Tax Planning & Management

UNIVERSITY OF LUCKNOW
DEPATMENT OF COMMERCE
SUBJECT- TAX PLANNING AND MANAGEMENT
TOPIC- TAX PLANNING REGARDING INCOME FROM HOUSE PROPERTY
NAME- AJAY KUMAR
CLASS- M.COM 4TH SEM
SL. NO.- 75 SEC- A
ROLL NO.- 190012125075
SUBMITTED TO – PRAKHAR OM
PRAKASH
TAX PLANNING FOR INCOME
FROM HOUSE PROPERTY
 The income from a self-occupied property will always be zero or negative
—to the extent of interest paid or the specified limit, whichever is lower
 The Income Tax Act divides the income received by a person into five
different heads. One of them is the ‘income from house property’ that
comprises the income earned by a person through the property(s) owned
by him/her
 Property covered under ‘income from house property’ essentially
comprises any building (house, office building, godown, factory, hall,
shop, auditorium, etc) and/or any land attached to the building (e.g.
compound, garage, garden, car parking space, playground, gymkhana, etc.)
Terminologies Associated With Income
From House Property
 Annual value: This is the actual rent received or to be received by the property owner on
renting out the house.
 Municipal value: This is the value on house property as calculated by the municipal
authorities for imposing municipal taxes.
 Fair rent value: Fair rental value is the rent which a similar property with similar features
in the same locality would fetch.
 Standard rent: The standard rent is determined under the Rent Control Act. If the
standard rent has been fixed for any property under the Rent Control Act, the property owner cannot
charge a rent higher than the standard fixed rent
 Gross Annual Value (GAV): This is the highest of:
Rent received
Fair market value
Municipal Valuation
 Net Annual Value: NAV is calculated as Gross Annual Value minus Municipal
Taxes paid.
 Deductions: To ascertain the actual taxable income, the taxpayer can claim the
following deductions under Section 24 of the Income Tax Act, 1961.
 Standard Deduction: The assesse can claim 30% of the NAV as a deduction
towards rent collection, repairs etc., irrespective of what the actual expense incurred
is. This deduction will not be permitted in case the GAV is nil.
 Interest on home loan: Deduction can be claimed for interest on home loan under
Section 24 of the Income Tax Act. The limit under this section is Rs 2 lakhs.
ANNUAL VALUE OF SELF
OCCUPIED HOUSE PROPERTY
 If the house that the assesse is staying in is the only property he or she owns, the
annual value will be nil. However, if the individual has multiple properties, all with
the purpose of self-occupation, he or she can only specify one of the property’s
annual value as nil. The annual value of the remaining properties will be assessed
according to the expected rent if the property was let out.
 Calculation of Income from House Property:
 Gross Annual Value XXX
 Less: Municipal Taxes (XXX)
 Net Annual Value XXX
 Less: Deduction under Section 24 (XXX)
 Standard Deduction @ 30% (XXX)
 Interest paid on Borrowed Loan (XXX)
 Income from House Property XXX
HOW TO SAVE TAX ON INCOME
FROM HOUSE PROPERTY?
 There are a number of measures an individual can undertake to save tax on Income from House
Property. They are:
 Become co-owners: If the individual and his or her spouse have jointly taken a home loan, both
can claim tax exemption towards payment of principal and interest.
 Thinking about getting a second home: If the assesse already has one property registered
in his or her name, it is a good idea to register the second property in the name of individual's spouse or
relative so as to avoid excess taxation.
 Multiple properties ownership: The Income Tax Act, 1961, states that if an individual owns
multiple house properties, only one of these will be regarded as self-occupied. The taxpayer needs to
evaluate the tax liability on all the properties he or she owns and occupy the one with the highest tax
liability and give out the others on rent.
WHAT IS A SELF OCCUPIED
PROPERTY, LET OUT PROPERTY AND
DEEMED LET OUT PROPERTY?
 Self-occupied: Is one where you or your family resides and the
question of receiving rental income out of this does not arise
 Let Out: Is one which you have given out on rent. Therefore, the
rental income would be considered as your income from house property.
 Deemed Let out: When a taxpayer owns more than two house
property, the law mandates that only two (Prior to Budget 2019, it was only
one property) such properties can be treated as self-occupied while the third
one (irrespective of whether let out or not) will be deemed to be let out.

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UNIVERSITY OF LUCKNOW

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