House Property Income

House Property Income Calculation

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Computation Of The Income Under The Head "Income From House Property"

The computation depends upon the purpose for which the House Property is used. They are: -

  1. Any House used for own Business or Profession

  2. One used for own Residence or Deemed to be used for own Residence

  3. Let-out for Residence or Business/Profession

  4. More than one House-Property used for own Residence - Deemed Let-out

In any case, the computation involves two steps: -

  1. Determination of Annual Value [Gross Annual Value less Municipal Tax]

  2. Deduction under Section 24 [Standard Deduction & Interest on Borrowed Capital]

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Property used for own Business/Profession [Section 22]

As per section 22, portion of the house property used for the owner's own business/profession, is not chargeable to income-tax.

All the expenses incurred in relation to such portion, such as municipal taxes, repairs, interest on borrowed capital, etc., are deductible from the "Profits and Gains of Business or Profession" chargeable under section 28.

Moreover, depreciation can be claimed under section 32, in the respect of the house property.

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Concession in respect of any one Residential House [Section 23(2)]

Concession is given in the computation of income in respect of the following property consisting of "a house" or "a part of a house": -

  1. Which is in the occupation of the owner for the purposes of his own residence; or

  2. Which could not actually be occupied by the owner, by reason of the fact that, owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building belonging to him.

Occupation of the property by relatives of the Owner does not entitle the Owner for this concession - Smt.Jashvidyaben C. Mehta vs. CIT (1988) 172 ITR 680 (Guj).

Further, this benefit of self-occupation for own residence cannot be availed by HUF - Deepak L Banker vs. CIT (1998) 145 CTR (Mad) 489, or Firm - CIT vs. Dewan Chand Dholan Dass (1981) 132 ITR 790 (Del) or for that purpose by any other person.

However, in the case of property owned by an AOP, in respect of which section 26 is applicable, the co-owners are eligible for the benefit under section 23(2) and the benefits available under the Act shall be allowable in respect of each of their share in the co-owned property, individually - as explained by Explanation to section 23(2) and as decided in CIT vs. Bijoy Kumar Almal (1995) 215 ITR 22 (SC) & CIT vs. Abdullah M Moonim (1981) 132 ITR 642 (Bom).

However, such benefit cannot be availed if such 'House' or 'Part of the House' is -

  1. Actually let during the whole or any part of the Previous Year, or

  2. Any other benefit is derived by the Owner from that property.

The computation of income is as under: -

Particulars Rs
Gross Annual Value [Refer Paragraph 14 above] Nil
Less: Interest on Borrowed Capital (Refer Note below) xxx
Income under the head "Income from House Property" xxx

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Interest Deductible

  1. Where property has been acquired, constructed, repaired, renewed or constructed with borrowed capital, the amount of interest payable on such capital is eligible for deduction.

  2. Where property has been acquired or constructed with borrowed capital, the amount of interest payable on such capital is eligible for deduction as under: -

    1. Interest for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted over a period of 5 successive previous years from the said previous year in equal instalments.

    2. The entire interest for the previous year in which the property was acquired or constructed, or thereafter, can be claimed in the respective previous year itself.

  3. Where the property has been repaired, renewed or reconstructed with borrowed capital, the amount of interest payable on such capital is eligible for deduction in the respective previous years itself.

  4. Interest payable outside India is not deductible, as per section 25, if: -

    1. tax has not been paid or deducted under Chapter XVII-B, and

    2. there is no person in India who may be treated as an agent under section 163 in respect of such payment outside India.

  5. The assessee has to furnish a Certificate from the person to whom he is liable to pay interest, specifying the amount of interest payable by the assessee - third proviso to section 24(b).

  6. As per Explanation to third Proviso, the interest on new loan borrowed for the purpose of repayment of old loan borrowed for acquisition or construction of the house property is also eligible for deduction under this section 24.

However, the maximum amount of interest deductible is restricted to the following amounts in the case of as per the first and second provisos to section 24: -

Particulars Rs
Interest relating to loans borrowed after 31.03.1999 for the purpose of construction or acquisition of property (construction or acquisition of which is complete within 3 years from the end of the financial year in which the loan is borrowed) 1,50,000
Interest in cases other than the above situation 30,000

The benefit of additional interest up to Rs 1,50,000, is available only in respect of properties acquired or completed after 31.03.1999.

Where the interest on original borrowed was eligible for the enhanced limit of Rs 1,50,000, then interest on new loan borrowed for repaying such original loan may also be eligible for such enhanced limit of Rs 1,50,000.

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