Dr Ram Manohar Lucknow

Lohiya

National Law University,

Project work on Law of Taxation-I

TOPIC - Income Tax on Income From House Property

Submitted To:By:Mr. U.P. Singh Singh Lecturer of Law of Taxation Semester

Submitted Rohit Kannojia, Yagyawalkya B.A LL.B (Hons.) VII th

Section B Roll No: 109, 158

1 Introduction
Income from house property is one of the important heads of income under the Income Tax Act. The tax payers have been, in particular, keen to know about the exemptions and deductions available to them on repayment of interest and principal of the loan taken to purchase the house property, if that house property is let out or self-occupied. Section 4 of the Income tax Act 1961 provides for charge of income tax. However, this section by itself does not create any liability. It has been observed by the Supreme Court.1 although section 4 is the charging section, yet income tax can be charged only when the central Act, which normally is the Finance Act, enacts that income tax shall be charged for any assessment year at the rate or rates specified therein.

2. Analysis of statutory provisions regarding Income from House Property

2.1 Introduction to Income under the Head Income from House Property and Basis of Charge Section 22 provides for taxation of annual value of a property consisting of any buildings or lands appurtenant thereto, of which the assessee is owner, under the head income from House Property. Tax imposed under section 22 is a tax on `annual value of house property and is not a tax on House Property. However, if a house property is occupied by a taxpayer for the purpose of business or profession carried on by him, annual value of such property is not chargeable to tax under the head Income from House Property. The phrase lands appurtenant thereto needs to be clarified in this context that income from letting of vacant plots of land when there is no adjoining building will not be taxed under this head (but will be taxed as income from other sources). The existence of a building is, therefore, an essential prerequisite. Building will, of course, include residential house (whether let out or self occupied), office building, factory building, godowns, flats, etc. as long as they are not used for business or profession by owner. And the purpose for which the building is used by the tenant is also immaterial. Thus, income from letting out godowns will be taken as income from house property. It does not make any difference at all if the property is owned by a limited company or a firm. Three conditions are to be satisfied for property income to be taxable under this head:
1

CIT Vs. K. Srinivasan (1972) 83 ITR 346-351.

1. The property should consist of buildings or lands appurtenant thereto. 2. The assessee should be the owner of the property. 3. The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to income-tax. Unless all the aforesaid conditions are satisfied, the property income cannot be charged to tax under the head Income from House property. 2.2. Applicability of Section 22 2.2.1 Buildings or lands appurtenant thereto What is covered by the expression appurtenant' is the land which is necessary for enjoyment of the building and not the land only.2 The word 'building' is not confined in its scope only to dwelling houses. 'House' is defined in the Oxford Dictionary of English, 10th Edition, as: A building for human habitation especially one that is lived in by a family or by a small group of people consisting of ground floor and one or more storey. The word 'house' in association with other words also has many other meanings. But a commercial building is not regarded as a house. That, however, would not take the income from such buildings out of the ambit of section 22. The term building includes residential houses, bungalows, office buildings, warehouses, docks, factory buildings, music halls, lecture halls, auditorium etc. The appurtenant lands in respect of a residential building may be in the form of approach roads to and from public streets, compounds, courtyards, backyards, playgrounds, kitchen garden, motor garage, stable or coach home, cattle-shed etc, attached to and forming part of the building. In respect of non-residential buildings, the appurtenant lands may be in the form of car-parking spaces, roads connecting one department with another department, playgrounds for the benefit of employees, etc. All other types of properties are excluded from the scope of section 22. Rental income from a vacant plot of land (not appurtenant to a building) is not chargeable to tax under the head Income from house property, but is taxable either under the head Profits and gains of business or profession or under the head Income from other sources , as the case may be. However, if there is land appurtenant to a house property, and it is let out along with the house property, the income arising from it is taxable under this head. 2.2.2 Ownership of House Property 2.2.2.1 Owner-concept For the purpose of section 22, the concept hitherto understood even in court decisions has been that the owner has to be a legal owner. Annual value of property is assessed to tax under section 22 in the hands of owner even if he is not in receipt of income or even if income is received by some other person. For instance, if a person makes gift of rental income to a friend or a relative, without transferring ownership of the property, annual

Gowardhan Das & sons v. CIT [2007], 158 Taxman 465/288 ,ITR 481 (Punj. & Har.).

value of property is taxable in the hands of the donor, even if rental income is received by the donee.3 The term 'occupy' appearing in section 22 has been judicially interpreted, as occupation directly by the assessee himself or through an employee or agent but such occupation by the employees, etc., within the meaning of the exception in the said section, must be subservient to and necessary for the performance of the duties in connection with the business of the company. The word owner refers to the owner of the property itself and not the owner of its annual value In other words, for the purpose of section 22, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. 4 However, there has been some refinement in the concept of ownership after the decision of the Supreme Court in the case of CIT v. Podar Cement (P) Ltd.5 In this case, the Supreme Court has expressed the view that under common law owner means a person who has got valid title generally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, Registration Act etc. But in the context of Section 22 of the Income tax Act, having regard to the ground realities and further having regard to the object of the Income tax Act, namely, to tax the income, owner is a person who is entitled to receive income from the property in his own right. The requirement of registration of the sale deed in the context of section 22 is not warranted. In view of this, where a property is handed over to a purchaser to enjoy fruits of that property by the builder, the purchaser is to be treated as owner of that property even though no registered document has been executed in his favour. Rationale and the concept of deemed owner Section 27 of the Income Tax Act provides that, in certain circumstances, persons who are not legal owners are to be treated as deemed owners of house property for the purpose of tax liability under this head. 1. Transfer to a Spouse or Child (Section 27(i)) If an individual transfers a house property to his or her spouse (except in connection with an agreement to live apart) or to a minor child (except a married daughter) without adequate consideration, he is deemed as the owner of the property for tax purposes. However, if an individual transfers cash to his or her spouse or minor child, and the transferee acquires a house property out of the gifted amount, the transferor shall not be treated as the deemed owner of the house property. 2. The Holder of an Impartible Estate (Section 27(ii))
3 4

S. Kartar Singh v. CIT (1969) 73 ITR 438 (Delhi). Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC). 5 (1997) 92 Taxman 541 (SC)/226 ITR 625 (SC).

The Holder of an Impartible Estate is deemed to be the individual owner of all the properties comprised in the estate. The Impartible Estate, as the word itself suggests, is a property which is not legally divisible. 3. A Member of a Co-Operative Society etc. (Section 27(iii)) A member of a co-operative society, company or association of persons, to whom a property (or a part thereof) is allotted or leased under a house building scheme of the society, company or association, is deemed to be the owner of such property or part thereof allotted to him although the society, company or association is the legal owner of that building. 4. Person in Possession of Property (Section 27 (iiia)) A person who is allowed to take or retain possession of any building (or part therof) in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, is deemed as the owner of that building (or part thereof) This would cover the cases where the: (a) Possession of the property is handed over to the buyer, (b) Sale consideration has been paid or promised to be paid by the seller to the buyer, (c) Sale deed has not been executed in favour of the buyer, although certain other documents like power of attorney/agreement to sell/will etc. have been executed. The buyer would be deemed to be the owner of the property although it is not registered in his name. 5. A person who has acquired a right in a building for a period not less than 12 years (Section 27(iii)(b)) A person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building (or part there3of) by virtue of any such transaction as is referred to in section 269UA(f) i.e. if a person takes a house on lease for a period of 12 months or more, is deemed as the owner of that building or part thereof. Persons who purchase properties on the basis of Power of Attorney and under long term leases (12 months & more) are also deemed to be owners. The concept of deemed owner is introduced to prevent misuse like transferring properties in the name of spouse or minor child etc. and for assessment of income in the hands of beneficial owner. This provision does not cover any right by way of a lease renewable from month to month or for a period not exceeding one year. Ownership must be of the superstructure. It is not necessary that the assessee is also the owner of the land. Thus, when a person obtains a piece of land on lease and constructs a building on it, the income from such building will be taxed in his hands as income from house property. Property owned by Co-owners Section 26 concerns properties which are owned by co-owners. This section provides that where property consisting of building or buildings and land appurtenant thereto is

owned by two or more persons and their respective shares are definite and ascertainable such persons shall not, in respect of such property, be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income as under: (a) Where house property is self-occupied by each co-owner : Where house property owned by co-owners is self-occupied by each co-owner, the annual value of the property for each of such co-owner shall be nil and each of the co-owner shall be entitled to a deduction of Rs. 30,000/1,50,000 under section 24(b) on account of interest on borrowed money. (b) Where the entire part of the property is let: Where the entire part of the property is let out, the income from such property or part thereof shall be first computed as if this property/part is owned by one owner and thereafter the income so computed shall be apportioned amongst each co-owner as per their definite share. 2.2.4 The property should not be used by the owner thereof for the purpose of any business or profession carried on by him, the profit of which is chargeable to tax If the property is used by the owner thereof for any business or profession carried on by him; and the profits of such business are chargeable to tax, then income from such property shall not be chargeable to tax under this head. The following points are relevant to explain this point: (a) Use for business must be by owner: For instance if a company gives its house property to its subsidiary for business of such subsidiary, then income from such property shall be taxable under this head, as use for business purposes is not by owner of house i.e. the company, but by its subsidiary. (b) Letting out for business purposes is use for business purposes : For instance, when a house property owned by an assessee is occupied for residence by its employees/directors, etc., whether on payment of rent or otherwise, to enable them to discharge their functions efficiently and letting out of the property is subservient and incidental to the main business of the assessee, such an occupation amounts to use of the property by the assessee itself for the purpose of its business, even though no business is actually carried on in such premises. Income from such property is not assessable as Income from House Property, but as income from business or profession.6 2.2.6 Rental income of a dealer in house property If a person is engaged in the business of purchasing house properties with the purpose of letting them on high rents and disposing off those properties which are not profitable for this purpose, the rental income from such property will not be taxed as business income. Any rent from house property, whether received by a dealer or a landlord, is taxable under the head Income from house property. It will remain so even if the property is
6

CIT v. Modi Industries Ltd. [1994] 210 ITR 1 (Delhi) (FB).

held by the assessee as stock-in-trade of a business or if the assessee is a company which is incorporated for the purpose of building houses and letting them on rent.

2.5 Property Incomes Exempt from Tax Some incomes from house property are exempt from tax. They are neither taxable nor included in the total income of the assessee for the rate purposes. These are: 1. Income from a farm house: Income from any building owned or occupied by an agriculturist or receiver of rent/ revenue of such land provided that the building is in the immediate vicinity of agricultural land and is used as an dwelling house or a store house or other out-building. 2. Annual value of one palace in the occupation of an ex-ruler. 3. Property income of a local authority. 4. Property income of an approved scientific research association. 5. Property income of an educational institution and hospital. 6. Property income of a registered trade union. 7. Income from property held for charitable purposes. 8. Income from property used for own business or profession. 10. Annual value of self occupied property: Annual Value shall be taken as Nil. Annual Value The basis of calculating Income from House property is the annual value. This is the inherent capacity of the property to earn income and it has been defined as the amount for which the property may reasonably be expected to be let out from year to year. It is not necessary that the property should actually be let out. It is also not necessary that the reasonable return from property should be equal to the actual rent realized when the property is, in fact, let out. Where the actual rent received is more than the reasonable return, it has been specifically provided that the actual rent will be the annual value. Where, however, the actual rent is less than the reasonable rent (e.g., in case where the tenancy is affected by fraud, emergency, close relationship or such other consideration), the latter will be the annual value. The municipal value of the property, the cost of construction, the standard rent, if any, under the Rent Control Act, the rent of similar properties in the same locality, are all pointers to the determination of annual value. The determination of Annual Value is important in the context of taxation of income from House Property because though the tax under the head Income from house property is tax on income, yet it is not in that sense a tax on income but upon inherent capacity of such property to yield income and for this annual value is the yardstick. The inherent capacity has been defined as the sum for which the property might

reasonably be expected to be let from year to-year. It is not necessary, that the property should be actually let. It is also not necessary that the reasonable return from property should be equal to the actual rent realized when the property is, in fact, let out. Where the actual rent received is more than the reasonable return, it has been specifically provided that the actual rent will be the annual value. Where, however, the actual rent is less than the reasonable rent (e.g. in case where the tenancy is affected by manipulation, emergency, close relationship or such other consideration), the latter will be annual value. The municipal value of the property, the cost of construction, the standard rent if any under the Rent Control Act, the rent of similar properties in the same locality are relevant factors for the determination of the annual value. However, if a property is let and was vacant during any part or whole of the year and due to such vacancy, the rent received is less than the notional rent, such lesser amount shall be the Annual Value. Where the property is subject to Rent Control Act, its annual value under Section 23(1) cannot exceed the standard rent (fixed or determined) under the Rent Control Act unless it is actually let out for a higher amount.7 Factors of Annual Value The following four factors have to be taken into consideration while determining the Gross Annual Value of the property: 1. Rent payable by the tenant (actual rent) 2. Municipal valuation of the property. 3. Fair rental value (market value of a similar property in the same area). 4. Standard rent payable under the Rent Control Act. Actual Rent Received or Receivable It is the most important factor in determining the annual value of a let out house property. It does not include rent for the period during which the property remains vacant. Moreover, it does not include the rent that the tax payer is unable to realize, if certain conditions are satisfied. Sometimes a tenant pays a composite rent for the property as well as certain benefits provided by the landlord. Such composite rent is to be disintegrated and only that part of it which is attributable to the letting out of the house property is to be considered in the determination of the annual value. It may however be observed that the municipal taxes of the house property are to be borne by the occupier who in the case of let out property is the tenant. Therefore, if such municipal taxes are borne by the tenant, the rent received/ receivable should not be increased to calculate de facto rent. Further where repair expenses are borne by the tenant, the rent received/ receivable should not be decreased to calculate the de facto rent.
7

Dewan Daulat Rai Kapoor v. NDMC, (1980) 122 ITR 700 (SC); Amolak Ram Khosla v. CIT, (1981) 131 ITR 589 (SC);Mrs. Shiela Kaushik v. CIT, (1981) 131 ITR 435 (SC).

Municipal Valuation Municipal or local authorities charge house tax on properties situated in the urban areas. For this purpose, they have to determine the income earning capacity of the property so as to calculate the amount of house tax to be paid by the owner of the property. But this valuation cannot be treated as a conclusive evidence of the rental value of the property, although such valuation is given due consideration by the Assessing Officer. Fair Rental Value It is the rent normally charged for similar house properties in the same locality. Although two properties cannot be alike in every respect, the evidence provided by transactions of other parties in the matter of other properties in the neighbourhood, more or less comparable to the property in question, is relevant in arriving at reasonable expected rent. Standard Rent Standard Rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act. This rule is applicable even if a tenant has lost his right to apply for fixation of the standard rent. This means that if a property is covered under the Rent Control Act, its reasonable expected rent cannot exceed the standard rent. The Gross Annual Value is the municipal value, the actual rent (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross annual value cannot exceed the standard rent under the Rent Control Act, or the actual rent, whichever is higher. If the property is let out but remains vacant during any part or whole of the year and due to such vacancy, the rent received is less than the reasonable expected rent, such lesser amount shall be the Annual value. For the purpose of determining the Annual value, the actual rent shall not include the rent which cannot be realized by the owner. However, the following conditions need to be satisfied for this: (a) The tenancy is bona fide; (b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property. (c) The defaulting tenant is not in occupation of any other property of the assessee; (d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfied the Assessing Officer that legal proceedings would be useless. Standard Rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act. This rule is applicable even if a tenant has lost his right to apply for fixation of the standard rent. This means that if a property is covered under the Rent Control Act, its reasonable expected rent cannot exceed the standard rent. The

Gross Annual Value is the municipal value, the actual rent (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross annual value cannot exceed the standard rent under the Rent Control Act, or the actual rent, whichever is higher. If the property is let out but remains vacant during any part or whole of the year and due to such vacancy, the rent received is less than the reasonable expected rent, such lesser amount shall be the Annual value. For the purpose of determining the Annual value, the actual rent shall not include the rent which cannot be realized by the owner. However, the following conditions need to be satisfied for this: (a) The tenancy is bona fide; (b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property. (c) The defaulting tenant is not in occupation of any other property of the assessee; (d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfied the Assessing Officer that legal proceedings would be useless. House Property which is part of the year let and part of the year occupied for own residence. Where a house property is, part of the year let and part of the year occupied for own residence, its annual value shall be determined as per the provisions of section 23(l) relating to let out property. ln this case, the period of occupation of property for own residence shall be irrelevant and the annual value of such house property shall be determined as if it is let for pan of the year, Hence, the expected rent as per section 23(l) (u) shall be taken for full year but the actual rent received or receivable shall be taken only for the period let and the gross annual value shall be higher of these two. Computation of income of house property which ls partly let and partly selfoccupied In this case the annual value, deductions and the income of the part of the property which is let shall be computed separately under the let out property and the income of the portion or the part of the property which is self occupied shall be determined under the "self-occupied property" category. For instance, where one unit is let out and the other unit is self occupied, then the whole property cannot be taken as a single unit. Municipal value or fair rent if not given separately, shall be apportioned between the let out portion and self occupied portion on built up area basis. Similarly, where, in a building the ground floor is self-occupied and the first floor is let out or vice-versa, such a property shall not be treated as a single unit. Instead, income from First floor which is let shall be computed separately as per let out provisions and

the Hour which is self-occupied shall be computed separately as per self-occupied provisions. Municipal tax and interest shall also be apportioned on the basis of built up/floor area space.

Income from subletting Income from subletting is not taxable under section 22. For example, A owns a house property. He lets it out to be B. B further lets it (or a portion of it) out to C. Rental income of A is taxable under the head Income from house property. However, since B is not the owner of the house, his income is not taxable as income from house property, but as income from other sources under section. 4. Deductions from Annual Value in cases of let out properties 4.1 Introduction to Deductions under Section 24 Two deductions will be allowed from the net annual value (which is gross annual value less municipal taxes) to arrive at the taxable income under the head income from house property. It has to be borne in mind that the deductions mentioned here (section 24) are exhaustive and no other deductions are allowed. The deductions admissible are as under: 4.1.1 Standard Statutory deduction 30 per cent of the net annual value will be allowed as a deduction towards repairs and collection of rent for the property, irrespective of the actual expenditure incurred. 4.1.2 Interest on borrowed capital Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital is allowed as a deduction. The amount of interest payable yearly should be calculated separately and claimed as a deduction every year. It is immaterial whether the interest has been actually paid or not paid during the year. 4.1.3 Interest attributable to the period prior to completion of construction It may so happen that money is borrowed earlier and acquisition or completion of construction takes place in any subsequent year. Meanwhile interest becomes payable. In such a case interest paid/payable for the period prior to the previous year in which the property is acquired/constructed (as reduced by any part thereof allowed as a deduction under any other provisions of the Income-tax Act) will be aggregated and allowed in five successive financial years starting from the year in which the acquisition/construction was completed. Interest will be aggregated from the date of borrowing till the end of the previous year prior to the previous year in which the home is completed and not till the date of completion of construction.

5. Some Special Provisions 5.1 Treatment of unrealised rent As per the Explanation to Section 23(1) the actual rent received or receivable mentioned in Section, 23(l)(b) and (c) shall not include the amount of rent which the owner cannot realise, subject to the rules made in this behalf. In other words, unrealized rent, if any should be deducted from clause (b) or (c) of Section 23( I). 5.1.1 Rules for unrealised rent The amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where: (a) The tenancy is bona fide; (b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property; (c) The defaulting tenant is not in occupation of any other property of the assessee; (d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless. Important Note Explanation to section 23(l) mentioned above provides that unrealized rent should be deducted from clause (b) or clause (c) of section 23(l) i.e. the actual tent received or receivable. It does not provide that it should be deducted from clause (a) i.e. from expected rent. Thus problem will arise when gross annual value is to be taken as expected rent instead of actual rent received orreceivable as the assessee in that case cannot take the deduction of unrealized rent. However, in the income-tax return forms, unrealized rent has been shown as deduction from the gross annual value (i.e. alter taking expected rent or actual rent whichever is higher). It is therefore, recommended that unrealized rent should be deducted alter computation of gross annual value. Similarly where a house is vacant for part of the year, section 23(l)(c) provides that gross annual value is be taken as actual rent if the same is less than the expected rent. In this case also, unrealised rent should be deducted after computation of gross annual value (i.e. the actual rent). 5.2 Taxability of Unrealized Rent recovered later (Section 25A) Where the assessee could not realise rent from a property let to a tenant and the same was allowed as deduction 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. 5.2.1 Special provisions for arrears of rent received Where the assessee: (a) Is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to n tenant; and (b) 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. Further, it will be 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.8 5.2.2 Assessment of arrears of rent received When the owner of a property receives arrears of rent from such a property, the same shall be deemed to be the income from house property in the year of receipt. 30% of the receipt shall be allowed as deduction towards repairs, collection charges etc. No other deduction will be allowed. As in the case of unrealized rent, the assessee need not be the owner of the property in the year of receipt. 5.3 House property owned by co-owners Section 26 concerns properties which are owned by co-owners. This section provides that where property consisting of building or buildings and land appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable such persons shall not, in respect of such property, be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income as under: (a) Where house property is self-occupied by each co-owner : Where house property owned by co-owners is self-occupied by each co-owner, the annual value of the property for each of such co-owner shall be nil and each of the co-owner shall be entitled to a deduction of Rs. 30,000/1,50,000 under section 24(b) on account of interest on borrowed money. (b) Where the entire part of the property is let: Where the entire part of the property is let out, the income from such property or part thereof shall be first computed as if this property/part is owned by one owner and thereafter the income so computed shall be apportioned amongst each co-owner as per their definite share. Objective

Section 25B, Income Tax Act, 1961.

Aim is to avoid assessment as AOP : The sum and substance of section 26 is to prohibit the assessment of co-owners of the house property as an association of persons.9 Controversy about status will not attract section 26: In a case where the controversy is whether the income of the house property should be included in the total income of a firm. company or a Joint Hindu Family, or should be assessed in the hands of the members of thefirm, company or Joint Hindu Family, section 26 does not come into operation; in all these cases, section 22 alone applies.10 Provision is mandatory: Section 26 is mandatory.11 Co-heirs Co-widows inheriting property in equal shares are co-owners: Co- widows inheriting certain immovable properties in equal shares would be co-owners.12 Firm Firm cannot claim status of AOP qua property income: A firm having only property income cannot claim the status of AOP under section 26 in respect of rental income, so long as the partnership is in operation.13 Loss from house property If the aggregate amount of permissible deductions exceeds the annual value of the house property, there will be a loss from that property. So far as income from a self-occupied property is concerned, and in respect of a property away from the workplace, the annual value is taken at nil and no other deductions are allowed except for interest on borrowed capital upto a maximum of Rs.30,000 or Rs.1,50,000. In such cases, there may be a loss upto a maximum of Rs.30, 000 or Rs.1, 50,000, as the case may be. However, in respect of a let out house property, there are no restrictions on deductions and therefore, there can be loss of any amount under this head. The loss from one house property can be set off against the income from another house property. The remaining loss, if any, can be set off against incomes under any other head like salary. In case the loss does not get wiped out completely, the balance will be carried forward to the next assessment year to be set off against the income from house property of that year. However, such carry forward is restricted to eight assessment years only.

CIT v. Abdullabhai M. Moonim, [1981] 132 ITR 642 (Bom.) S.M Syed Mohammed Saheb & Bros. v. CIT, [1968] 68 ITR 791 (Ken). 11 Gora Chand Sen v. CIT, [1985] 154 ITR 435 (Cal.) 12 CIT v. Indira Balkrishna [1960] 39 ITR 546 (SC) 13 Balaji Enterprises v. ClT, [1997] 225 ITR 471 (Kar
10

References Books referred Ahuja Girish and Ravi Gupta, Systematic Approach to Income Tax, 25th edition 2011, Bharat Law House Pvt. Ltd., New Delhi Ahuja, Girish, Taxation of Salaried Persons, Bharat Law House Pvt. Ltd., New Delhi, 5th edition, 2009. Mahesh, Chandra and D.C. Shukla, Income Tax Law and Practice , Pragati Publication, New Delhi, 2009. Singhania, Vinod K., Students guide to Income Tax, Taxman Prints India Pvt. Ltd., New Delhi, 40th Edition, 2009.

Bhargava U.K., Taxmanns Income Tax Act, 52nd edition 2008, Taxmann publications (P.) Ltd, New Delhi Taxmanns Direct Tax Manual Vol. 3, 38th edition 2008, Taxmann publications (P.) Ltd, New Delhi

Websites referred www.incometaxindia.gov.in/Archive/House_Property.pdf www.du.ac.in/fileadmin/DU/Academics/course.../TM_06.pdf http://wircicai.org/wirc_referencer/income%20tax%20&%20wealth%20tax/Income %20From%20House%20Property.htm www.du.ac.in/fileadmin/DU/Academics/course.../TM_06.pdf 220.227.161.86/18882sm_dtl_finalnew_cp5.pdf

http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php? autono=633762 www.incometaxbangalore.org/faq/houseproperty.htm http://www.caclubindia.com/forum/income-from-house-property-faq-111402.asp http://finotax.com/itax/inchp.htm http://finance.indiamart.com/taxation/income_tax/tax_Income_house_property.html www.thefinapolis.com/files/humtum15thaug.pdf http://www.simpletaxindia.net/p/income-from-house-property-income-tax.html http://easyitfiling.com/income-tax-returns-filing-online/income-tax-house-property/