Income From House Property: Prepared By: Vaishali Narolia

INCOME FROM
HOUSE PROPERTY
PREPARED BY :
VAISHALI NAROLIA
CONDITIONS U/S 22
• The Property should consist of any buildings or lands appurtenant thereto.

• Assessee should be the Owner of the property
• Property should not be used by owner for own business and profession purposes.
All the above conditions must be satisfied for an income to be classified under ‘income from
house property’
DEEMED OWNER
• When the house property is transferred to spouse or minor children without adequate
consideration, the transferor is treated as the Deemed owner. Exceptions - if it has been transferred
to spouse under an agreement to live apart OR transferred to a minor married daughter.
• When the property is transferred through a ‘power of attorney’ transaction under Transfer of
Property Act.
• Holder of an impartible estate
• When the property is held on a lease for more than 12 years
• Members of a co-operative housing society allotted individual residential units under a house
building scheme of the society.
COMPUTATION OF HOUSE PROPERTY INCOME
Particulars Amount (Rs.)

Gross Annual Value XXXX
Less: Municipal Taxes (xxxx)
Net Annual Value XXXX
Less: Deduction u/s 24
i. Standard deduction @ 30% (xxxx)
ii. Interest on Borrowed Capital (xxxx)
INCOME FROM HOUSE PROPERTY XXXX
GROSS ANNUAL VALUE
Find out the Reasonable Expected Rent of the Property for PY

Step 1
Reasonable Expected Rent = MV or FR, whichever is higher subject to a maximum of SR
Actual Rent Received/Receivable minus Unrealised Rent (before deducting Loss due to
Step 2
vacancy)
Step 3 Find the Higher amount of Step 1 or Step 2
Step 4 Find Loss due to vacancy .

GROSS ANNUAL VALUE = Step 3 minus Step 4
Step 5
Note: Only If Step 2 is higher than Step 1, reduce Loss of vacancy , other wise not.
MUNICIPAL TAXES
Deducted from GAV only when both the following conditions are met:
• These taxes are borne by Owner
• These are actually paid during the relevant PY
INTEREST ON BORROWED CAPITAL
• Interest on capital borrowed for the purchase, construction, repair, renewal or reconstruction of
house property.
• Deductible on ‘accrual’ basis.
• Interest on unpaid interest is not deductible
• No deduction allowed for brokerage or commission
• In case of ‘let-out’ property, no maximum ceiling on Interest on borrowed capital
• Interest of pre-construction period is allowed as deduction in 5 equal instalments starting
from PY in which house property is constructed/acquired.
PRE CONSTRUCTION PERIOD
• The period Commencing on the ‘date of borrowing’ of the loan/capital
and
• Ending on
A) 31st March immediately prior to the date of completion of construction/acquisition
B) date of repayment of loan, whichever is earlier
TEST YOURSELF
Mr. B takes a loan of Rs. 75,000 @ 8% p.a. for constructing a house on June 10, 2015. Construction
of the house is completed on January 20, 2021. Date of repayment of loan is
(a) January 16, 2023
(b) June 20, 2022
(c) October 31, 2018
(d) September 30, 2020
You are required to find out Interest on borrowed capital u/s 24.
SELF OCCUPIED PROPERTY (FOR
RESIDENTIAL PURPOSES)
• NAV is nil.
• Only deduction u/s 24(ii) ‘Interest on borrowed capital is provided subject to a maximum of Rs.
30,000. However, if all of the following conditions are satisfied, interest on borrowed capital is
deductible upto Rs. 2,00,000 :
• Capital is borrowed for the purpose of construction or acquisition of the property.
• It should be borrowed on or after 1/04/1999.
• The construction or acquisition should be completed within 5 years from the end of Financial year in
which the capital is borrowed.
• If the assessee owns more than 2 house properties for own residential purposes, only a maximum
of 2 houses can be claimed as ‘self-occupied’ and others will be treated as ‘Deemed to be Let-out’
under the Income tax act, 1961.
SCENARIO 1 – WHEN A PART OF PROPERTY IS
LET-OUT & PART IS SELF-OCCUPIED
SCENARIO 2 – WHEN A PROPERTY IS SELF OCCUPIED FOR PART
OF THE YEAR & LET OUT FOR REMAINING PART OF THE YEAR
ARREARS OF RENT & UNREALISED RENT
SUBSEQUENTLY REALISED
• Chargeable to tax in the year of realisation irrespective of the fact that assessee owns that
house property in the current PY.
• A deduction of 30% can be claimed from such amount.
NOTES
• GAV in case of a ‘Deemed to be let-out’ property is taken as the Reasonable Expected
Rent of that property.
• If the property is let out only for a part of the year and self occupied for the remaining
part of the year, it is treated as let out property for the whole year. In such case, the
reasonable expected rent of the property is taken for the whole year. And the annual
rent receivable is computed for the let-out part of the year.
QUESTIONS?

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INCOME FROM

• The Property should consist of any buildings or lands appurtenant thereto.

Particulars Amount (Rs.)

Find out the Reasonable Expected Rent of the Property for PY

Step 4 Find Loss due to vacancy .

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