Question 1

Mr. Madhvan is a finance manager in Star Private Limited. He

gets a salary of
Rs. 30,000 per month. He owns two houses, one of
which has been let out to his employer and which is
in tum provided to him as rent free accommodation.
Following details (annual) are furnished in respect of
two house properties for the Financial Year 2024-25.
House 1 House 2
Fair rent 75,000 1,95,000
Actual rent 65,000 2,85,000
Municipal Valuation 74,000 1,90,000
Municipal taxes paid 18,000 70,000
Repairs 15,000 35,000
Insurance premium on 12,000 17,000
building
Ground rent 7,000 9,000
Nature of occupation Let-out to Let-out to
Star Private Ms. Puja
Limited
Rs. 17,000 were paid as interest on loan taken by
mortgaging House 1 for construction of House 2.
During the previous year 2024-25, Mr. Madhvan
purchased a rural agriculturalland for Rs. 2,50,000.
Stamp valuation of such property is Rs. 3,00,000.
Determine the taxable income of Mr. Madhvan for the
assessment year 2025-
26. All workings should form part of your answer.

Answer 1
Computation of taxable income of Mr. Madhvan for A.Y.
2025-26
Particulars Rs Rs. Rs.
.
Salaries
Basic Salary = Rs. 30,000 x 12 3,60,000
Rent free accommodation 54,000
[Lower of lease rental paid or payable
by the employer (or) 15% of salary
i.e., lower of Rs. 65,000 or Rs. 54,000,
being 15% of Rs. 3,60,000]
Gross Salary 4,14,000
Less: Standard deduction us 16(IA)
[Actual salary or Rs. 40,000 (As per 40,000
amendment Rs. 50,000), 50,000
whichever is less]
House
3,74,000
Net Salary 1 3,64,000
Income from house property House 2
Municipal value (A) 74,000 1,90,000
 Fair rent (B) 75,000 1,95,000
Higher of (A) and (B) = (C) 75,000 1,95,000
Actual rent received 65,000 2,85,000
Gross Annual Value 75,000 2,85,000
[Higher of (C) and Actual rent]
Less: Municipal tax paid 18,000 70,000
Net Annual Value (NAV) 57,000 2,15,000
Less: Deductions us 24
30% of NAV 17,100 64,500
Interest on loan Nil 17,000
39,900 1,33,500
Income from house property 1,73,400
[Rs. 39,900 + Rs. 1,33,500]
Income from Other Sources
Purchase of rural agricultural land
for a consideration less than
stamp duty value [Not taxable
under section 56(2)(x), since rural Nil
agricultural land is not a capital
asset]
Total Income 5,47,400
Note - Expenditure on repairs, insurance premium on building and
ground rent are not allowable under the head “Income from house
property.”

Question 2

Mr. Kushal is a resident but not ordinarily resident in India

during the Assessment Year 2025-26. He furnishes the
following information regarding his income/expenditure
pertaining to his house properties for the previous year
2024-25:

• He owns two houses, one in New York and the other

in Ahmedabad.

• The house in New York is let out there at a rent of $

5,000 p.m. The entire rent is received in India. He paid
Property tax of

$ 1,250 and Sewerage Tax $ 750 there. ($ 1 = INR 81)

• The house in Ahmedabad is self-occupied. He had

taken a loan of

Rs. 30,00,000 to construct the house on 1st September, 2019

@10%. The construction was completed on 31st May, 2021
and he occupied the house on 1st June, 2021.

The entire loan is outstanding as on 31st March, 2025.

Property tax paid in respect of the second house is Rs. 2,800.
Compute the income chargeable under the head "Income
from House property" in the hands of Mr. Kushal for the
Assessment Year 2025 -26 if he has opted out of the default
tax regime under section 115BAC.

Answer

Computation of income from house property of Mr.

Kushal for A.Y. 2025-26
Particulars Rs. Rs.
1. Income from let-out property in New
York [See Note 1 below]
1
Gross Annual Value ($ 5,000 p.m. x 12 48,60,000
months x Rs. 81)
Less: Municipal taxes paid during the year
[$ 2,000 ($ 1,250 + $ 750) x Rs. 81]2 1,62,000
Net Annual Value (NAV) 46,98,000
Less: Deductions under section 24
(a) 30% of NAV 14,09,400
(b) Interest on housing loan - 14,09,400
32,88,600
2. Income from self-occupied property
in Ahmedabad
Annual Value [Nil, since the property is self- NIL
occupied]
[No deduction is allowable in respect of
municipal taxes paid in respect of self-
occupied property]
Less: Deduction in respect of interest on 2,00,000
housing loan [See Note 2 below]
(2,00,000)
Income from house property 30,88,600
[Rs. 32,88,600 – Rs. 2,00,000]

Notes:

(1) Since Mr. Kushal is a resident but not ordinarily

resident in India for A.Y. 2024-25, 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 New York 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 under section 24

Interest for the current year (Rs. 30,00,000 x 10%)

Rs. 3,00,000

Pre-construction interest
For the period 01.09.2019 to 31.03.2021
(Rs. 30,00,000 x 10% x 19/12) = Rs. 4,75,000
Rs. 4,75,000 allowed in 5 equal installments
(Rs. 4,75,000/5)

95,000
3,95,000

In case of self-occupied property, interest deduction to be

restricted to 2,00,000

Q.3. Mr. Roy owns a house in Kolkata. During the previous

year 2024-25, 3/4th portion of the house was self-
occupied and 1/4th portion was let out for residential
purposes at a rent of Rs. 12,000 p.m. The tenant vacated
the property on 28th February, 2025. The property was
vacant during March, 2025. Rent for the months of
January 2025 and February 2025 could not be realised in
spite of the owner’s efforts. All the conditions prescribed
under Rule 4 are satisfied.
Municipal value of the property is Rs. 4,50,000 p.a., fair
rent is Rs. 4,70,000 p.a. and standard rent is Rs. 5,00,000.
He paid municipal taxes @10% of municipal value during
the year. A loan of Rs. 30,00,000 was taken by him during
the year 2013 for acquiring the property. Interest on
loan paid during the previous year 2024-25 was Rs.
1,51,000. Compute Roy’s income from house property
for the A.Y. 2025-26.
Answer 3
There are two units of the house. Unit I with 34th area is used
by Mr. Roy 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 14th
area is let
-out during the previous year and its annual value has to be
determined as per section 23(1).
Computation of Income from house property of
Mr. Roy for
 the A.Y. 2025-
26
Particulars Rs.
Unit I (34th area – self-occupied)
Annual Value Nil
Less: Deduction under section 24(b) 34th of Rs. 1,13,25
1,51,000 0
Income from Unit I (self-occupied) (1,13,25
0)

Unit II (14th area – let out)

Computation of GAV
Step 1 – Computation of Expected Rent (ER)
ER = Higher of municipal value (MV) and fair rent 1,17,5
(FR), butrestricted to standard rent (SR). 00
However, in this case, standard rent of Rs.
1,25,000 (14th of
Rs. 5,00,000) is more than the higher of MV of Rs.
1,12,500(14th of Rs. 4,50,000) and FR of Rs.
1,17,500 (14th of Rs.
4,70,000). Hence the higher of MV and FR is the
ER. In thiscase, it is the fair rent.
Step 2 – Computation of actual rent received
receivable 1,08,0
Rs. 12,000 ×9 = 1,08,000 00
[The property was let-out for 11 months.
However, rent for 2 months i.e., January and
February, 2022 could not be realized. Actual rent
should not include any amount of rent which is not
capable of being realized. Therefore, actual rent
has been computed for 9 months]
Step 3 – Computation of GAV
The actual rent of Rs. 1,08,000 is lower than 1,08,000
expected rent of 1,08,0
Rs. 1,17,500 owing to vacancy, since had the 00
property not been vacant in March 2022, the
actual rent would have been Rs. 1,20,000 (i.e. Rs.
1,08,000 + Rs. 12,000), which is higher than
the ER of Rs. 1,17,500. Therefore, actual rent is
the GAV.
Gross Annual Value (GAV)
Less: Municipal taxes paid by the owner during
theprevious year relating to let-out portion
14th of (10% of Rs. 4,50,000) =Rs. 45,0004 = Rs. 11,250
11,250
Net Annual Value (NAV) 96,750
Less: Deductions under section 24
(a) 30% of NAV = 30% of Rs. 96,750 29,025
 (b) Interest paid on borrowed capital
(relating to let out portion) [14th of Rs. 37,750 66,775
1,51,000] 29,975
Income from Unit II (let-out)
Loss under the head “Income from house property” (- -
1,13,250 +29,975) 83,275
Note – Alternatively, as per income-tax returns, unrealized
rent can be deducted from GAV. In such a case, GAV would be
Rs. 1,32,000, being higher of expected rent of Rs. 1,17,500
and actual rent of Rs. 1,32,000. Thereafter, unrealized rent of
Rs. 24,000 and municipal taxes of Rs. 11,250 would be
deducted from GAV of Rs. 1,32,000 to arrive at the NAV of Rs.
96,750.

Question 4
Ms. Pihu has three houses, all of which are self-occupied.
The particulars of thesehouses are given below:
(Value in Rs.)
Particulars House – I House – II House-III
Municipal Valuation per annum 1,30,000 1,20,000 1,20,000
Fair Rent per annum 1,10,000 1,85,000 1,45,000
Standard rent per annum 1,00,000 1,90,000 1,30,000
Date of completion 30-01- 31-07- 31.5.201
2008 1
2005
Municipal taxes payable during the 12% 9% 10%
year (paid for House II & III only)
Interest on money borrowed for - 75,000 -
repair
of property during current year
You are required to compute Pihu’s income from house
property for the Assessment year 2025-26 and suggest
which houses should be opted by Pihu to be assessed as
self- occupied so that her tax liability is minimum.
Answer 4
In this case, Pihu has more than two house properties for self-
occupation. As per section23(4), Pihu can avail the benefit of
self-occupation (i.e., benefit of “Nil” Annual Value) only in
respect of any two of the house properties, at her option. The
other house property would be treated as “deemed let-out”
property, in respect of which the Expected rent would be the
gross annual value. Pihu should, therefore, consider the most
beneficial option while deciding which house properties
should be treated by her as self-occupied.
OPTION 1 [House I & II – Self-occupied and House III- Deemed to be let
out]
If House I and II are opted to be self-occupied, Pihu’s income from
house property for
A.Y.2025-26 would be –
Particulars Amount
in Rs.

House I (Self-occupied) [Annual value is Nil] Nil

House II (Self-occupied) [Annual value is Nil, but interest

deduction
would be available, subject to a maximum of Rs. 30,000. In
case of money (30,00
borrowed for repair of self-occupied property, the interest 0)
deduction

would be restricted to Rs.30,000, irrespective of the date of

borrowal].
House III (Deemed to be let-out) [See Working Note below] 82,60
0

Income from house property 52,60

0

OPTION 2 [House I & III – Self-occupied and House II- Deemed to be let
out]
If House I and III are opted to be self-occupied, Pihu’s income from
house property for
A.Y.2025-26 would be –
Particulars Amount in
Rs.
House I (Self-occupied) [Annual value is Nil] Nil
House II (Deemed to be let-out) [See Working Note 46,940
below]
House III (Self-occupied) [Annual value is Nil] Nil
Income from house property 46,940
 OPTION 3 [House I – Deemed to be let out and House II & III – Self-
occupied]
If House II and III are opted to be self-occupied, Pihu’s income from
house property for
Since Option 3 is more beneficial, Pihu should opt to treat House – II & III as Self- occupied
and House I as Deemed to be let out, in which case, her income from house property
would be Rs. 40,000 for the A.Y. 2025-26.
A.Y.2025-26 would be –
Particulars Amount in
Rs.
House I (Deemed to be let-out) [See Working Note below] 70,000
House II (Self-occupied) [Annual value is Nil, but interest
deductionwould be available, subject to a maximum of Rs.
30,000. In case of money borrowed for repair of self- (30,000)
occupied property, the interest deduction would be
restricted to Rs.30,000, irrespective of the date of
borrowal].
House III (Self-occupied) [Annual value is Nil] Nil
Income from house property 40,000
Working Note:
Computation of income from House I, II and House III
assuming that all aredeemed to be let out

Particulars Amount in Rupees

House I House II House III
Gross Annual Value (GAV)
Expected rent is the GAV of house property
Expected rent= Higher of Municipal Value 1,00,00 1,85,000 1,30,000
and Fair Rent but restricted to Standard 0
Rent
Less: Municipal taxes (paid by the Nil 10,800 12,000
owner during the previous
year)
Net Annual Value (NAV) 1,00,00 1,74,200 1,18,000
0
Less: Deductions under section 24
(a) 30% of NAV 30,000 52,260 35,400
(b) Interest on borrowed capital
(allowed - 75,000 -
in full in case of deemed let out
property)
Income from deemed to be let-out house 70,000 46,940 82,600
property

Question 5
Mr. Sailesh constructed a house in P.Y. 2016-17 with 3
independent units. During the P.Y. 2024-25, Unit - 1 (50%
of floor area) is let out for residential purpose at monthly
rent of Rs. 20,000. Rent of January, 2025 could not be
 collected from the tenant and a notice to vacate the unit
was given to the tenant. No other property of Mr. Sailesh
is occupied by the tenant. Unit - 1 remains vacant for
February and March 2022 when it is not put to any use.
Unit - 2 (25% of the floor area) is used by Mr. Sailesh for
the purpose of his business, while Unit
- 3 (the remaining 25%) is utilized for the purpose of his
residence. Other particulars of the house are as follows:
Municipal valuation - Rs. 2,88,000 Fair rent - Rs. 2,98,000
Standard rent under the Rent Control Act - Rs. 2,78,000 Municipal
taxes - Rs.
30,000 paid by Mr. Sailesh Repairs - Rs. 7,000
Interest on capital borrowed for the construction of the
property - Rs. 90,000,Ground rent - Rs. 6,000 and
Fire insurance premium paid - Rs. 60,000.
Income of Sailesh from the business is Rs. 2,40,000
(without debiting house rent and other incidental
expenditure).
Determine the taxable income of Mr. Sailesh for the
Assessment year 2025-26if he opts to be taxed under
section 115BAC.
Answer 5
Computation of taxable income of Mr. Sailesh for A.Y.
2025-26
Particulars Amount Amoun
t
Income from house property
Unit - 1 [50% of floor area - Let out]
Gross Annual Value, higher of
- Expected rent Rs. 1,39,000 [Higher of Municipal
Value of Rs. 1,44,000 p.a. and Fair Rent of Rs.
1,49,000 p.a., but restricted to Standard Rent of Rs.
1,39,000 p.a.]
- Actual rent Rs. 1,80,000 i.e., [Rs.
20,000 x 10] less unrealized rent of
January, 2022 Rs. 20,000
Gross Annual Value 1,80,000
Less: Municipal taxes [50% of Rs.30,000] 15,000
Net Annual Value 1,65,000
Less: Deductions from Net Annual Value
(a) 30% of Net Annual Value 49,500
(b) Interest on loan [50% of Rs. 90,000] 45,000 70,500
Unit – 3 [25% of floor area – Self occupied]
Net Annual Value -
Less: Interest on loan [ Not allowed as Mr. Sailesh is - -
optingfor section 115BAC.]
Income from house property 70,500
Profits and gains from business or
profession
 Business Income [without deducting expenditure of 2,40,000
Unit - 225% floor area used for business purposes]
Less: Expenditure in respect of Unit -2
- Municipal taxes [25% of Rs. 30,000] 7,500
- Repairs [25% of Rs. 7,000] 1,750
- Interest on loan [25% of Rs. 90,000] 22,500
- Ground rent [ 25% of Rs. 6,000] 1,500
- Fire Insurance premium [25% of Rs. 15,000 48,25 1,91,750
60,000] 0
Taxable Income 2,62,250

Note: Alternatively, if as per income-tax returns, unrealised

rent is deducted from GAV, then GAV would be Rs. 2,00,000,
being higher of unexpected rent of Rs. 1,39,000 and actual
rent of Rs. 2,00,000. Thereafter, unrealized rent of Rs. 20,000
and municipal taxes of Rs. 15,000 would be deducted from
GAV of Rs. 2,00,000 to arrive at the NAV of Rs. 1,65,000

Question 6
Prem owns a house in Madras. During the previous year
2024-25, 2/3rd portionof the house was self-occupied
and 1/3rd portion was let out for residential purposes
at a rent of Rs. 8,000 p.m. Municipal value of the
property is Rs. 3,00,000 p.a., fair rent is Rs. 2,70,000
p.a. and standard rent is Rs. 3,30,000 p.a. He paid
municipal taxes @10% of municipal value during the
year. A loan of Rs. 25,00,000was taken by him during
the year 2020 for acquiring the property. Interest on
loan paid during the previous year 2024-25 was Rs.
1,20,000. Compute Prem’s income from house property
for the A.Y.2025-26 assuming that he has exercisedthe
option of shifting out of the default tax regime provided
under section 115BAC(1A).
What would be Prem’s income from house property under the
default tax regime?

Answer 6
There are two units of the house. Unit I with 23rd area is
used by Prem for self- occupation throughout the year and
no other benefit is derived from that unit, hence it will be
treated as self-occupied and its annual value will be Nil.
Unit 2 with 13rd area is let-out throughout the previous 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. 2025-26
Particu Amount in Rs.
lars
Unit I (23rd area – self-occupied)
Annual Value Nil
 Less Deduction under section 24(b)23rd of
: Rs. 1,20,000 80,000
Income from Unit I (self-occupied) (80,000)
Unit II (13rd area – let out)
Computation of GAV
Step I Compute ER
ER = Higher of MV and FR, restricted to SR 1,00,00
However,in this case, SR of Rs. 1,10,000 (13rd of 0
Rs. 3,30,000) is more than the higher of MV of
Rs. 1,00,000 (13rd of Rs. 3,00,000) and
FR
of
Rs. 90,000 (13rd of Rs. 2,70,000). Hence the higher
of MV and FR is the ER. In this case, it is the
MV.
Step Compute actual rent received receivable
2 Rs.8,000X 12 = Rs. 96,000 96,000
Step Compare ER and Actual rent
3 receivedreceivable
Step GAV is the higher of ER and actual rentreceived 1,00,00
4 receivable i.e. higher of Rs. 1,00,000 and 0
Rs.96,000
Gross Annual Value(GAV) 1,00,000
Less: Municipal taxes paid by the owner during the 10,000
previous year relating to let-out portion 13rd
of(10% of Rs. 3,00,000) = Rs. 30,0003
=Rs.10,000
Net Annual Value(NAV) 90,000
Less: Deductions under section 24
(a) 30% of NAV = 30% of Rs. 90,000 27,000
(b) Interest paid on borrowed capital (relatingto 40,000 67,000
letout portion) 13rd of Rs. 1,20,000
Income from Unit II (let-out) 23,000
Loss under the head “Income from house
property” = (Rs.80,000) + Rs. 23,000 =
(Rs.57,000)

Question 7
Mr. Anand sold his residential house property in March, 2024.
In June, 2024, he recovered rent of Rs. 10,000 from
Mr. Gaurav, to whom he had let out his house for two
years from April 2017 to March 2019. He could not
realise two months rent of Rs. 20,000 from him and
to that extent his actual rent was reduced while
computing income from house property for A.Y.2019-
20.
Further, he had let out his property from April, 2019
to February, 2023 to Mr.Satish. In April, 2021, he had
increased the rent from Rs. 12,000 to Rs. 15,000 per
month and the same was a subject matter of dispute.
In September, 2024, the matter was finally settled
 and Mr. Anand received Rs. 69,000 as arrears of rent
for the period April 2021 to February, 2023.
Would the recovery of unrealised rent and arrears of
rent be taxable in the hands of Mr. Anand, and if so in
which year?

Answer 7
Since the unrealised rent was recovered in the P.Y.2024-25,
the same would be taxable in the A.Y.2024-25 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.2024-25, and hence the
same would be taxable in the A.Y.2025- 26 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.2024- 25.
Computation of income from house property of Mr. Anand for
A.Y. 2025-26
Particulars Rs.

(i) Unrealized rent recovered 10,000

(ii) Arrears of rent received 69,000
79,000
Less: Deduction@30% 23,700
Income from house property 55,300

Question 8
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
Rs. 50,00,000@10% taken on 1.4.2023 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 Rs. 3,00,000@12% on
1.10.2023 for repairs of this flat. Compute the
deduction which would be available to Ms. Aparna
and Ms. Dimple under section 24(b) for A.Y.2025-26,
ifboth exercise the option of shifting out of the default
tax regime provided under section 115BAC(1A).

Answer 8
Computation of deduction us 24(b) available to Ms. Aparna for
A.Y.2025-26
Particul Rs.
Ars
I Interest on loan taken for acquisition of residential
house
 property at Calcutta
Rs. 50,00,000 x 10% = Rs. 5,00,000
Ms. Aparna’s share = 50% of Rs. 5,00,000 = Rs.
2,50,000
Restricted to Rs. 2,00,000 2,00,000
II Interest on loan taken for repair of flat at Pune
Rs. 3,00,000 x 12% = Rs. 36,000
Restricted to Rs. 30,000 30,000
Total interest 2,30,000
Deduction under section 24(b) in respect of (I) and (II)above 2,00,000
tobe restricted to

Computation of deduction us 24(b) available to Ms. Dimple

for A.Y.2025-26
Particular Rs.
S
Interest on loan taken for acquisition of residential property
at house Calcutta
Rs. 50,00,000 x 10% = Rs. 5,00,000
Ms. Dimple’s share = 50% of Rs. 5,00,000 = Rs. 2,50,000
Restricted to Rs. 2,00,000 2,00,000
Deduction under section 24(b) 2,00,000

Question 9
You are required to compute the income from "House
Property" for the A.Y. 2025-26 of MRs. Rajni from her
house property at Panchkula in Haryana. The Municipal
value of the property is Rs. 7,50,000, Fair Rent of the
property is Rs. 6,30,000 and Standard Rent is Rs.
7,20,000 per annum. The property was let out for Rs.
80,000 per month for the period April 2024 to
November 2024.
Thereafter, the tenant vacated the property and MRs.
Rajni used the house for self -occupation. Rent for the
months of October and November 2021 could not be
realized from the tenant. The tenancy was bonafide
but the defaulting tenant was in occupation of
another property of the assessee, paying rent
regularly.
She paid municipal taxes @ 12% during the year and
paid interest of Rs. 50,000during the year for amount
borrowed towards repairs of the house property.
Answer 9
Computation of income from house property of MRs. Rajni
for the A.Y.2025-26
Particulars Amount in Rs.
Computation of Gross Annual Value
 Expected Rent for the whole year = Higher of Municipal
Value of Rs. 7,50,000 and Fair Rent of Rs. 6,30,000, but7,20,000
restricted to Standard Rent of Rs. 7,20,000
Actual rent received for the let-out period = Rs. 80,000 6,40,000
x8
[Unrealised rent is not deductible from actual rent in
thiscase since the defaulting tenant is in occupation
of
another property of the assessee, and hence, one of
the conditions laid out in Rule 4 has not been
fulfilled]
GAV is the higher of Expected Rent for the whole year
and Actual rent receivedreceivable for the let-out7,20,000
period
Gross Annual Value (GAV) 7,20,000
Less: Municipal taxes (paid by the owner during the
previous year) = 12% of Rs. 7,50,000 90,000
Net Annual Value (NAV) 6,30,000
Less: Deductions under section 24
(a) 30% of NAV = 30% of Rs. 6,30,000 1,89,000
(b) Interest on amount borrowed for
repairs
(Fully allowable as deduction, since it 50,00 2,39,000
pertainsto let- out property) 0
Income from house property 3,91,000

Question 10
Mr. Ramesh constructed a big house (construction
completed in Previous Year 2008 -09) with 3 independent
units. Unit - 1 (50% of floor area) is let out for residential
purpose at monthly rent of Rs. 15,000. A sum of Rs. 3,000
could not be collected from the tenant and a notice to
vacate the unit was given to the tenant. No other property
of Mr. Ramesh is occupied by the tenant. Unit - 1 remains
vacant for 2 months when it is not put to any use. Unit - 2
(25% of the floor area) is used by Mr. Ramesh for the
purpose of his business, while Unit - 3 (the remaining
25%) is utilized for the purpose of his residence. Other
particulars of the house are as follows:
Municipal valuation - Rs.
1,88,000 Fair rent - Rs.
2,48,000 Standard rent under
the Rent Control Act - Rs.
2,28,000 Municipal taxes -
Rs. 20,000 Repairs - Rs.
5,000
Interest on capital borrowed for the construction of the
property - Rs. 60,000,ground rent
Rs. 6,000 and fire insurance premium paid - Rs. 60,000.
Income of Ramesh from the business is Rs. 1,40,000
(without debiting house rent and other incidental
 expenditure).
Determine the taxable income of Mr. Ramesh for the assessment
year 2025-26
if he does not opt to be taxed under section 115BAC.

Answer 10
Computation of Taxable Income of Mr. Ramesh for A.Y.
2025-26 under theregular provisions of the Act
Part Amount Amount
icul (Rs.) (Rs.)
ars
Income from house property
Unit - 1 [50% of floor area - Let out]
Gross Annual Value, higher of
- Expected rent Rs. 1,14,000 [Higher of
Municipal Value of Rs. 94,000 p.a. and Fair
Rent of Rs. 1,24,000 p.a., but restricted to
Standard Rent of Rs. 1,14,000 p.a.]
- Actual rent Rs. 1,47,000 [Rs.
15,000 x 10] less 1,47,000
unrealized rent3 of Rs. 3,000
Gross Annual Value
(Alternatively, Rs. 1,50,000 can be shown as
actual rent and gross annual value, and
thereafter, deduct
Rs. 3,000 unrealized rent therefrom)
Less: Municipal taxes [50% of Rs.20,0004] 10,000
Net annual value 1,37,000
Less: Deductions from Net Annual Value
(a) 30% of Net Annual Value 41,100
(b) Interest on loan [50% of Rs. 60,000] 30,000
Unit – 3 [25% of floor area – Self occupied]
Net Annual Value - 65,900
Less: Interest on loan [ 25% of Rs. 60,000] 15,0 (15,000)
Income from house property 00 50,900
Profits and gains from business or
profession
Business Income [without deducting 1,40,000
expenditure onUnit - 2 25% floor area used
for business purposes]
Less: Expenditure in respect of Unit
-2
- Municipal taxes [25% of Rs. 5,000
20,0005]
- Repairs [25% of Rs. 5,000] 1,250
- Interest on loan [25% of Rs. 60,000] 15,00
0
- Ground rent [ 25% of Rs. 6,000] 1,500
 - Fire Insurance premium 15,00 1,02,25
[25% of Rs.60,000] 0 37,7 0
50
Taxable Income 1,53,15
0
3 Since the conditions laid down under Rule 4 of
Income-tax Rules, 1962, aresatisfied
4 Assumed to have been paid during the year by Mr. Ramesh

Question 11
You are required to compute the income from "House
Property" for the A.Y. 2025-26 of MRs. Rajni from her
house property at Panchkula in Haryana. The Municipal
value of the property is Rs. 7,50,000, Fair Rent of the
property is Rs. 6,30,000 and Standard Rent is Rs.
7,20,000 per annum. The property was let out for Rs.
80,000 per month for the period April 2024 to
November 2024.
Thereafter, the tenant vacated the property and MRs.
Rajni used the house for self -occupation. Rent for the
months of October and November 2024 could not be
realized from the tenant. The tenancy was bonafide
but the defaulting tenant was in occupation of another
property of the assessee, paying rentregularly.
She paid municipal taxes @ 12% during the year and paid
interest of Rs. 50,000 during the year for amount
borrowed towards repairs of the house property.

Answer 11 Computation of income from house property of MRs. Rajni for

the A.Y.2025-26
Computation of Gross Annual Value
Expected Rent for the whole year = Higher of
Municipal 7,20,000
Value of Rs. 7,50,000 and Fair Rent of Rs. 6,30,000, but
restricted to Standard Rent of Rs. 7,20,000
Actual rent received for the let-out period = Rs. 6,40,000
80,000 x 8
[Unrealised rent is not deductible from actual rent in
this case since the defaulting tenant is in occupation
of another property of the assessee, and hence, one of
the
conditions laid out in Rule 4 has not been fulfilled]
GAV is the higher of Expected Rent for the whole year
and Actual rent receivedreceivable for the let-out7,20,000
period
Gross Annual Value (GAV) 7,20,000
Less: Municipal taxes (paid by the owner during the
previous year) = 12% of Rs. 7,50,000 90,000
Net Annual Value (NAV) 6,30,000
Less: Deductions under section 24
 (a) 30% of NAV = 30% of Rs. 6,30,000 1,89,000
(b) Interest on amount borrowed for
repairs
(Fully allowable as deduction, since it 50,00 2,39,000
pertainsto let- out property) 0
Income from house property 3,91,000

Question 12
Mr. Varun is a resident but not ordinarily resident in India
during the Assessment year 2024-25. He furnishes the
following information regarding his incomeexpenditure
pertaining to his house properties for the previous year
2024- 25:
• He owns two houses, one in Australia and the other in Delhi.
• The house in Australia is let out there at a rent of SGD
3,000 p.m. The entire rent is received in India. He paid
Property tax of SGD 1000 and Sewerage Tax SGD 500 there.
(1SGD=INR 55)
• The house in Delhi is self-occupied. He had taken a loan of
Rs. 20,00,000 to construct the house on 1st June, 2017
@12%. The construction was completed on 31st May,
2021 and he occupied the house on 1st June, 2021.
The entire loan is outstanding as on 31st March, 2025.
Property tax paid in respect of the second house is Rs.
2,500.
Compute the income chargeable under the head "Income
from House property" inthe hands of Mr. Varun for the
Assessment year 2025-26. (RTP May 20)
Answer 12
Computation of income from house property of Mr. Varun for A.Y.
2024-25
Pa Rs. Rs.
rti
cul
ars
1. Income from let-out property in Australia 19,80,0
[SeeNote 1 below] 00
4Gross Annual Value (SGD 3,000 p.m. x 12
months x Rs.
55)
Less: Municipal taxes paid during the year
[SGD 1,500(SGD 1,000 + SGD 500) x Rs. 82,500
55]5
Net Annual Value (NAV) 18,97,50
0
Less: Deductions under section 24
(a) 30% of NAV 5,69,25
0
 (b) Interest on housing loan
- 5,69,25
0
13,28,2
50
3. Income from self-occupied property in
Delhi Nil

Annual Value [Nil, since the property is

self-occupied]
[No deduction is allowable in respect of Nil
municipal taxes paid in respect of self-
occupied property]
Less: Deduction in respect of interest on 2,00,000
housing loan
[See Note 2 below]
(2,00,00
0)
Income from house property [Rs. 13,28,250 – 11,28,2
Rs. 50
2,00,000]
Notes:
(1) Since Mr. Varun is a resident but not ordinarily resident
in India for A.Y. 2025-26, 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 Australia 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 under section 24.

Interest for the current year (Rs. 20,00,000 x 12%) Rs. 2,40,000
Pre-construction interest
For the period 01.06.2017 to 31.03.2021 (Rs. 20,00,000 x 12% x 3412)
=Rs. 6,80,000
Rs. 6,80,000 allowed in 5 equal installments (Rs. 6,80,0005)

Rs. 1,36,000
R
s
.
3
,
7
6
,
0
0
 0
In case of self-occupied property, interest deduction to be restricted to Rs.
2,00,000

Question 13
Mr. Raman is a co-owner of a house property along
with his brother holdingequal share in the property.
Particular Rs.
s
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
jointly taken and the interest charged by the bank is
Rs. 25,000, out of which Rs. 21,000 has been paid.
Interest onthe unpaid interest is Rs. 450. To repay
this loan, Raman and his brother have takena fresh
loan and interest charged on this loan is Rs. 5,000.
The municipal taxes of Rs. 5,100 have been paid by the tenant.
Compute the income from this property chargeable
in the hands of Mr. Raman forthe A.Y. 2025-26.

Answer 13
Computation of income from house property of Mr. Raman
for A.Y. 2025-26
Particulars Rs. Rs.
Gross Annual Value (See Note 1 below) 1,80,000
Less: Municipal taxes – paid by the tenant, hence not Nil
deductible
Net Annual Value (NAV) 1,80,000
Less: Deductions under section 24
(i) 30% of NAV 54,000
(ii) Interest on housing loan (See Note 2 below)
- Interest on loan taken from bank 25,000
- Interest on fresh loan to repay old loan for
thisproperty 5,000 84,000
Income from house property 96,000
50% share taxable in the hands of Mr. Raman (SeeNote 48,000
3)
Notes:
1. Computation of Gross Annual Value (GAV)
GAV is the higher of Expected rent and actual rent
received. Expected rent isthe higher of municipal
value and fair rent, but restricted to standard rent.
 Particulars Rs. Rs. Rs. Rs.

(a) Municipal value 1,60,0

0
0
(b) Fair rent 1,50,0
0
0
(c) Higher of (a) and (b) 1,60,00
0

(d) Standard rent 1,70,00

0

(e) Expected rent [lower of (c)and 1,60,00

(d)] 0

(f) Actual rent [Rs. 15,000 x 12] 1,80,00

0

(g) Gross Annual Value [higherof 1,80,00

(e)and (f)] 0

2. 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.
3. 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 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.

Question 14
Mr. X owns one 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 Rs. 8,000 p.m. The rented unit was vacant
for 2 months during the year. The particulars of the
house for the previous year 2024-25 are as under:
Standard rent Rs. 1,62,000 p.a.
 Municipal valuation Rs. 1,90,000 p.a.
Fair rent Rs. 1,85,000 p. a
Municipal tax (Paid by 5% of municipal
Mr. X) valuation
Light and water charges Rs. 500 p.m.
Interest on borrowed Rs. 1,500 p.m.
capital
Lease money Rs. 1,200 p.a.
Insurance charges Rs. 3,000 p.a.
Repairs Rs. 12,000 p.a.
Compute income from house property of Mr. X for the
A.Y. 2025-26 if he exercises the option of shifting out
of the default tax regime provided under section
115BAC(1A).

Answer 14
Computation of Income from house property
for A.Y. 2025-26
Particulars Rs. Rs.
(A) Rented unit (50% of total area – See Note
below)
Step I - Computation of Expected Rent
Municipal valuation (Rs. 1,90,000 x ½) 95,000
Fair rent (Rs. 1,85,000 x ½) 92,500
Standard rent (Rs. 1,62,000 x ½) 81,000
Expected Rent is higher of municipal valuation 81,000
andfair rent, but restricted to standard rent
Step II - Actual Rent
Rent receivable for the whole year (Rs.8,000 x 10) 80,000
Step III – Computation of Gross Annual Value
The actual rent of Rs. 80,000 is lower than ER of Rs. 80,000
81,000 owing to vacancy, since, had the property not
been vacant the actual rent would have been Rs.
96,000
(Rs. 80,000 + Rs. 16,000, being notional rent for two
months. Therefore, the actual rent is the GAV.
Gross Annual Value 80,000
Less: Municipal taxes (5% of Rs. 95,000) 4,750
Net Annual value 75,250
Less : Deductions under section 24 -
(i) 30% of net annual value 22,575
(ii) Interest on borrowed capital (Rs. 750 x 12) 9,000 31,575
Taxable income from let out portion 43,675
 (B) Self- occupied unit (50% of total area – See
Notebelow)
Annual value Nil
Less : Deduction under section 24 -
Interest on borrowed capital (Rs. 750 9,000 9,000
x12)
Loss from self- occupied portion (9,000)
Income from house property 34,675
Note: No deduction will be allowed separately for light
and water charges, lease money paid, insurance charges
and repairs.

Question 15
Mrs. Rohini Ravi, a citizen of the U.S.A., is a resident
and ordinarily resident in Indiaduring the financial
year 2024-25. She owns a house property at Los
Angeles, U.S.A., which is used as her residence. The
annual value of the houseis $ 20,000. The value of one
USD ($) may be taken as Rs. 75. She took ownership
and possession of a flat in Chennai on 1.7.2024, which
is usedfor self-occupation, while she is in India. The
flat was used by her for 7 months only during the year
ended 31.3.2025. The municipal valuation is Rs.
3,84,000
p.a. and the fair rent is Rs. 4,20,000 p.a. She paid the
following to Corporation of Chennai:
Property Tax Rs. 16,200
Sewerage Tax Rs. 1,800
She had taken a loan from Standard Chartered Bank
in June, 2019 forpurchasing this flat. Interest on loan
was as under:
Particulars Rs.
Period prior to 1.4.2024 49,200
1.4.2023 to 30.6.2024 50,800
1.7.2024 to 31.3.2025 1,31,300
She had a house property in Bangalore, which was
sold in March, 2020. In respectof this house, she
received arrears of rent of Rs. 60,000 in March,
2025. This amounthas not been charged to tax
earlier.
Compute the income chargeable from house
property of Mrs. Rohini Ravi for the A.Y. 2025-26 if she
has exercised the option of shifting out of the default
tax regime provided under section 115BAC(1A).
 Would your answer change if she pays tax under the
default tax regime undersection 115BAC?
Answer 15
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 for A.Y.2025- 26will be calculated as under:
Particulars Rs. Rs.

1. Self-occupied house at Los Angeles

Annual value Nil
Less: Deduction under section 24 Nil
Chargeable income from this house property Nil
2. Self-occupied house property at Chennai
Annual value Nil
Less: Deduction under section 24
Interest on borrowed capital (See Note 1,91,940
below)
Arrears in respect of Bangalore property (1,91,940)
3. (Section 25A)
Arrears of rent received 60,000

Less: Deduction @ 30% us 25A(2) 18,000 42,000

Loss under the head "Income from house (1,49,940)

property”
Note: Interest on borrowed capital
Particular Rs.
s
Interest for the current year (Rs. 50,800 + Rs. 1,31,300) 1,82,100
Add: 15th of pre-construction interest (Rs. 49,200 x 15) 9,840
Interest deduction allowable under section 24 1,91,940

Question 16
Two brothers Arun and Bimal are co-owners of a house property with equal
share.The property was constructed during the financial ye