House Property Income Tax

House Property Income Calculation

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Let Out House Property Income

In the case of a property, which is let out, either for residential purpose or business purpose, for the whole or part of the previous year, the income is to be computed as under:

Particulars Rs Rs
Gross Annual Value [Refer Paragraph 14 above] xxx
Less: - Municipal Taxes (including service tax thereon) levied by Government and paid by Landlord during the Previous Year xxx
---
Annual Value xxx
Less: - Deduction under section 24: -
  • Standard Deduction - 30% of the Annual Value

xxx
  • Interest on borrowed capital

xxx
---
xxx
---
Income under the head "Income from House Property" xxx
---

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Deemed Let Out House Property Income

An assessee can claim concession under section 23(2) only in respect of one residential house property. All other properties will be deemed to be let out for the purpose of charge to income tax.

The computation is similar to that of the let out properties, subject to the following changes: -

  1. The concept of Actual Rent is not applicable and Vacancy allowance cannot be claimed - Liquidator of Mahamudabad Properties (P) Ltd. vs. CIT (1980) 124 ITR 31 (SC), i.e., the Expected Rent would be the "Annual Value" always.

  2. Unrealised rent does not arise.

For selecting the property, which is to be treated as self-occupied for own residence, the following procedure can be followed: -

  1. Determine the income chargeable under the head "House Property" for all the properties, treating them as Self-occupied (or partly Self-occupied) for own residence.

  2. Determine the income chargeable under the head "House Property" for all the properties, treating them as let-out, as explained supra.

  3. Evaluate the alternative "combinations" [Ex: taking first house as self-occupied (or partly Self-occupied) for own residence and all other properties as deemed let-out, taking second house as self-occupied (or partly Self-occupied) for own residence and all other properties as deemed let-out, so on.]

  4. Choose the alternative, which results in minimising the chargeable income of the assessee.

The alternative chosen can change from one year to another year depending upon the benefit available to the assessee.

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Charge To Income-Tax In Respect Of Unrealised Rent Recovered

Unrealised Rent Claimed As Deduction Up To Previous Year Ending 31.03.2001 [Section 25A]

Where a deduction has been made under section 24(1)(x), as it stood immediately before its substitution by the Finance Act, 2001, in the assessment for any year in respect of rent from property let to a tenant which the assessee cannot realise and subsequently during any previous year the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head "Income from house property" and accordingly charged to income-tax (without making any deduction under section 23 or section 24, as it stood immediately before its substitution by the Finance Act, 2001) as the income of that previous year, whether the assessee is the owner of that property in that year or not.

Unrealised Rent Claimed As Deduction From Previous Year Ending 31.02.2002 And Thereafter [Section 25AA]

Where the assessee cannot realise rent from a property let to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head "Income from house property" and accordingly charged to income-tax as the income of that previous year in which such rent is realised whether or not the assessee is the owner of that property in that previous year.

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Special Provision For Charge Of Arrears Of Rent Received [Section 25B]

Where the assessee-

  1. is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and

  2. has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year,

the amount so received, after deducting a sum equal to 30% of such amount, shall be deemed to be the income chargeable under the head "Income from house property" and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not.

The amount chargeable to income-tax is as under: -

Particulars Rs
Arrears Rent Received xxx
Less: Standard Deduction – 30% of Arrears Rent Received xxx
Income under the head “Income from House Property” xxx

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Exemption Under Section 10 on House Property Income

The Annual Value of any one Palace in the Occupation of Ex-ruler is exempt under section 10(19A).

There are certain other persons, in whose hands the income under the head "Income from House Property" is exempt.

Few of them are: -

  1. Local Authority - Section 10(20)

  2. Registered Trade Union or An Association of Registered Unions - Section 10(24)

  3. Political Parties - Section 13A

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