) (INR 18,600 x 2/3) 12,400
Loss from self-occupied property (A) (12,400)
II. Let-out portion (One third)
Gross Annual Value
(a) Actual rent received (INR 5,000 x 12) INR 60,000
(b) Expected rent INR 36,000
[higher of municipal valuation (INR 96,000) and fair rent (i.e.,
1,26,000) but restricted to standard rent (i.e., INR 1,08,000)] =
1,08,000 x 1/3
Higher of (a) or (b) 60,000
Less: Municipal taxes (INR 96,000 x 11% x 1/3) 3,520
Net Annual Value 56,480
Less: Deductions under section 24
a) 30% of NAV 16,944
b) Interest on loan (See Note below) (INR 18,600 x 1/3) 6,200

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Particulars Amount
Income from let out portion (B) 33,336
Income from house property (A + B) 20,936

Note: Interest on loan taken for construction of building

Interest for the year (1.4.2021 to 31.3.2022) = 12% of INR 1,00,000 = INR 12,000

Pre-construction period interest = 12% of INR 1,00,000 for 33 months (from 1.07.2014 to 31.3.2017) = INR
33,000

Pre-construction period interest to be allowed in 5 equal annual installments of INR 6,600 from the year of
completion of construction i.e., from F.Y. 2017-18 till F.Y. 2021-22.

Therefore, total interest deduction under section 24 = INR 12,000 + INR 6,600 = INR 18,600

Concept Problem 15

Mrs. Rohini Ravi, a citizen of the U.S.A., is a resident and ordinarily resident in India during the FY 2021-22. She
owns a house property at Los Angeles, U.S.A., which is used as her residence. The annual value of the house is
$20,000. The value of one USD ($) may be taken as INR 75.

She took ownership and possession of a flat in Chennai on 1.7.2021, which is used for self-occupation, while she is
in India. The flat was used by her for 7 months only during the year ended 31.3.2022. The municipal valuation is
INR 3,84,000 p.a. and the fair rent is INR 4,20,000 p.a. She paid the following to Corporation of Chennai:

Property Tax = INR 16,200

Sewerage Tax = INR 1,800

She had taken a loan from Standard Chartered Bank for purchasing this flat. Interest on loan was as under:

Period prior to 1.4.2021 49,200

1.4.2021 to 30.6.2021 50,800
1.7.2021 to 31.3.2022 1,31,300

She had a house property in Bangalore, which was sold in March, 2018. In respect of this house, she received
arrears of rent of INR 60,000 in March, 2022. This amount has not been charged to tax earlier.

Compute the income chargeable from house property of Mrs. Rohini Ravi for the assessment year 2022-23.

Solution

Since the Assessee is a resident and ordinarily resident in India, her global income would form part of her total
income i.e., income earned in India as well as outside India will form part of her total income.

She possesses a self-occupied house at Los Angeles as well as at Chennai. She can take the benefit of “Nil” Annual
Value in respect of both the house properties.

As regards the Bangalore house, arrears of rent will be chargeable to tax as income from house property in the
year of receipt under section 25A. It is not essential that the Assessee should continue to be the owner. 30% of the
arrears of rent shall be allowed as deduction.

Accordingly, the income from house property of Mrs. Rohini Ravi will be calculated as under:

S. No Particulars Amount Amount

1. Self-occupied house at Los Angeles
Annual value Nil
Less: Deduction under section 24 Nil
Chargeable income from this house property Nil

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S. No Particulars Amount Amount

2. Self-occupied house property at Chennai

Annual value Nil
Less: Deductions u/s 24(b) for Interest on borrowed capital (Note below) 1,91,940 (1,91,940)

3. Arrears in respect of Bangalore property (Section 25A)

Arrears of rent received 60,000
Less: Deduction @ 30%u/s 25A(2) 18,000 42,000
Income under head "Income from house property” (1,49,940)

Note: Interest on borrowed capital u/s 24(b) Amount

Interest for the current year (INR 50,800 + INR 1,31,300) 1,82,100
Add: 1/5th of pre-construction interest (INR 49,200 x 1/5) 9,840
Interest deduction allowable under section 24 1,91,940

Concept Problem 16

Two brothers Arun and Bimal are co-owners of a house property with equal share. The property was constructed
during the financial year 1998-99. The property consists of eight identical units and is situated at Cochin.

During the financial year 2021-22, each co-owner occupied one unit for residence and the balance of six units were
let out at a rent of INR 12,000 per month per unit. The municipal value of the house property is INR 9,00,000 and
the municipal taxes are 20% of municipal value, which were paid during the year. The other expenses were as
follows:

i) Repairs= 40,000

ii) Insurance premium (paid) = 15,000

iii) Interest payable on loan taken for construction of house = 3,00,000

One of the let-out units remained vacant for four months during the year.

Arun could not occupy his unit for six months as he was transferred to Chennai. He doesn’t own any other house.

The other income of Mr. Arun and Mr. Bimal are INR 2,90,000 and INR 1,80,000, respectively, for FY 2021-22.

Compute the income under the head ‘Income from House Property’ and the total income of two brothers for the
assessment year 2022-23.

Solution

Computation of total income for the A.Y. 2022-23

Particulars Arun Bimal

Income from house property
Occupied portion (25%)
Annual value Nil Nil
Less: Deduction under section 24(b) Interest on loan taken for construction I 30,000 30,000
NR 37,500 (being 25% of INR 1.5 lakh) restricted to maximum of INR 30,000
for each co-owner since the property was constructed before 1.04.1999
Loss from self-occupied property (30,000) (30,000)
Let out portion (75%) – See Working Note below 1,25,850 1,25,850
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Particulars Arun Bimal

Income from house property 95,850 95,850

Other income 2,90,000 1,80,000
Total Income 3,85,850 2,75,850

Working Note

Computation of income from let-out portion of house property

Particulars Amount Amount

Let-out portion (75%)
Gross annual value
Municipal value (75% of INR 9 lakh) 6,75,000
Actual rent [(INR 12000 x 6 x 12) – (INR 12,000 x 1 x 4)] = (8,64,000 - 48,000) 8,16,000
GAV = whichever is higher 8,16,000
Less: Municipal taxes 75% of 1,80,000 (20% of INR 9 lakh) 1,35,000
Net Annual Value (NAV) 6,81,000
Less: Deduction u/s 24(a) @ 30% of NAV 2,04,300
Less: Deduction u/s 24(b) Interest on loan taken for the house [75% of INR 3 2,25,000 4,29,300
lakh]
Income from let-out portion of house property 2,51,700
Share of each co-owner (50%) 1,25,850

2. IC AI RT P S , MT P S A N D P A S T Y E A R Q U E S T I O N S

Concept Problem 17

Mr. Raphael constructed a shopping complex. He had taken a loan of INR 25 lakhs for construction of the said
property on 01-08-2020 from SBI @ 10% for 5 years. The construction was completed on 30-06-2021. Rental
income received from shopping complex INR 30,000 per month-let out for the whole year. Municipal taxes paid
for shopping complex INR 8,000.

Arrears of rent received from shopping complex INR 1,20,000.

Interest paid on loan taken from SBI for purchase of house for use as own residence for PY 2021-22, INR 3 lakhs.

You are required to compute income from house property of Mr. Raphael for AY 2022-23.

Solution

Computation of income from house property of Mr. Raphael for AY 2022-23

Particulars Amount
Shopping complex
Gross Annual Value [30,000 × 9] 2,70,000
Less: Municipal Taxes 8,000
Net Annual Value (NAV) 2,62,00
Less: Deduction u/s 24(a) @ 30% of NAV 78,600
Less: Interest on borrowed capital u/s 24(b) (Working Note) 2,83,333
Loss from shopping complex (A) (99,933)

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Particulars Amount

Self-occupied residential house

Gross Annual Value Nil
Less: Municipal Taxes Nil
Net Annual Value (NAV) Nil
Less: Deduction u/s 24(a) @ 30% of NAV Nil
Less: Interest on borrowed capital u/s 24(b) (Note b) 2,00,000
Loss from self-occupied house (B) (2,00,000)

Taxability of arrears of Rent under section 25A

Arrears of rent received 1,20,000
Less: Deduction @ 30% u/s 24(a) 36,000
Taxable amount (C) 84,000
Net Income under the head House Property (A+B+C) (2,15,933)

Working Note: Interest on borrowed capital (Shopping Complex)

Particulars Amount
Interest for the current year (10% of INR 25 lakhs) 2,50,000
Add: 1/5th of pre-construction interest (interest for the period from 1.8.2020 to 31.3.2021 i.e., for 33,333
8 months) [(INR 25,00,000 x 10% x 8/12) x 1/5]
Interest deduction allowable under section 24 2,83,333

Note: It has been assumed that loan of INR 25 lakhs has to be repaid after the five-year period. Hence, there has
been no repayment upto 31.3.2021. Interest computation has been made accordingly.

Income under the head Other Sources

Rent received in relation to under-construction house property = 30,000 x 3 = 90,000

Concept Problem 18

Mr. Vihaan is a resident but not ordinarily resident in India during the AY 2022-23. He furnishes the following
information regarding his income/expenditure pertaining to his house properties for PY 2021-22:

• He owns two houses, one in Singapore and the other in Pune.

• The house in Singapore is let out there at a rent of SGD 4,000 p.m. The entire rent is received in India. He
paid Property tax of SGD 1250 and Sewerage Tax SGD 750 there. (1 SGD = INR 51)

• The house in Pune is self-occupied. He had taken a loan of INR 25,00,000 to construct the house on 1 st June,
2017 @ 12%. The construction was completed on 31st May, 2019 and he occupied the house on 1 st June, 2019.

The entire loan is outstanding as on 31 st March, 2022. Property tax paid in respect of the second house is INR
2,800.

Compute income chargeable under the head "Income from House property" in hands of Vihaan for AY 2022-23.

Solution

Computation of income from house property of Mr. Vihaan for A.Y. 2022-23

Particulars Amount
1. Income from let-out property in Singapore [See Note 1 below]
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Gross Annual Value (SGD 4,000 p.m. x 12 months x INR 51) 24,48,000
Less: Municipal taxes paid during the year [SGD 2,000 (SGD 1,250 + SGD 750) x INR 51] 1,02,000
Net Annual Value (NAV) 23,46,000
Less: Deductions under section 24
(a) 30% of NAV 7,03,800
Income from let-out property in Singapore 16,42,200
2. Income from self-occupied property in Pune
Annual Value [Nil, since the property is self-occupied] [No deduction is allowable in NIL
respect of municipal taxes paid in respect of self-occupied property]
Less: Deduction in respect of interest on housing loan [See Note 2 below] 2,00,000
(2,00,000)
Income from house property [INR 16,42,200 – INR 2,00,000] 14,42,200

Notes:

1) Since Mr. Vihaan is a resident but not ordinarily resident in India for A.Y. 2022-23, income which is, inter
alia, received in India shall be taxable in India, even if such income has accrued or arisen outside India by
virtue of the provisions of section 5(1). Accordingly, rent received from house property in Singapore would be
taxable in India since such income is received by him in India.

2) Interest on housing loan for construction of self-occupied property allowable as deduction u/s 24

Interest for the current year (INR 25,00,000 x 12%) = 3,00,000

Pre-construction interest

For the period 01.06.2017 to 31.03.2019 (INR 25,00,000 x 12% x 22/12) = INR 5,50,000

INR 5,50,000 allowed in 5 equal instalments (INR 5,50,000/5) = 1,10,000

Total = 4,10,000

In case of self-occupied property, interest deduction to be restricted to 2,00,000

Concept Problem 19

Mitul owns a residential house. Ground floor of the house is self -occupied by her while first floor has been rented
out since 01/10/2021. The reconstruction of the house was started on 01-04-2021 and was completed on 30-09-
2021. The monthly rent is INR 10,000. The tenant also pays INR 3,000 p.m. as power back-up charges. She took a
housing loan of 12 lakhs on 01-04-2021. Interest on housing loan for the period 01-04-2021 to 30-09-2021 was
INR 60,000 and for the period 01-10-2021 to 31-03-2022 was INR 40,000. During the year, she also paid
municipal taxes for the F.Y. 2020-21 INR 5,000 and for F.Y. 2021-22 INR 5,000.

Calculate gross total income of Mitul for AY 2022-23.

Solution

Particulars Amount Amount Amount

Income from House Property
Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV = INR 60,000
10,000 p.m. x 6 months]
Less: Municipal taxes paid by her in the P.Y.2021-22
pertaining to let out portion [(INR 5,000 + INR 5,000)/2],
allowable since it is paid during the year, even if it relates to 5,000
earlier years

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Particulars Amount Amount Amount

Net Annual Value (NAV) 55,000
Less: Deduction u/s 24
(a) 30% of INR 55,000 16,500
(b) (b) Interest on housing loan [(60,000 (+)40,000)/2] 50,000 66,500
(11,500)
Self-occupied portion [Ground Floor]
Annual Value Nil
Less: Deduction u/s 24
Interest on housing loan for reconstruction 30,000 (30,000) (41,500)
50,000 [(INR 60,000 + INR 40,000)/2] restricted to
IV Income from Other Sources
Power back up charges from tenant (3,000 p.m. x 6 months) 18,000
Less: Actual expenditure incurred for providing power back up 6,000 12,000
GTI 29,500

Concept problem 20

Mr. Ram took a loan of INR 5,00,000 on 01.10.2018 @ 10% p.a. for construction of house which was completed
on 31.03.2022. Compute interest on capital borrowed for the previous year 2021-22.

Solution

Interest on capital borrowed for the previous year 2021-22 u/s 24(b).

Particulars Amount
Current period Interest
From 01.04.2021 to 31.03.2022
(5,00,000 x 10%) 50,000
Prior period interest
From 01.10.2018 to 31.03.2021
5,00,000 x 10% x 30/12 = 1,25,000
Instalment (1,25,000/5) 25,000
Total Interest (50,000 + 25,000) allowed u/s 24(b) in PY 2021-22 75,000

Concept problem 21

Mr. Ram has taken a loan of INR 15,00,000 on 01.07.2017 from State Bank of India @ 12% p.a. for construction of
one house which was completed on 01.05.2021 and was let out @ INR 90,000 p.m. wef. 01.07.2021 and fair rent is
INR 1,00,000 p.m. The Assessee has paid municipal tax of INR 30,000 in PY 2021-22 and the Assessee has repaid
the loan amount in annual installment of INR 1,00,000 starting from 01.01.2020.

Compute his Total Income for the assessment year 2022-23.

Solution

Computation of Total Income for previous year 2021-22

Particulars Amount
GAV (Refer Note 1) 11,00,000
Less: Municipal Tax 30,000

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Particulars Amount
Net Annual Value 10,70,000
Less: 30% of NAV u/s 24(a) 3,21,000
Less: Interest on capital borrowed u/s 24(b) (Refer Note 2) 2,84,400
Income under the head house property 4,64,600
Gross Total Income 4,64,600
Less: Deduction u/s 80C 1,00,000
Total Income 3,64,600

Note 1

Gross Annual Value Amount

Fair Rent (1,00,000 x 11) 11,00,000
Expected Rent 11,00,000
Rent received/ receivable (90,000 x 9) 8,10,000
If there was no vacancy, in that case rent received/ receivable would have been INR
990,000 (90,000*11) and it was still less than expected Rent, therefore GAV shall be
expected rent.
GAV 11,00,000

Note 2

Current period Interest

From 01.04.2021 to 31.03.2022
(13,00,000 x 12% x 9/12) + (12,00,000 x 12% x 3/12) = 1,53,000
Prior period interest
From 01.07.2017 to 31.03.2021
15,00,000 x 12% x 30/12= 4,50,000
14,00,000 x 12% x 12/12 = 168,000
13,00,000 x 12% x 3/12 = 39,000

Instalment (6,57,000/5) 131,400

Total Interest (1,53,000 + 131,400) 2,84,400

Concept Problem 22

Compute GAV in the following cases for the assessment year 2022-23:

Particulars Case I Case II Case III Case IV

Fair Rent (p.m.) 9,000 13,000 12,000 16,000
Municipal Valuation (p.m.) 10,000 9,000 9,000 18,000
Standard Rent (p.m.) 12,000 11,000 7,000 16,000
Rent received/ receivable(p.m.) 7,000 11,500 20,000 16,500
Vacancy 1 Month 1 Month 2 Month 2 Month

Solution

Case I

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Computation of Gross Annual Value Amount

a) Fair Rent (9,000 x 12) 1,08,000
b) Municipal Valuation (10,000 x 12) 1,20,000
c) Higher of (a) or (b) 1,20,000
d) Standard Rent (12,000 x12) 1,44,000
e) Expected Rent {Lower of (c) or (d)} 1,20,000
f) Rent Received / Receivable (7,000 x 11) 77,000
If there was no vacancy, in that case rent received/ receivable would have been INR 84,000 and
It was still less than expected Rent, therefore GAV shall be expected rent.
Gross Annual Value 1,20,000

Case II

Computation of Gross Annual Value Amount

a) Fair Rent (13,000 x 12) 1,56,000
b) Municipal Valuation (9,000 x 12) 1,08,000
c) Higher of (a) or (b) 1,56,000
d) Standard Rent (11,000 x 12) 1,32,000
e) Expected Rent {Lower of (c) or (d)} 1,32,000
f) Rent Received/Receivable (11,500 x 11) 1,26,500
In this case, if there was no vacancy, rent received/receivable would have been INR 1,38,000
hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the
rent received/receivable
Gross Annual Value 1,26,500

Case III

Computation of Gross Annual Value Amount

a) Fair Rent (12,000 x 12) 1,44,000
b) Municipal Valuation (9,000 x 12) 1,08,000
c) Higher of (a) or (b) 1,44,000
d) Standard Rent (7,000 x 12) 84,000
e) Expected Rent {Lower of (c) or (d)} 84,000
f) Rent Received / Receivable (20,000 x 10) 2,00,000
In this case, rent R/R is higher than the expected Rent, GAV shall be Rent R/R.
Gross Annual Value 2,00,000

Case IV

Computation of Gross Annual Value Amount

a) Fair Rent (16,000 x 12) 1,92,000
b) Municipal Valuation (18,000 x 12) 2,16,000
c) Higher of (a) or (b) 2,16,000
d) Standard Rent (16,000 x 12) 1,92,000
e) Expected Rent {Lower of (c) or (d)} 1,92,000
f) Rent Received / Receivable (16,500 x 10) 1,65,000

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Computation of Gross Annual Value Amount

In this case, if there was no vacancy, rent received/receivable would have been
INR 198,000 hence rent received/receivable is lower in this case due to vacancy,
therefore GAV shall be the rent received/receivable
Gross Annual Value 1,65,000

Concept Problem 23

Compute the GAV in the following cases for the AY 2022-23:

Particulars Case I Case II Case III

Fair Rent (p.m.) 11,000 14,000 16,000
Municipal Valuation (p.m.) 12,000 9,000 18,000
Standard Rent (p.m.) 13,000 8,000 17,000
Rent received/ receivable(p.m.) 8,000 21,000 17,000
Vacancy - 1 Month 3 Month
Unrealized Rent 1 Month 3 Month 1 Month

Solution

Case I

Computation of Gross Annual Value Amount

a) Fair Rent (11,000 x 12) 132,000
b) Municipal Valuation (12,000 x 12) 1,44,000
c) Higher of (a) or (b) 1,44,000
d) Standard Rent (13,000 x12) 1,56,000
e) Expected Rent {Lower of (c) or (d)} 1,44,000
f) Rent Received / Receivable (8,000 x 11) 88,000
Gross Annual Value (Higher of e and f) 1,44,000

Case II

Computation of Gross Annual Value Amount

a) Fair Rent (14,000 x 12) 1,68,000
b) Municipal Valuation (9,000 x 12) 1,08,000
c) Higher of (a) or (b) 1,68,000
d) Standard Rent (8,000 x12) 96,000
e) Expected Rent {Lower of (c) or (d)} 96,000
f) Rent Received / Receivable (21,000 x 8) 1,68,000
Since rent received/ receivable is higher than expected Rent, therefore GAV shall be rent
received/ receivable
Gross Annual Value 1,68,000

Case III

Computation of Gross Annual Value Amount

a) Fair Rent (16,000 x 12) 1,92,000
b) Municipal Valuation (18,000 x 12) 2,16,000

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Computation of Gross Annual Value Amount

c) Higher of (a) or (b) 2,16,000
d) Standard Rent (17,000 x12) 2,04,000
e) Expected Rent {Lower of (c) or (d)} 2,04,000
f) Rent Received / Receivable (17,000 x 8) 1,36,000
If there was no vacancy, in that case, rent received/ receivable would be 187,000 and it was still
lower than expected Rent, therefore GAV shall be expected rent.
Gross Annual Value 2,04,000

Concept Problem 24

Neha has one big house - 25% of it is being used in her own business/ profession and 50% of the house is let out @
INR 10,000 p.m. However, it remained vacant for one month and there is unrealized rent for one and half month.
Remaining 25% is self-occupied throughout the year. Fair rent of the entire house is INR 25,000 p.m., municipal
valuation INR 22,000 p.m. and municipal tax paid is INR 3,000, insurance charge 6,000, repairs 8,000, land
revenue 4,000, Ground Rent 3,000 and depreciation of the house is INR 12,000. Assessee's income under the
head Business/ Profession before charging expenditure relating to house property is INR 2,00,000.

Compute his total income for assessment year 2022-23 if he does not opt to be taxed under section 115BAC.

Solution

Computation of income under the head House Property

Income from self-occupied property = Nil

Income from let out property

Particulars Amount
Gross Annual Value 1,50,000
a) Fair Rent (12,500*12) 1,50,000
b) Municipal Value (11,000*12) 1,32,000
d) Expected Rent {Higher of a or b} 1,50,000
f) Rent received /receivable (10,000 x 9.5) 95,000
If there was no vacancy, in that case, rent received/ receivable would be 1,05,000 which is
still less than expected Rent, therefore GAV shall be expected rent
GAV 1,50,000
Less: Municipal Tax 1,500
Net Annual Value 1,48,500
Less: 30% of NAV u/s 24(a) 44,550
Less: Interest on capital borrowed u/s 24 (b) Nil
Income under the head House Property 1,03,950

Computation of income under the head Business/Profession

Particulars Amount
Income before debiting any expense under house property 2,00,000
Less: Municipal taxes 750
Less: Insurance charges 1,500
Less: Repairs 2,000
Less: Land revenue 1,000

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Particulars Amount
Less: Ground rent 750
Less: Depreciation 3,000
Income under the head Business/Profession 1,91,000

Computation of Total Income

Particulars Amount
Income under the head house property 1,03,950
Income under the head Business/Profession 1,91,000
Gross Total Income 2,94,950
Less: Deduction u/s 80C Nil
Total Income 2,94,950

Concept Problem 25

Mr. Ram has let out one house along with generator facility and has charged a sum of INR 50,000 p.m. as rent,
out of which INR 5,000 p.m. is on account of the generator. He has paid INR 2,500 and the tenant has paid INR
1,000 towards municipal taxes. The interest on the capital borrowed for construction of the house is INR 10,000.
Mr. Ram has paid repair charge of the generator INR 3,500, fuel charges INR 6,000 and operator's salary INR
500 p.m.

Compute the total income of Mr. Ram for assessment year 2022-23.

Solution

Computation of income under the head House Property

Particulars Amount
GAV (45,000*12) 5,40,000
Less: Municipal Tax 2,500
Net Annual Value 5,37,500
Less: 30% of NAV u/s 24(a) 1,61,250
Less: Interest on capital borrowed u/s 24(b) 10,000
Income under the head house property 3,66,250

Computation of income under the head Other Source

Particulars Amount
Income from Generator (5,000*12) 60,000
Less: Repair charges 3,500
Less: Fuel charges 6,000
Less: Salary (500*12) 6,000
Income under the head Other Source 44,500

Computation of Total Income

Particulars Amount
Income under the head house property 3,66,250
Income under the head Other Source 44,500
Gross Total Income 4,10,750

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Particulars Amount
Less: Deduction u/s 80C Nil
Total Income 4,10,750

Concept Problem 26

Mrs. Ram, a resident and ordinarily resident individual, owns a house in USA. She receives rent @ $2,000 per
month. She paid municipal taxes of $ 1,500 during the financial year 2021-22.

She also owns a two-storied house in Mumbai; ground floor is used for her residence and first floor is let out at a
monthly rent of INR 10,000. Standard rent for each floor is INR 11,000 per month

Municipal taxes paid for the house amounts to INR 7,500. Mrs. Ram had constructed the house by taking a loan
from a nationalized bank on 20.06.2018. She repaid the loan of INR 54,000 including interest of INR 24,000 in the
current year.

The value of one dollar is to be taken as INR 65.

Compute total income from house property of Mrs. Ram for assessment year 2022-23.

Solution

Computation of income from house property of Mrs. Ram in USA for the AY 2022-23

Particulars Amount
GAV of the house in USA ($ 2000 p.m. x INR 65 per USD x 12 months) 15,60,000
Less: Municipal taxes paid ($1500 x INR 65 per USD) (97,500)
Net annual value 14,62,500
Less: Statutory deduction under section 24(a)@ 30% of NAV (4,38,750)
Income from house property 10,23,750

Computation of income from House at Mumbai (let out portion) - 1st Floor

Particulars Amount
Gross annual value (10,000 x 12) 1,20,000
Less: Municipal taxes paid (1/2 of INR 7,500) (3,750)
Net annual value (NAV) 1,16,250
Less: Statutory deductions under section 24(a) @ 30% of NAV (34,875)
Less: interest on Housing loan (1/2 of INR 24,000) 24(b) 12,000
Income from house property 69,375

Computation of income from House at Mumbai (Self-occupied portion) – Ground Floor

Particulars Amount
GAV of house at Mumbai Nil
Less: Municipal taxes Nil
Net annual value Nil
Less: Statutory deduction under section 24(a) @ 30% of NAV Nil
Less: Interest on Housing loan (1/2 of INR 24,000) 24(b) (12,000)
Loss from house property (12,000)
Income from house property 10,81,125
Gross total income 10,81,125

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Less: deduction u/s 80C (Repayment of housing loan) (30,000)

Total income (rounded off 288A) 10,51,130

Concept Problem 27

Raj Prakash has let out a building to Rohit at a rent of INR 2,00,000 per month and has paid municipal taxes of
INR 1,00,000. Rohit has sub-let 50% of the property to Mr. Shyam at a rent of INR 80,000 per month.

Compute the income of Raj Prakash and Rohit.

Solution

In case of Raj Prakash, income shall be computed under the head House property

Particulars Amount
GAV (2,00,000*12) 24,00,000
Less: Municipal Tax 1,00,000
NAV 23,00,000
Less: Deduction u/s 24(a) 690,000
Income under the head House Property 16,10,000

Income of Rohit shall be computed under the head Other Sources

Particulars Amount
Gross Rent received (80,000*12) 9,60,000
Less: Rent paid by him (2,00,000*50%*12) 12,00,000
Loss under the head Other Sources (2,40,000)

Concept Problem 28

Mr. Kalpesh borrowed a sum of INR 30 lakhs from the National Housing Bank towards purchase of a residential
flat. The loan amount was disbursed directly to the flat promoter by the bank. Though the construction was
completed in May, 2022, repayments towards principal and interest had been made during the year ended
31.3.2022. In the light of the above facts, state:

a) Whether Mr. Kalpesh can claim deduction under section 24 in respect of interest for the AY 2022-23?

b) Whether deduction under Section 80C can be claimed for the above assessment year, even though the
construction was completed only after the closure of the year?

Solution

a) As per section 24(b), Interest payable on loans borrowed for the purpose of acquisition, construction, repairs,
renewal or reconstruction of house property can be claimed as deduction.

Interest payable on borrowed capital for the period prior to the previous year in which the property has been
acquired or constructed, can be claimed as deduction over a period of 5 years in equal annual installments
commencing from the year of acquisition or completion of construction.

It is stated that the construction is completed only in May, 2022. Hence, deduction in respect of interest on
housing loan cannot be claimed in the assessment year 2022-23.

b) Deduction under section 80C is allowed where there is any payment for the purpose of purchase or
construction of a residential house property, the income from which is chargeable to tax under the head
‘Income from House Property’.

Such payment covers repayment of any amount borrowed from the National Housing Bank. However,
deduction is eligible only if the income from such property is chargeable to tax under the head “Income from

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House Property”. During the assessment year 2022-23, there is no such income chargeable under this head.
Hence, deduction under section 80C cannot be claimed for A.Y. 2022-23.

Concept Problem 29

Mr. Rajesh, owner of a residential house, let out for a monthly rent of INR 15,000. The fair rental value of the
property for the let-out period is INR 1,50,000. The house was self-occupied by him from 1st January, 2022 to 31st
March, 2022. He has taken a loan from bank of INR 20 lacs for the construction of the property and has repaid INR
1,05,000 (including interest INR 40,000) during the year. Compute Rajesh’s income from house property for the
AY 2022-23.

(Answer - INR 1,00,000)

Concept Problem 30

Mr. Roxx, a citizen of the Country Y, is a resident but not ordinarily resident in India during the FY 2021-22. He
owns two house properties in Country Y, one is used as his residence. Another house property is rented for a
monthly rent of $ 18,000. Fair rent of house property is $ 20,000. The value of one CYD ($) may be taken as 78.

He took ownership and possession of a flat in Delhi on 1.10.2021, which is used for self- occupation, while he is in
India. The flat was used by him for 3 months at the time when he visited India during the previous year 2021-22.
The municipal valuation is 4,58,000 p.a. and the fair rent is 3,60,000 p.a. He paid property tax of 13,800 and 2,800
as Sewerage tax to Municipal Corporation of Delhi.

He had taken a loan of 18,00,000 @ 9.5% from HDFC Bank on 1st August, 2019 for purchasing this flat. No amount
is repaid by him till 31.03.2022.

He also had a house property in Bangalore which is let out on a monthly rent of 40,000. The fair rent of which is
4,58,000 p.a. and Municipal value of 3,58,000 p.a. and Standard Rent of 4,20,000 p.a. He had taken a loan of
25,00,000 @ 10% from one of his friends, residing in Country Y for this house. Municipal tax of 5,400 is paid by
him in respect of this house during the previous year 2021-22.

Compute the income chargeable from house property of Mr. Roxx for the assessment year 2022-23.

Solution

Since Mr. Roxx, is a resident but not ordinarily resident in India, only the income in respect of properties
situated in India would be taxable in his hands.

Thus, the rental income which accrues or arises in Country Y from the let-out property and annual value of self-
occupied property would not be taxable in his hands. However, income arising from properties in India are taxable
in the hands of Mr. Roxx.

Accordingly, the income from house property of Mr. Roxx for A.Y. 2022-23 will be calculated as under:

S.No. Particulars Amount Amount

1. Self – occupied house at Delhi
Annual Value Nil
Less: Deduction under section 24 Nil
Interest on borrowed capital (See Note below) 2,00,000
Chargeable income from this house property (2,00,000)
2. Let out house property at Bangalore
Expected rent, being higher of 3,58,000 municipal value and fair rent of 4,20,000
4,58,000 but restricted to standard rent of 4,20,000
Actual rent [40,000 x 12] 4,80,000
Gross Annual value, being higher of expected rent and actual rent 4,80,000
Less: Municipal taxes 5400

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Net Annual Value 4,74,600

Less: Deduction under section 24
- 30% of net annual value [30% x 4,74,600] 1,42,380
- Interest on borrowed capital ( actual allowable as deduction without 2,50,000 3,92,380
any ceiling limit)
82,220
Loss uth “Income from house property” (2,00,00 -82,220) (1,17,780)

Note: - Interest on borrowed capital

Particulars Amount
Interest for the current year [18,00,000 x 9.5%] 1,71,000
Add: 1/5 th of pre- construction interest (2,85,000 x 1/5) 57,000
1.8.2019 to 31.03.2020 – (18,00,000 x 9.5% x 8/12) 1,14,000
1.4.2020 to 31.03.2021 – (18,00,000 x 9.5% ) 1,71,000
2,28,000
Interest deduction allowable under section 24, restricted to 2,00,000

Concept Problem 31

Mrs. Jasmin, an Australian citizen, got married to Mr. Kapil of India in Australia on 2.01.2020 and came to India for
the first time on 18.03.2021. She left for Australia on 10.8.2021. She returned to India again on 23.02.2022.

On 01.04.2021, she had purchased a Flat in Mumbai, which was let out to Mr. Sunil on a rent of 28,000 p.m. from
1.5.2021. She had taken loan from an Indian bank for purchase of this flat on which bank had charged interest of
2,15,500 upto 31.03.2022.

While in India, during the previous year 2021-22, she had received a gold chain from her in-laws worth 1,50,000, a
car worth 6,25,000 from married sister of her husband and 1,72,000 from very close friends of her husband.

Determine her residential status and compute her gross total income chargeable to tax for AY 2022-23.

Solution

Under section 6(1), an individual is said to be resident in India in any previous year, if hesatisfies any one of the
following conditions:

(i) He has been in India during the previous year for a total period of 182 days or more, or

(ii) He has been in India during the 4 years immediately preceding the previous year for a total period of 365
days or more and has been in India for at least 60 days in the previous year .

If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the above conditions
are not satisfied, the individual is a non-resident.

Therefore, the residential status of Mrs. Jasmin, an Australian, for A.Y.2022-23 has to be determined on the basis of
her stay in India during the previous year relevant to A.Y. 2022-23 i.e. P.Y.2021-22 and in the preceding four
assessment years.

Her stay in India during the previous year 2021-22 and in the preceding four years are as under:

P.Y. 2021-22
01.04.2021 to 10.08.2021 132 days
23.02.2021 to 31.03.2021 37 days
Total 169 days

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Four preceding previous years

P.Y. 2020-21 [1.4.2020 to 31.3.2021] 14 days

P.Y. 2019-20 [1.4.2019 to 31.3.2020] Nil
P.Y. 2018-19 [1.4.2018 to 31.3.2019] Nil
P.Y. 2017-18 [1.4.2017 to 31.3.2018] Nil
Total 14 days

The total stay of Mrs. Jasmin during the previous year in India was less than 182 days and during the four
years preceding this year was for 14 days. Therefore, due to non-fulfillment of any of the two conditions for a
resident, she would be treated as non-resident for the Assessment Year 2021-22.

Computation of gross total income of Mrs. Jasmin for A.Y. 2021-22.

Particulars Amount Amount

Income from house property
Flat located in Mumbai let- out from 01.05.2020 to 31.03.2021 @ 28,000 p.m.
Gross Annual Value [28,000 x 11] 3,08,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 3,08,000
Less: Deduction under section 24
30% of NAV 92,400
Interest on loan [fully allowable as deduction, since property is let-out] 2,15,500 100
Income from other sources
Gold chain worth 1,50,000 received from parents of husband would be Nil
exempt , since parents of husband fail within the definition of relatives and
gifts from a relative are not chargeable to tax.
Car worth 6,25,000 received from married sister of her husband is exempt, Nil
since sister-in-law fails within the definition of relative and gifts from a
relative are not chargeable to tax. Moreover, car is not included in the
definition of property.
Gift received from friends of her husband aggregating to 1,72,000 is taxable 1,72,000 1,72,000
u/s 56(2) (x) since the amount of cash gifts 1,72,000 exceeds 50,000.
Gross Total Income 1,72,000

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