House Property PDF

NEERAJ GUPTA CA IPCC TAX CLASSES
INCOME FROM HOUSE PROPERTY
CHAPTER - 4
(Sections 22 to 27)
IMPORTANT SECTIONS TO BE DISCUSSED IN THIS CHAPTER:
Section 22
Income from house property basis of charge
Section 23(1)(a),(b)& (c)
Annual value of let-out property
Section 23(2)(a)
Annual value of self-occupied (residential) property
Section 23(2)(b)
Annual value of a property

employment/ business etc.
Section 23(4)(a)& (b)
Deemed to be let out houses
Section 24
Permissible deductions
Section 24(a)
Standard deduction
Section 24(b)
Deduction for interest on borrowed capital
Section 25
Amount not deductible from income from house property
Section 25A & 25AA
Recovery of unrealised rent
Section 25B
Taxation of Arrears of rent
Section 26
Property owned by co-owners
Section 27
Deemed owner
non-occupied
due
to
Question 1. Explain the concept of Annual Value ?

Ans: As per Section 22 of Income Tax Act, annual value of a house property is taxable under
this head. Property may be let out for residential & commercial purpose.
What is annual value ?- Annual value is the amount for which the property might reasonably
be expected to let during the year. The taxability is not on the rent received, but on the inherent
capacity of house property to receive rental income. Thus here income is taxable on notional
basis.
What is annual value ?
Annual value is the amount
for which the property
might reasonably be
expected to let during the year.
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Assessment Year 2014-15
For sms only 9810139214
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The taxability is
not on the rent received,
but
on the inherent capacity
of house property
to receive rental income.
Thus here income is taxable on notional basis.
Note 1 : This Chapter deals with the rental Income of Buildings whether Residential or
Commercial like : Office, shop, Factory, Godown etc.
Note 2 : Taxation is on the Rental Capacity of the Building not on the rent earned .
Note 3: Annual Value is for one year rent earning capacity of Building.
HOW MUCH A BUILDING CAN EARN BY WAY OF RENT IN ONE YEAR IS ANNUAL
VALUE WHICH IS TAXABLE UNDER THE HEAD INCOME FROM HOUSE
PROPERTY
Steps for computing taxable income from house property (IFHP)
Gross Annual Value (GAV)
(-) Municipal taxes paid by the owner
------------------------------------------------------------------Net Annual Value (NAV)
(-) Deduction u/s 24(a) Std. Ded. @ 30% of +NAV
(-) Deduction u/s 24(b) Interest on housing loan
------------------------------------------------------------------Income from house property (IFHP)
------------------------------------------------------------------All steps discussed above will be covered in detail later on. First try to understand the basic
points:
GAV : In normal case, it is annual rental income from the house property.
MUNICIPAL TAX: It is the house tax paid by owner during the previous year. It is fully
deductible.
STANDARD DEDUCTION: This is deduction for various repair & maintenance expenses of
building.
INTEREST: Interest on loan for purchase, construction, repair etc. is deductible.
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Question 2.
Mr. N G is owner of a flat in Delhi. It is let out @Rs.7,000 p.m. to Bank Officer. Municipal tax
paid by Mr. N G during the year Rs.4,000. Interest paid during the year for a loan to purchase a
house is Rs.20,000. in addition he incurred following expenses :
(i)
(ii)
(iii)
Insurance of the property

Repair expenses for the year
Ground rent
600
4,000
300
Compute taxable income from house property.

Question 3.
Rental income of property
10,000 p.m.
House tax payable for year
15,000 (60% paid by owner and 40% paid by tenant)
Annual repair expense
3,000 Rs.
Interest on housing loan
20,000 Rs.
Annual insurance premium
500 Rs.
Compute income from house property?

Question 4 Explain deduction of municipal taxes from GAV.
Ans: Deduction of municipal taxes
Municipal tax paid during the year is fully deductible, if paid by owner.
Municipal taxes can be :
House Tax
Water Tax
Fire Tax
Education Tax
Scavenging Tax [Cleaning Tax]
Sewage Tax
General Tax
Local Tax
If amount is paid by tenant, the amount is not deductible.
This deduction is on payment basis. Thus, if any portion of municipal tax remains unpaid, it is
not deductible on due basis.
Deduction is available for the municipal tax paid whether for current year, earlier years or
next years.
Municipal tax paid can exceed the GAV. In this case Net Annual Value shall be
negative.
MUNICIPAL TAX PAID BY OWNER IS FULLY DEDUCTIBLE. AMOUNT WHICH IS DUE OR
PAID BY TENANT IS NOT DEDUCTIBLE
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Question 5
Compute NAV in following situations if GAV is Rs. 60,000
(a)
Municipal tax paid by owner is Rs. 6,000.
(b)
Municipal tax paid by owner is 18,000 (including Rs. 12,000 by way of advance)
(c)
Municipal tax paid by owner is Rs. 66,000 (including arrears for last 10 years)
(d)
Municipal tax is paid by owner Rs. 6,000 but later on reimbursed by tenant.
(e)
Municipal tax is paid by tenant Rs. 6,000
(f)
Municipal tax is paid by tenant Rs. 6,000 but later on he get reimbursement from
landlord.
(g)
Municipal tax due is Rs. 6,000
(h)
Municipal tax paid is Rs. 6,000 (including Rs. 2,000 by tenant).
Question 6 Mr. X is owner of a property which is let out @ 3000 p.m. Its annual municipal tax liability
is Rs. 4,000/-. Compute NAV in following assumptions
(a)
Municipal Tax is paid by owner
(b)
Municipal Tax is paid by tenant
(c)
Municipal Tax is outstanding
Question 7: A flat is let out a monthly rent of Rs.5,000 p.m. , housing tax payable for one year
is Rs.6,000. During current year he paid house tax for 11 years, interest on housing loan
Rs.8,000 p.a. Compute income from house property
Question 8: How to compute Gross Annual Value?
Annual value is generally determined taking into account the following factors:
(a) Actual Rent received or receivable by owner;
(b) Municipal value of the property;
(c) Fair rental value;
(d) Standard rent.
Municipal value of the property:
Generally at all places, these days municipalities or municipal corporations
impose house tax
and for that purpose
annual value of the properties is determined.
The rental value so fixed
by these local bodies
is known as municipal value, which forms the basis of annual value.
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Fair rental value / Market rental value :
Rent of similar property
in same or similar locality
is also used
for determining GAV.
Fair rental value of the property depends on the rental value in general prevailing in the same or
similar locality, for the same type of houses. It is certain that no two types of properties are
similar and therefore rents of the two houses are not comparable. Even then the general trend
of rents prevailing is definitely available and forms the basis of the annual value.
Standard rent: This is the rent as per Rent Control Act. If standard rent is fixed for a particular
area, the landlord cannot reasonably expect to receive from a tenant anything more than the
standard rent and the Rent Control Act.
Computation of GAV:
Rule 1
Take higher of Municipal valuation (MV) or market rent (MR) of the property.
Rule 2
Compare higher of the two with Standard rent (SR) & find lower of two figures.
This figure is known as expected rental value (ERV) of the property.
Rule 3
Expected rental value shall be compared with ARV (actual rental value / reduced
actual rental value) & higher of the two is GAV.
SPACE FOR DIAGRAM:
Question 9 Compute GAV in following situations :

(a)
(b)
Market rent
80,000
38,000
Municipal Value
85,000
30,000
Standard rent
83,000
40,000
Actual rent
84,000
36,000
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(c)
63,000
63,000
N.A.
62,000
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Question 10 Compute NAV with the help of following data:

Rs.
Rs. 2,30,000 p.a.
Rs. 2,00,000 p.a
Rs. 2,10,000 p.a.
Rs. 15,000 p.m.
Rs. 16,000 (p.a.)
Market Rent
Municipal Value
Standard Rent
Actual Rent
Municipal tax paid by tenant
Question 11. Compute GAV in following situations:
Market rent
Municipal value
Standard rent
Actual rent
P
1,20,000
1,15,000
1,18,000
1,17,000
Q
8,90,000
7,00,000
9,00,000
8,50,000
R
1,40,000
1,50,000
1,60,000
1,70,000
S
6,80,000
7,00,000
7,30,000
6,50,000
Question 12. Explain provisions relating to Standard Deduction from NAV.

Ans: Standard Deduction u/s 24(a)
This is equal to 30% of positive NAV. Even if actual expenses are less or NIL, full
deduction of 30% of NAV shall be allowed.
If NAV is negative due to excess of municipal tax over GAV then such deduction is not
allowed.
Basically this deduction is allowed to cover repair expenses of house property & similar
other expenses like Insurance premium, Annual Charge, ground rent, land revenue,
depreciation of the building etc.
STANDARD DEDUCTION = 30% OF POSITIVE NAV. NO STANDARD DEDUCTION IF NAV

IS NIL OR NEGATIVE.
Question 13 Compute IFHP with the help of following data
(a)
Annual rental value
Rs.60,000
(b)
Municipal tax due
Rs. 7,000
(c)
Annual repair expenses
Rs. 3,000
(d)
Insurance Premium Paid
Rs.
(e)
Annual Charges due
Rs. 3,000
(f)
Ground rent paid
Rs.
100
(g)
Land revenue due
Rs.
300
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500
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Question 14: Compute IFHP with the help of following data

(a)
(b)
(c)
(d)
(e)
(f)
MV Rs 89,000
FR Rs 90,000
SR NA
AR Rs 92,000
Municipal tax paid by owner Rs 12,000
Interest on borrowed capital Rs 14,000
Question 15 Compute IFHP with the help of following data

(a)
(b)
(c)
(d)
(e)
(f)
MV Rs 40,000
FR Rs 50,000
SR Rs 42,000
AR Rs 40,000
Municipal tax paid including arrears Rs 45,000
Interest on borrowed capital Rs 8,000
Question 16: Discuss the impact of non-receipt of rent from tenant i.e. unrealized rent.
Ans:
TREATMENT OF UNREALIZED RENT
Unrealized rent
is the rent
which could not be recovered
from the tenant
inspite of legal efforts by assessee.
In this situation while computing GAV, ARV is reduced to the extent of unrealized rent.
Actual rental value
(-) unrealized rent
-----------------------------Reduced actual rental value
In such cases of unrealized rent, GAV is higher of ERV & Reduced ARV.
Note: only current years unrealized rent is deductible. Unrealized rent of last years is not
deductible.
UNREALISED RENT OF CURRENT YEAR IS DEDUCTIBLE AGAINST ACTUAL RENTAL
VALUE
Question 17
Compute GAV in following cases
Owner
ERV (p.a.)
Actual rent (p.m.)
Unrealized rent
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Mr. X
70,000
6,000
5,000
Mr. Y
65,000
7,000
6,000
Mr. Z
80,000
6,000
3,000
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Question 18
Compute GAV with the help of following data:
ERV
Rs.1,60,000
ARV
Rs.15,000 p.m.
Unrealized rent of current year
Rs.15,000
Unrealized rent of last year
Rs.10,000
Question 19 : Compute NAV with the following data:

1)
2)
3)
4)
5)
6)
MV : Rs 99,000
FR : Rs 90,000
SR : Rs 89,000
AR : Rs 8,000 pm
UR : Rs 4,000
Municipal Tax paid : Rs 8000

1)
2)
3)
4)
5)
6)
MV : Rs 30,000
FR : Rs 34,000
SR : Rs 35,000
AR : Rs 2,500 pm
UR : Rs 3,000
Municipal Tax paid : Rs 1000

1)
2)
3)
4)
5)
6)
MV : Rs 66,000
FR : Rs 70,000
SR : NA
AR : Rs 6,000 pm
UR : Rs 8,000
Municipal Tax due : Rs 6500
Question 22 : What are the conditions which should be fulfilled in order to be eligible for
deduction of unrealized rent.
Ans: Conditions for claiming deduction of unrealized rent: Rule 4 of income tax rules
It may so happen that a tenant has defaulted in payment of rent due to the assessee. In such a
case, if the assessee is able to prove that the rent due from the tenant has become
irrecoverable, the unrealized rent will be allowed as a deduction provided the following
conditions mentioned in Rule -4 are satisfied:
a)
The tenancy is bonafide;
b)
The defaulting tenant has vacated, or steps have been taken to compel him to vacate
the property;
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c)
The defaulting tenant is not in occupations 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 proceeding would
be useless;
Question 23. Compute GAV with the help of following data

Owner
Mr. X
Mr. Y
ERV
1,00,000
33,000
ARV
1,05,000
32,000
Unrealized rent
12,000
5,000
Mr. Z
67,000
72,000
3,000
Question 24 : What is the impact on computation of GAV if property remains vacant for some
part of the year.
Ans: Vacancy allowance [Deduction for loss due to vacancy]
IF LET OUT PROPERTY IS VACANT FOR SOME PART OF THE YEAR:
Taxable GAV = GAV [as per rules discussed above] (-) Vacancy allowance
Vacancy allowance = Actual rental value p.m. X Vacant months
VACANCY ALLOWANCE DEDUCTION IS LAST STEP FOR COMPUTING TAXABLE GAV
ERV (p.a.)
ARV (p.m.)
Vacancy
Municipal tax paid
Mr. A
1,00,000
8,000
2 months
7,000
Mr. B
80,000
7,000
1 month
4,000
Mr. C
60,000
5,000
2.5 months
3,500
ERV (p.a.)
ARV (p.m.)
Vacancy
Municipal tax paid
Mr. P
1,50,000
12,000
5 months
11,000
Mr. Q
1,30,000
13,000
2 months
1,18,000
Mr. R
4,00,000
30,000
7 months
32,000
Question 27 Mr. B is owner of a building having three floors. Ground floor is let out @7,000
p.m. Other floors are let out @6000 p.m. each. Expected rental value of the property is
Rs.3,00,000. Municipal taxes paid during current year is Rs.15,000. Ist floor of the house is
vacant for one month & Ground floor is vacant for 2 months. Compute NAV.
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Question 28 N G has a house property situated in Mumbai, which has two units. Unit I has a
floor area of 70% whereas the Unit II has a floor area of 30%. Both the units were self-occupied
by the assessee. As the assessee was allowed a rent-free accommodation by his employer
w.e.f. 1.4.2013, he vacated and let out Unit I at a rent of Rs. 11,000 p.m. Unit II was let out for
Rs. 4,000 p.m. Unit I remained vacant for 1 months, whereas Unit II was vacant for March
2013. Other particulars of the house property are as under :
Municipal valuation
Fair rent
Standard rent
Municipal taxes paid
Ground rent due
Rs.
1,50,000
1,70,000
1,60,000
30,000
10,000
Compute income from house property for the assessment year 2014-15.
Question 29 : Compute IFHP with the following data:
1)
2)
3)
4)
5)
6)
7)
MV : Rs 1,40,000
FR : Rs 1,90,000
SR : Rs 1,89,000
AR : Rs 16,000 pm
UR : Rs 4,000
Vacancy: 1.5 months
Municipal Tax paid : Rs 18,000
Question 30 : Compute IFHP with the following data:

1)
2)
3)
4)
5)
6)
7)
8)
MV : Rs 2,00,000
FR : Rs 2,50,000
SR : Rs 2,60,000
AR : Rs 20,000 pm
UR : Rs 10,000
Vacancy: 3 months
Municipal Tax due : Rs 11,300
Interest on housing Loan: Rs 23,000
Question 31 : What is the treatment if property is vacant throughout the year.

Ans: Property is vacant throughout the year
(a)
owner does not want to let out:- In this situation house property shall be taxable & ERV
shall be taken as GAV. All other provisions shall apply in normal way.
(b)
Suitable tenant is not available:- In this situation GAV shall be taken as NIL provided
assessing officer is satisfied about the fact that a suitable tenant is not available in this
case.
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Question 32 Mr. A is working with a MNC. He is owner of a DDA flat in Rohini. The house is
vacant throughout the year as the owner does not want to let out the property. If let, the
property can fetch a rent of Rs.3,500 p.m. Municipal taxes (Rs.3,000) are duly paid by him.
Whether he is taxable under Income Tax Act for this vacant house. If yes, compute his taxable
IFHP.
Question 32 Mr. D is owner of a showroom on the Main Road of Pitampura. He wants to let
out the property but inspite of reasonable efforts a suitable tenant is not available throughout the
year. Market rent of the property is Rs.25,000 p.m. Municipal valuation is Rs.2,30,000 p.a.
Municipal taxes paid during the year is Rs.40,000. Compute NAV.
Question 33 Compute IFHP with the help of following data:
Market rent
1,30,000 p.a.
Standard rent
1,35,000 p.a.
Municipal value
1,18,000 p.a.
Actual rent
12,000 p.m.
Unrealised rent
5,000
Vacancy
1.5 months
Local taxes paid
6,000
Interest on housing loan
15,000
Does it make any difference if tenant is using the property for commercial purpose.
Question 34. Compute income from house property.
ERV
2,00,000
ARV
16,000pm
Unrealized rent for current year
5,000
Vacancy
1.5 months
Municipal tax
11,000
Question 35 : How will you deal with change of rent in computation of NAV.
Ans: TREATMENT OF CHANGE OF RENT DURING THE YEAR
In this situation, Annual rental value & loss due to vacancy is calculated on the basis of average
rental value calculated as follows:
Average rental value:
Rent received
Let out months
Question 36 Compute IFHP with the help of following information:
Municipal value
:
Rs.56,000 p.a.
Fair rent
:
Rs.66,000 p.a.
Rent as per Rent Control Act
:
Rs.55,000 p.a.
Actual rent
:
April July Rs. 4,000 p.m.
Oct March Rs. 6,000 p.m
Vacancy
:
Aug & September
Fire & water tax paid to Municipality Rs.4000/- Fire insurance Premium paid Rs.3,000/Question 37 Mr. A is owner of a flat having ERV of Rs.30,000 p.a. Actual rent from April
October is 2,000 p.m. For the month of Nov & December the flat is vacant. From Ist January
the flat is again let out @3,000 p.m. As per rent agreement, tenant is liable for municipal tax &
so an amount of Rs.1200/- is duly paid during the year. Compute NAV.
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Question 38: How to compute NAV if property is purchased in current financial year or is sold in
the current year.
Ans: SALE / PURCHASE OF PROPERTY DURING THE YEAR
In this situation, ERV is calculated for ownership months. ARV is also calculated for ownership
months. If there is any vacancy then it shall be adjusted before computing taxable GAV.
Question 39 Mr. A purchased a property on 1/7/2013 & let out w.e.f. 1/8/2013 @5000 p.m.
ERV of property is Rs.66,000 p.a. Municipal tax paid during the year is Rs.3,000. Compute
NAV.
Question 40 Mr. A purchased a property on 1/6/13 from Mr. B. The property is let out w.e.f.
1/9/13 @15,000 p.m. ERV of property is Rs.2,10,000 p.a. Local taxes paid Rs.13,000.
Unrealised rent is Rs.10,000. Compute IFHP for Mr. A for assessment year 2014 15.
Question 41: Explain the treatment of composite rent.
Ans :CONCEPT OF COMPOSITE RENT
In this situation the composite rent is divided in two categories:
One: the rent of building which is considered for calculating ARV.
Two: the rent of facilities like electricity, food, cloth washing, guard, cable tv expenses etc which
is considered for calculating Income from other source.
If rent can not be disintegrated then total rent shall be treated in the chapter of IFOS like e.g.
paying guest accommodation, renting of hospital, cinema hall etc.
The test to determine the above concept is that if building is capable of being let out without
attached furniture, machines & facilities then the rent charged shall be disintegrated. If this is not
the case, then the rent shall be treated like business receipts or Income from other sources.
Question 42 A building in Rohini is let out @6000 p.m. (including 1,000 p.m. for facilities of
electricity & water). ERV of building is Rs. 54,000 p.a. The following expenses are incurred
during the year:
Municipal tax
Rs.2,500
Electricity bills
Rs.6,000
Water bills
Rs.2,100
Repair expense
Rs.4,000
Compute IFHP & IFOS.
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Question 43: Can Income from house property be a negative figure ? If yes, explain its
treatment in the Income tax law.
Ans : Treatment of loss
As per Sec 70 & 71 of Income tax Act:
If the IFHP is negative,
it will first be adjusted
against
other positive incomes
under the same head,
i.e.
it will first be adjusted
against other positive incomes of house property
OF THE SAME YEAR
and
if the loss can not be fully adjusted
then
balance will be adjusted against other incomes
under other heads of income
like salary income, business income etc.
OF THE SAME YEAR
CARRY FORWARD OF LOSS SECTION 71B
If,
still some amount is left to be adjusted,
then
it is carried forward
for next years
to be adjusted against house property income only.
It means during the current year of loss,
the house property losses can be adjusted against other heads of income,
but during subsequent years [maximum 8 years]
it can be adjusted only against house property incomes.
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Question 44 Compute Net Income with the help of following data:

IFHP (I)
35,000
IFHP (II)
(-) 80,000
Business Income
1,40,000
Question 45 : Compute Net income with the help of following data for Assessment year
2014-15
IFHP (I)
Rs 90,000
IFHP (II)
(-)Rs 2,00,000
Salary income
Rs 78,000
Upto which assessment year this loss can be carried forward.
Question 46:
IFHP
Rs 67,000
Business income
Rs 79,000
Loss from house property (-) Rs 23,000 [Assessment Year 2002-03]

Loss from House Property (-) Rs 85,000 [Assessment year 2010-11]
Compute net income for assessment year 2014-15.
Question 47: Explain provisions relating to interest on borrowed capital.
Ans;Interest on borrowed capital [24(b)]:
Interest on loan
taken for the purpose of
purchasing,
constructing,
reconstructing or
repairing the house property
is allowable as a deduction
on due basis.
Due basis means Interest for Current Financial year whether it is paid or outstanding.
Interest on unpaid interest is not deductible.
If capital is borrowed for the purpose of purchasing a plot of land, interest liability is
deductible even if construction is financed out of own funds.
Interest on a fresh loan raised merely to repay the original loan taken for the above
purposes is allowable as a deduction under this section. [Circular no. 28, dated 20/8/1969].
This rule is applicable even if the first loan was interest free loan.
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Interest paid on outstanding amount of sale purchase transaction is deductible. Similarly if

property is taken on installment, interest portion of the installment is deductible.
Brokerage or commission paid for arranging the loan is not deductible.
SECTION 25
If interest is payable outside India

then it must be paid
after TDS
as per the requirement of Section 25 of Income Tax Act,
otherwise
the deduction shall not be allowed.
Interest for Pre- construction / Acquisition period

In very simple terms it means the interest for the period prior to the year of purchase /
completion of construction.
This interest is allowed as deduction
in five equal annual installments
starting from the year of completion of construction / purchase.
For example, if interest for pre construction period is Rs 40,000/- , the deduction shall be Rs
8,000 p.a. for five years. The first year in which deduction shall be allowed will be the year in
which construction is complete. Even if construction is complete in the middle of the year say in
july or November etc. or in extreme case on 31st March of any previous year, first installment
shall be deductible in the year of completion of construction or acquisition.
The period starts from the date of loan and ends on earlier of the two dates:
1.
The date of refund of loan
2.
31st March immediately preceding the date of completion of construction
For example if construction ends on 31st July 2012, the pre construction period shall end on 31st
March, 2012. If construction ends on 31st Mar 2012, then the pre construction period shall end
on 31st March 2011.
If Construction is completed in the year of loan then Pre-Construction Period does not
exist.
Special note: if property is sold, within 5 years of installment, then for balance years, the
deduction shall not be allowed.
Question 48 Mr. N G took a loan of Rs. 2,00,000 @ 15% p.a. for repair of a house property on
1.5.2011. How much is deduction allowed u/s 24 (b) if following amounts are paid as Interest
during financial year 2013-14 is :
(a)
Rs. 30,000
(b)
Rs. 90,000 (including arrears for last 2 years)
(c)
Rs. 60,000 (including advance for next year)
(d)
Rs. 12,000
(e)
Nil
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Question 49 Is there any restriction u/s 24 (b) that housing loan cannot be taken from friends,
relatives or private financing companies.
Question 50 Compute Deduction u/s 24 (b) with the help of following data for financial year
2013-14 :
Date of loan for repair of house
1.11.2011
Amount of loan and Interest
Rs. 2,00,000 @ 18% p.a.
Date of refund
(a)
31.5.2013
(b)
31.1.2014
(c)
31.3.2014
(d)
31.5.2014
(e)
31.1.2013
(f)
No refund
Question 51 Whether concept of PCP Installments is applicable to repair/ renovation Loans.

Question 52 Compute Deduction u/s 24(b) with the help of following data for financial year
2013-14 :
Date of loan
1.6.2010
Date of completion of construction
31.5.2012
Date of refund
30.6.2013
Amount of loan
Rs. 1,00,000 @ 12% p.a.
2013-14 :
Date of loan
1.1.2011
3.4.2013
Date of refund
No refund till date
Amount of loan
Rs. 1,50,000 @ 12% p.a.
Question 54
Compute Deduction u/s 24(b) with the help of following data for financial year 2013-14 :
Date of loan
1.8.2010
31.8.2013
Date of refund
31.1.2013
Amount of loan
Rs. 3,00,000 @ 10% p.a.
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Question 55
Date of loan
1.4.2010
31.3.2013
Date of refund
31.7.2011
Amount of loan
Rs. 2,00,000 @ 12% p.a.
Question 56
Date of loan
1.5.2006
31.3.2009
Date of refund
30.9.2013
Amount of loan
Rs. 1,00,000 @ 12% p.a.
2013-14 :
Date of loan
10.4.2011
25.3.2012
Date of refund
31.1.2013
Amount of loan
Rs. 1,75,000 @ 16% p.a.
Question 58 Compute Income from house property with the help of following data :
Annual Municipal value
Fair rental value
Standard rent
Actual rent
Unrealised rent
Municipal taxes paid @ 11%
Loan for construction
Date of loan
Date of completion
Date of refund
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Rs. 2,00,000 p.a.

Rs. 2,28,000 p.a.
Rs. 2,30,000 p.a.
Rs. 20,000 p.m.
Rs. 18,000
Rs. 5,00,000 @ 12% p.a.
1.6.2011
31.5.2012
31.10.2013
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Question 59 : Explain the tax treatment under the head Income from House Property relating
to self occupied houses.
Ans: Steps for computing taxable value of Self-occupied house property SECTION
23(2)(a)
As per Section 23(2)(a),
the NAV of such house is taken as NIL.
That means in this case, municipal tax paid by landlord is to be ignored.
From NAV [which is already NIL]
only one deduction of section 24 is allowed and that is
interest on borrowed capital deduction u/s 24(b)
subject to a maximum limit of Rs 1,50,000.
This limit has been raised to Rs 1,50,000
where the property is acquired with capital borrowed
on or after April 1, 1999
and
such acquisition or construction is completed
within 3 years
from the end of the financial year
in which loan is taken.
Moreover, the person (bank etc.) extending the loan
certifies that such interest is payable in above respect
In following situations, the limit is Rs. 30,000 only:
Loan is taken before 1/4/99
Loan is taken for repair / renovation (even after 1/4/99)
Construction is not complete in three years
Required certificate is not produced.
Income from house property in this situation shall be negative. Treatment of loss is same as
already discussed.
The tax-concession applies only to individual and HUF. Thus, where a firm uses its
building for the residence of its partners, it cannot claim to have occupied the building for
its residence. Annual value of such houses cannot be taken to be nil u/s 23(2)(a).[ CIT v.
Diwan Chand Dholan Das]
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Tax concession is available only when the house is occupied in the capacity of owner.
Thus when the house is occupied in the capacity of tenant the concession is not
available. For example, such exemption is not available in case of self-lease
transactions.(D.R. Sunderraj v. CIT)
In assessee has only one house, and that is let out, then no exemption is available.
Question 60
Mr. N is owner of a house property, which is self occupied for his residential purpose during the
financial year 2013-14. Market rental value of the house is Rs. 4,50,000 p.a. Municipal tax paid
during the year is 6,500. Earlier during 2010-11, he took a loan of Rs. 80,000 @ 12% p.a. for
construction of property on 1.8.2010. Construction is complete on 31.8.2012 but loan is still
outstanding. Compute Income from house property for assessment year 2014-15.
Question 61: Mr A purchased a house on 1.2.2011 for residential purpose. He took a loan of
Rs 25 lacs @ 9% p.a. from SBI. Loan is refunded on 31st Jan, 2015. He is working with PNB at
a salary for 40,000 pm. Compute his net income for the assessment year 2014-15.
Question 62
Mr N is residing in a house in Rohini since 1998. He took a repair loan of Rs 4 lacs @ 11% from
HDFC. His business income for the year is Rs 5,00,000. Compute his net income for
assessment year 2014-15.
Question 63
Mr A took a loan of Rs 5,00,000 @ 12% from Bank of India for construction of his residential
house on 1.1.2009. The construction is complete on 30.4.2012. The loan is refunded on
30.6.2013. Compute IFHP for assessment year 2014-15.
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Question 64: If assessee has to reside in a house not belonging to him due to his
business/employment in a city other then the city in which he is having a residential house, then
what is the treatment of that residential house..
Ans :
Steps for computing taxable value of self-occupied house remaining vacant due to
employment.[Section 23(2)(b)]
If the property consists of one residential house
which cannot actually be occupied by the owner
due to his employment, business or profession carried on at any other place, and
he has to reside at that other place
in a house not belonging to him,
the annual value of that property
which remained vacant
shall be NIL,
provided the property is not actually let out
and no other benefit from the same is derived by the owner.
As per Section 23(2)(b), the NAV of such house is taken as NIL. That means in this
case, municipal tax paid by landlord is to be ignored.
The reason for staying in other house must be employment and not personal
convenience. For example, where the assessee owns only one residential house but
lives in the same town in a house owned by his father for the sake of personal
convenience no relief can be allowed to him for keeping his house
vacant.(Shikharchand Jain v CIT)
Where an official has to reside in official residence as a constitutional obligation and,

therefore, his own residential house is kept vacant for self-occupancy, the benefit of
Section 23(2)(b) would apply [ CIT v. Justice Avadh Bihari Rohtagi]
If benefit is applicable, all provisions of section 23(2) (a) shall apply. Means NAV shall be
taken as NIL, municipal tax ignored, limit for interest on housing loan etc.
Question 65
Discuss whether true or false with reasons.
(a)
Benefit of section 23 (2) (b) can be claimed for more than one property
(b)
Benefit of section 23 (2) (a) and 23(2) (b) can be claimed in same year for two separate
properties.
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Situation: Property is given free of rent to Friends/ relatives ?

Question 66 Mr. N is owner of a flat in Delhi, which is vacant as he is working in Mathura. He
allowed one of his friend to occupy the flat for residential purpose without any rent. Municipal tax
paid by N is Rs. 4,500. ERV of flat is Rs. 50,000 p.a. Interest on housing loan is Rs. 8,000.
Compute Income from House Property. What shall be your answer in above question if house is
allowed to any of his relative for residential purpose.
Question 67: What is the concept of Deemed Let Out properties in Income Tax Act.
Steps of computing taxable Income from house property of a DEEMED LET OUT
PROPERTY [Section 23(4)
If there are more than one residential house, which are in the occupation of the owner for his
residential purposes then he may exercise an option to treat any one of the houses to be selfoccupied. The other house(s) will be deemed to be let out house properties. The decision
should be able to reduce the tax liability.
Step 1 Computation of Gross Annual Value
Step 2 Deduction of municipal taxes paid by the owner
Step 3 Balancing figure is Net annual value.
Step 4 From NAV allow deductions of Section 24
Step 5 Balancing figure is Taxable income from house property of a DEEMED LET OUT
PROPERTY.
Step 1 Computation of GAV:
Here GAV = expected rental value of the property [ERV].
Note: Vacancy allowance cannot be allowed in case of such properties. Obviously no question
of unrealized rent also.
Step 2 Deduction of municipal taxes
Municipal tax paid during the year is fully deductible, if paid by owner. Municipal tax may belong
to current year or any earlier year / forthcoming years.
Step 3 Computation of NAV
After deduction of municipal tax from GAV, the balancing figure is NAV. If municipal taxes paid
during the year exceed GAV, NAV shall be negative.
Step 4 Deduction u/s 24
From NAV, following deductions are allowed. After allowing these deductions, the balancing
figure is
Income from house property [IFHP].
1. Standard Deduction [Section 24(a)]:-
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2. Interest on borrowed capital [24(b)]:For those houses which are treated like Deemed Let out houses, interest on borrowed capital is
fully deductible i.e. ceiling of Rs. 30,000 / 150,000 will not be applicable in this case.
Step 5 Computation of taxable IFHP
After deducting the above deductions from NAV, the resultant figure is taxable income
from house property. This figure can also be negative. Treatment of loss is same as
already discussed.
Question 68 Compute Income from House property with the help of following data. All the
houses are self occupied.
House II
House III
House I
ERV
90,000
2,50,000
1,45,000
Municipal tax paid
7,000
22,000
10,000
24 (b)
18,000
33,000
31,000
[Loan in 97]
Vacancy
2 months
1 month
3 months
Question 69 Compute Income from House Property with the help of following data. All the
houses are self occupied.
House I
House II
House III
S/o
S/o
S/o
ERV
1,60,000
1,58,000
1,61,000
Municipal tax paid
11,000
12,000
13,000
24 (b)
38,000
36,000
37,000
[Loan in 1998]
Question 70 X owns three house properties, which are situated in three different cities. All the
house properties are meant for self-occupation of the assessee. The particulars of the house
properties are as under :
Municipal valuation
Fair rent
Standard rent
Municipal taxes paid
Interest on money borrowed
(for repair of house property)
Ground rent due
Land revenue due
Property A Property B Property C

1,00,000
1,20,000
1,40,000
1,40,000
1,50,000
1,60,000
1,30,000
1,60,000
1,50,000
30,000
20,000
80,000
35,000
5,000
--
20,000
-6,000
15,000
8,000
--
Compute the income under the head House Property by making assumption in such a manner
that the tax liability of X is minimum.
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Question 71: Explain a situation when part of property is let out and other part is being used for
business purposes of assessee.
Ans: PROPERTY WHICH IS PARTIALLY LET OUT & PARTIALLY USED FOR BUSINESS
PURPOSE
In this situation, that portion of the property which is partially being used for business purpose
shall be covered by chapter Profits & Gains from business & profession. Property related
expenses shall be deducted as per section 28 to 44D of the Income tax Act.
While computing taxable business income, following expenses shall be mainly deductible on
proportionate basis (it means for example if business is being done in 40% of building, then
house tax, repair etc. shall be deductible against business receipts to the extent of 40%):
(1) repair & maintenance expenses (paid /due)
(2) municipal tax (paid )
(3) Insurance premium against property (paid)
(4) Ground rent (paid /due)
(5) Land revenue (paid)
(6) Depreciation
(7) Interest on housing loan (paid /due)
(8) Interest on loan taken for furnishing building or for payment of municipal tax (paid /due)
(9) Any other expense directly connected with building (paid /due)
NOTE: Annual charge is a personal obligation hence not deductible. For example, Mr A
transferred a property to Mr B, his son, on the condition that he will give say Rs 5000 pm to his
mother till her life. Now this is a personal obligation created and hence not deductible.
In HP head, no expenses is deductible as all are deemed covered by standard deduction.
In BP head, no expenses of personal nature are allowed as deduction.
Question 72. Compute Net Income with the help of following informations:
(1)
70% portion of the Building is let out @ 7,000 pm.
(2)
30% portion of the building is used for professional purpose of assessee.
(3)
Expenses incurred during the year
(4)
Municipal tax paid
Rs. 10,000
Insurance Premium Paid
Rs.
2,000
Annual charges paid
Rs.
4,000
Ground rent due
Rs.
2,000
Land revenue due

Interest on loan for purchase of property
:
:
Rs.
500
Rs. 20,000
Interest on loan for payment of municipal tax:
Rs.
1,500
Depreciation of building
Rs.
8,000
Gross Business Income
Rs.1,60,000
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Question 73: Compute Net Income with the help of following informations:
Self-Occupied 2/3 portion
Business use 1/3 portion
Expenses
Municipal tax paid
15,000
4,800
Repair expenses due
Insurance Premium due
1,000
Interest on housing loan due
66,000
Dep. (Business portion)
4,200
Gross Business Income
85,000
Housing loan is taken on 1.08.2003 for repair of property
Question 74: What is the treatment if some floor of property is self occupied for residential
purpose and other portion is let out.
Ans: PROPERTY WHICH IS PARTIALLY SELF OCCUPIED & PARTIALLY LET OUT
In this situation, if part of the property is self occupied throughout the year, it shall be exempt &
provisions of section 23(2)(a) shall apply. For let out portion also, normal provisions shall apply.
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 first floor is let out or viceversa, 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 floor 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.
Question 75 3/4th portion of a building is self-occupied & balance portion is let out @2,500 p.m.
Annual municipal value of the property is Rs.1,28,000 p.a. Municipal taxes payable @15% p.a.
During current year he paid house taxes as follows.
Rs.19,200
For current year
Rs.8,000
For last year
Rs.6,000
For next year
Interest on loan for furniture of house is Rs.15,000. Compute IFHP.

Question 76 : What is the treatment if property is self occupied for some part of the year and let
out for some other part of the year.
Ans: Self occupied for part of the year & let out for other portion
If same property is both self occupied for part of the year as well as let out for other part of the
year, then property shall be taxable as if it is let out. In this situation ERV of 12 months shall be
compared with actual rental value of let out months to find out GAV.
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Question 77: Compute IFHP

Self occupied 4 months
Let out - 8 months @ 7000 p.m.
ERV 70,000 p.a.
M tax paid for the year Rs.5,000
Interest on housing loan Rs.31,000
Question 78 : Compute IFHP
MV : Rs 80,000
MR : Rs 90,000
SR : Rs 76,000
AR : Rs 7,000 pm
Let out : 7 months
Vacant : 1 month
Self occupied : 4 months
UR : Rs 8000
Municipal tax Paid: Rs 9000
Interest on Housing Loan: Rs 11,000
Question 79: How will you treat the recovery of unrealized rent.
Ans: Subsequent recovery of unrealised rent (Section 25A):
Applicable if deduction has been claimed in assessment year 2001 02 & earlier years
Where a deduction has been claimed
and allowed to the assessee
in respect of unrealised rent
and subsequently
the assessee realises any amount
in respect of such rent,
the amounts so realised
shall be deemed to be income chargeable under the head Income from house property
in the year of recovery
No deductions, whatsoever, will be allowed to the assessee for any expenses incurred for
recovery of such unrealised rent.
So, litigation expenses shall be ignored. Deductions of Sec 24 are also ignored.
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Only un-adjusted unrealised rent is deductible from recovered amount.

Un adjusted unrealised rent means that amount which was not allowed as deduction
earlier.
If recovery is less then this un adjusted unrealised rent, then nothing is deductible in current
year, because, unrealised rent deduction is allowed in current year only. Unrealised rent of
earlier years is ignored.
Interest on unrealised rent is income from other source.
The recovery amount is taxable as IFHP even if assessee is not the owner of that property
in the year of recovery.
Question 80.
(a)
Compute IFHP
ERV
Rs.60,000 p.a.
ARV
Rs.6,000 p.m.
Rs.15,000
Municipal tax paid
Rs.7,000
During financial year 1998 1999, owner claimed deduction for unrealized rent of Rs.20,000.
Deduction allowed so far is only Rs.11,000. In the current year owner recovered Rs.17,000
from defaulting tenant as full & final settlement. A legal expense on recovery is 2,200.
(b)
How will you treat if recovery is only Rs.8,000.
Question 81: For the assessment year 1999-2000, X claims a deduction of Rs 70,000 on
account of unrealized rent and the same is allowed by the Assessing Officer. On Jan 14, 2014,
he recovers Rs 50,000 from the defaulting tenant (expenses on recovery is Rs 17,000). What
will be the tax treatment.
Question 82: A owns a property which is given on rent. For the previous year 1998-99, he
claims a deduction of Rs 90,000 on account of unrealized rent, out of which the Assessing
officer allows only Rs 80,000 as deduction. What are the tax consequences if A recovers on
Aug 23, 2013 from the defaulting tenant (a) Rs 8700 (b) Rs 56,000 (c) Rs 90,000 as full and
final payment ?
Question 83 Discuss treatment of recovery of unrealized if assessee has already sold the
property. Also explain the situation where assessee has won the case against tenant on 25th
March 2013 but the amount is received on 10th April, 2013.
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Section 25AA - Recovery of unrealised rent of previous year 2001- 02 onwards in

subsequent years
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.
No deductions, whatsoever, will be allowed to the assessee for any expenses incurred for
recovery of such unrealised rent.
So, litigation expenses shall be ignored.
Only un-adjusted unrealised rent is deductible from recovered amount.
Un adjusted unrealised rent u/s 25AA is calculated as per following rules
(1) first we will find out how much actual deduction of unrealised rent can be claimed
in the year of unrealised rent.
(2) This is calculated as follows:
GAV (ignoring unrealised rent)
(-)
GAV (considering unrealised rent)
---------------------------------------------the actual deduction of unrealised rent
----------------------------------------------for example if ERV is Rs 1,00,000; ARV is Rs 9,000 pm. and unrealised rent is Rs
15,000, then GAV comes to Rs 1,00,000 (after considering unrealised rent). If we ignore
unrealised rent, then GAV is Rs 1,08,000. So the actual deduction of unrealised rent is only
Rs 8,000 {1,08,000 (-) 1,00,000}.
(3) Unrealised rent less the actual deduction of unrealised rent is the amount of unadjusted unrealised rent. Like in above example, the unrealised rent is Rs 15,000
and actual deduction of unrealised rent is Rs 8,000; so the un-adjusted amount is Rs
7,000.
If recovery is less then this un-adjusted unrealised rent, then nothing is deductible in current
year, because, unrealised rent deduction is allowed in current year only. Unrealised rent of
earlier years is ignored.
Interest on unrealised rent is income from other source.
The recovery amount is taxable as IFHP even if assessee is not the owner of that property
in the year of recovery.
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Question 84 Compute IFHP for assessment year 2013 14 & 2014 15.
A property is let out during financial year 2012 13 with following details
ERV
Rs.60,000 p.a.
ARV
Rs.6,000 p.m.
Rs.25,000
Municipal tax paid
Rs.7,000
In 2013 -14, the property is let out @ Rs 6,500 pm. ERV Rs 64,000 & municipal tax paid Rs
7,500. In Oct 2013 owner recovered Rs.17,000 from defaulting tenant as full & final settlement.
Legal expenses on recovery is 2,200.
(b)
How will you treat if recovery is only Rs.8,000.
Question 85: Compute IFHP for assessment year 2013-14 & 2014-15
MV Rs 1,00,000
FR Rs 1,20,000
SR Rs 1,10,000
AR Rs 10,000 pm
UR Rs 50,000 (previous year 2012-13)
UR NIL (previous year 2013-14)
Recovery of UR on 10th Nov 2013 : Rs 36,000
Municipal Tax paid: 15%
Question 86 : Compute IFHP for assessment year 2013-14 & 2014-15
MV Rs 2,00,000
FR Rs 2,20,000
SR Rs 2,40,000
AR Rs 20,000 pm
UR Rs 60,000 (previous year 2012-13)
UR NIL (previous year 2013-14)
Recovery of UR on 19th Oct 2013 : Rs 56,000
Municipal Tax paid: 15%
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Question 87 : How will you treat the taxation of arrears of rent.

Ans: Taxation of arrears of rent [not taxed earlier] Section 25B
Section 25B provides as follows The taxpayer has received any amount,
by way of arrears of rent
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.
It is taxable in the previous year in which it is received.
It is taxable even if the assessee is not the owner of that property in that year.
Amount not taxed earlier shall be : (the calculations should be done in working note)
GAV with new rent
(-)
GAV with old rent
------------------------------=
amount not taxed earlier
(-)
std ded. @ 30% of amount not taxed earlier
------------------------------taxable u/s 25B
==================
Question 88
A property is let out @ 5000 p.m. since 1.04.2011.
ERV (2011 12)
Rs.70,000 p.a.
ERV (2012 13)
Rs.78,000 p.a.
ERV (2013 14)
Rs.85,000 p.a.
The rent is increased to Rs.7,000 p.m. w.e.f. 1/4/11. Increased rent (Arrears) of Rs.48,000 is
received on 1/4/2013. Municipal tax paid during 2013 14 is Rs.5,000. Compute IFHP.
Question 89: Compute IFHP for Assessment year 2013-14 & 2014-15
MV : Rs 2,50,000
FR : Rs 2,80,000
SR : Rs 2,40,000
AR : Rs 18,000 pm
Municipal tax paid : Rs 30,000
Interest on housing Loan : Rs 29,000
On 1/4/2013 rent is increased with retrospective effect from 1/4/12 to Rs 25,000 pm. Arrears
duly received on 1/4/2013.
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THEORY PORTION OF THE CHAPTER

Question 90: Explain the concept of annual value ?
Ans: As per Section 22 of Income Tax Act, annual value of a house property is taxable under
this head.
What is annual value ?- Annual value is the amount for which the property might reasonably
be expected to let during the year. The taxability is not on the rent received, but on the inherent
capacity of house property to receive rental income. Thus here income is taxable on notional
basis.
Question 91: What are the essential conditions to be satisfied for taxable under the head
Income from House Property.
Ans: ESSENTIAL CONDITIONS FOR TAXABLE INCOME UNDER THIS HEAD
(1) Property must consist of any buildings
with or without adjoining lands
e.g. garden, garage etc.
In case of non-residential building, car parking, cycle stand, drying ground, washing taps etc.
are examples of adjoining lands.
Land, which is not adjoining, to any building is not covered by this section.
Rental income of such land is taxable under the head income from other source.
WHAT IS BUILDING:- The term is not defined in the Income tax Act. As per general
meaning it means a permanent structure built of Bricks and/or stones, constructed for a
useful purpose, which may or may not have the roof.
Thus roof is not always necessary, although it is necessary for a residential

building.
Stadiums & swimming pools dont have any roof, but still they can be treated as
building.
A house under construction, incapable of being let out, is not covered.
Building here does not mean residential House property only, hence if structure
is a factory or office or godown, rental income is taxable under this head only.
(2) Assessee must be the owner of the property:- It is only the owner of the house property,
who is liable to pay tax, under this head of income.

Thus where a person is himself a tenant & and if he further let out this property (i.e. subletting)
,he is not taxable under this head but under the head Income from other source, as he is not the
owner of the property.
Ownership includes legal ownership as well as deemed ownership.
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DEEMED OWNERS [Section 27]: The following are deemed to be the owners of the property:
(I)
Property gifted in family
An individual
who transfers
any house property
to his or her spouse,
or to his minor child,
shall be deemed to be the owner of the house property
so transferred.
Exceptions to the point are:
House transferred for adequate consideration.

House transferred in connection with an agreement to live apart.
House transferred to minor married daughter.
II.
The holder of an impartible estate
In case of properties jointly held by a family i.e. Hindu Undivided family, the karta is
treated as owner of property for taxation purpose. Also it covers cases, where as per
tradition, certain impartible property like some old temple building or similar kind of a
building is transferred to the eldest male member of family who is supposed to maintain
it for the benefit of all. Thus he is deemed as owner of property.
III. A member of a Co-operative Society, Company or an Association of persons to
whom a building/ flat is allotted under a house building scheme of the society,
company or association, shall be deemed to be the owner of that property, although
the co-operative society/ company/ association is the legal owner of that building.
IV. Person in possession of a property in a power of attorney transaction:A person who is allowed to take the possession of the property by way of power of
attorney transactions ( as per section 53A of Transfer of property Act), will be
deemed to be the deemed owner of the properties if the following conditions are
satisfied : possession of the property has been handed over to the buyer.
sale consideration has been paid to the seller by the buyer.
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.
V. A person, who acquires a property on lease of 12 years or more, shall be deemed
to be the owner of the property. If right of extension is given to lessee, then
aggregate period is considered for such purpose. But if property is given for less than
one year like eleven months or like such provision do not apply.
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(3)
The property should not be used by the assessee for the purpose of his own
business or profession.
Even if the assessee lets out a property for commercial purposes, he is taxable
under this head only and not under the head Profits and gains from Business and
profession.
But if he uses his house property for his own commercial purposes, he is not
assessable under this head. For example, if the assessee lets out property to a
doctor to be used as a clinic, the rental income is taxable under House property
head, but if is himself a doctor & uses his own house property for running his clinic,
the house property is outside the jurisdiction of this chapter.
All such properties are covered by the head Profits or gains from business or profession. In
that head, all expenses relating to house property portion is allowed as business expenditure.
Question 92: Explain the tax treatment of a property in a foreign country.
Ans:
PROPERTY IN A FOREIGN COUNTRY:- If foreign property is taxed in India, it will be

taxable under the head Income from house property and its annual value shall be
computed as if the property is situated in India.
In computing annual value of such a house property, municipal taxes levied by a
local authority of that country and which have been paid are to be deducted in
computing the annual value.
Question 93: Whether rental incomes from disputed buildings are also taxable ?
Ans: DISPUTED OWNERSHIP:- Mere dispute as to ownership cannot hold up an assessment.
Income tax department will decides based on the facts of each case, as to who is the
owner of the property. Generally, the one, who is receiving the rent or is having the
possession of the house property, shall be declared as owner and is thus taxable under
this head.
If, however, the decision of the court goes against the interim decision of the tax
authorities, the back years assessments are to be rectified according the verdict of
the court.
Question 94: If assessee is engaged in the business of letting out properties, he will be taxable
under the head PGBP. Discuss the statement.
Ans: ASSESSEE ENGAGED IN LETTING OUT BUSINESS: - Supreme Court in East India
Housing and Land Development Trust Ltd. vs. CIT (1961) held that if a company is
incorporated with the object of promoting and developing commercial markets & then
earning rental income, such income, though having the character of business income, is
taxable under this head only.
Thus, even if it is the business of assessee to let out properties, income is taxable as
Income from house property.
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LETTING OUT IS SUBSERVIENT AND INCIDENTAL TO THE MAIN BUSINESS :As per CIT v. Delhi Cloth & General Mills Co. Ltd., if an assessee constructs
residential quarters & lets them out to his employees and letting out of residential
quarters is only related to business, i.e. it is not the main business of assessee, then
income is taxable as business income & not income from house property.
Similarly, when a house property is occupied as residence by employees or its
directors etc. for promotion of business, then, if rent is received by assessee, such
rent will be treated as business income as held in CIT v. Modi Industries Ltd.
It is important to note here that following are deductible from above rental income :
(i)
(ii)
(iii)
Depreciation u/s 32
All repair expenses (on actual basis)
All municipal taxes, insurance, rent collection charges etc.

In the same way it was held in CIT v. National News prints & Paper Mills Ltd.,
that if the assessee makes its accommodation available to Govt. for locating a branch of
nationalised bank, post office, police station, central excise office etc., with the aim of
carrying on its business efficiently and smoothly, rent collected is taxable as business
income and not as house property income.
Question 95 : Discuss the various exemptions under the head IFHP.
Ans:
EXEMPTIONS REGARDING INCOME FROM HOUSE PROPERTY :1.
Income from farm house. [Section 10(1)]
2.
Annual value of one palace of ex-Indian Ruler. [Section 10(19A)]
3.
Property used for own business or profession [Section 22]
4.
One self-occupied property or non-occupied property due to employment.[Section

23(2)]
5.
Income from property owned by:

(i)
Local authority; [Section 10(22)]
(ii)
Development Authority; [Section 10(20A)]
(iii)
Scientific Research Association; [Section 10(21)]
(iv)
University, college etc.; [Section 10(23 C)]
(v)
Hospital; [Section 10(23C)]
(vi)
Games or sports association; [Section 10(23)]
(vii)
Trade union; [Section 10(24)]
(viii)
Charitable trust; [Section 11]
(ix)
Political party. [Section 13A]
(x)
Resident of Ladakh [Section 10(26A)]
(xi)
Central warehousing corpn. [Section 10(29)]
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Question 96: How will you tax rental income earned by joint property owners.
Ans: PROPERTY OWNED BY CO-OWNERS [SECTION 26] :
Some times the property is owned by two or more persons, who are knows as coowners. In such cases, if their respective shares are definite and ascertainable, then the
share of each co-owner in the income of the property (as computed under the head
Income from house property) shall be included in the total income of each such person.
The concessional tax treatment in respect of self-occupied property is applicable as if
each such person is individually entitled to such relief. [e.g. benefit of Section 24(b)]
to the extent of Rs 30,000 / Rs. 1,50,000 is available to each of the co-owner).
The co-owners shall be assessed as an association of persons if the share is not
definite.
Note : Each Co-owner should have taken a separate loan in respect of the same property in
his/her own name to take such relief.
Question 97 : Explain the concept of de-facto rent.
Ans: Actual rent received/receivable is an important factor in determining the annual value of a
property though this is not the only decisive factor.
There could be circumstances where the owner agrees to bear certain obligations of the tenant
e.g. the water and electricity bills of the tenant may be payable by the owner. In this case, the
de facto rent (i.e. what should have been the actual rent) will be calculated by reducing from the
rent received / receivable the amount spent by the owner on meeting the obligation of water and
electricity bills of the tenants as we have to tax rent from house property under this head and
not the amount recovered for other services provided in the nature of electricity and gas bills.
On the other hand, if any obligation of water and electricity bills of the owner is met by the
tenant, the de facto rent will be computed by adding to the rent received / receivable, the
amount spent by the tenant in discharging the obligation of the landlord. E.g. If the tenant who is
in the business of selling gas cylinders, besides giving rent of Rs 8,000 p.m. gives 4 gas
cylinders every month free to the landlord and the value of each gas cylinder provided free of
cost is Rs 500, then de-facto rent shall be Rs 8,000 + Rs 2,000 (value of 4 gas cylinders) = Rs
10,000 pm.
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 increased to calculate de facto rent (i.e. what should have been the actual rent).
The deposit received from the tenant for property is a capital receipt and thus, it cannot be
treated as income. Further while determining the actual rent, no notional interest on such
deposit should be considered.
A non-refundable deposit will be included in rent received or receivable on pro rata basis. For
example, Mr B let out a property to Mr C on the condition that he will make an advance deposit
of Rs 36,000 [non-refundable] for renting the property to him for 36 months in addition to
payment of Monthly rent of Rs 7000 pm. In this case de-facto rent is Rs 8000 pm.
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A refundable deposit cannot be included in rent received or receivable.

Advance rent is ignored while computing ARV.
Question 98: Only owner is taxable under the head IFHP. State its exceptions.
Ans: Word owner includes Deemed owner. Plus 25A, 25AA, 25B.
Question 99 : How would you treat the lncome from Letting out of Land ?
Ans: If any person has let out only land, which is not essential part of any building, income is
taxable under the head other sources.
Example: Mr A has one big piece of land which is let out for arranging exhibitions or for the
purpose of marriage parties etc., rent received or receivable is taxable under the head other
sources.
Question 100 : Explain the treatment in case of subletting of property .
Ans: If any person has sub-let any house property, any income received shall be taxable under
the head other sources as per section 56 and taxable amount shall be calculated by deducting
all rent payments and expenses incurred connected with such sub-letting e.g. rent collection
expenses etc.
Example:
Mr A has taken a property on rent having 20 rooms @ 60,000 pm. He sublets one of the room
@ 4000 pm. Rent collection expense for the year Rs 2,300. Compute his net income from other
source.
Ans:
Rent received
48,000
Less Rent paid
(36000)
Rent collection expenses
(2300)
-------------Net IFOS
9700
Question 101: If property is gifted to spouse, the transferor is treated like Deemed Owner u/s
27. What is the treatment in the situation that money is transferred say by Mr X and Mrs X
purchases a house property out of gifted cash and earns rental income from house property ?
Ans: In this situation, Mr X shall not be deemed as owner of the property. In this case, property
income shall be computed in the hands of Mrs X and the income so calculated will be included
in the income of Mr X as per clubbing provisions u/s 64(1).
Question 102: Please illustrate with few examples the concept of composite rent.
Ans: When building is let out with certain facilities the rent of building is taxable as IFHP and
rent of facilities as IFOS. If letting is separable from facilities then this rule is applicable
otherwise if letting is inseparable then the whole rent shall be treated like PGBP or IFOS.
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Illustration 1: A owns a property. It is given on rent to B. B annually pays Rs 2,00,000 as rent

of the property and Rs 20,000 for different services like electricity, lift, AC etc. In this case, Rs
20,000 is not taxable in the hand of A as IFHP. Rs 20,000 would be taxed in the hands of A
after deducting his actual expenditure for providing different services like electricity, lift, AC etc.
as IFOS or PGBP.
Illustration 2 : A owns an airconditioned Cinema hall. It is let out, annual rent being Rs
20,00,000 (it includes rent of building and rent of AC , equipments and furniture). In this case,
letting of cinema hall is not separable from letting of AC/furniture & equipments. This income
(after excluding expenditure) is PGBP or IFOS.
Position will not change even if rent is separately fixed for building and other things. For
example in above case if rent for building is Rs 15 lacs and 5 lacs for other things, then also it
will not be treated as IFHP as the letting of two is INSEPARABLE.
Illustration 3 : A gets Rs 50,000 per month as rent from B for letting out of a building and a car.
The two lettings are separable in the sense that B was given an option to take on rent either the
building (at Rs 40,000) or the car (at Rs 10000) or both. The rent of building is taxable under the
head Income from House property and rent of car is taxable either as business income or
IFOS.
Question 103: CMF Club was owning a house property and it was providing recreational and
refreshment facilities exclusively to its members and their guests. Its facilities are not available
to its non-members. The club is run on no profit no loss basis. The members pay for all their
expenses and are not entitled to any share in the profit. Surplus, if any, is used for maintenance
and development of the club. Whether annual value of house property is assessable under the
head IFHP.
Ans : Supreme Court in the case of Chelmsford Club v. CIT [2000] 109 Taxman 215 (SC) has
decided that both surplus from the activities of club as well as annual value of the Clubs house
property will be outside the purview of the levy of income tax.
Question 104 : Whether list given under section 24 is exhaustive.
Ans: Yes. Interest on housing loan is deductible as per Section 24(b). For all other expenses
deduction is allowed u/s 24(a) Standard Deduction @ 30% of NAV. No other deduction can be
claimed against Annual Value.
QUESTIONS BASED ON STUDY MODULE
Question 105: Rajesh, a British National, is a resident and ordinarily resident in India during the
previous year 2013-14. He owns a house in London, which he has let out at $ 10,000 pm. The
municipal taxes paid to the Municipal Corporation of London is $ 8000 during the PY 2013-14.
The value of one $ in Indian rupee to be taken at 45. Compute Rajeshs taxable income for the
AY 2014-15.
Question 106: Anirudh has a property whose municipal valuation is Rs 1,30,000 p.a. The fair
rent is Rs 1,10,000 p.a. and the standard rent fixed by Rent Control Act is Rs 1,20,000 p.a. The
property was let out for a rent of Rs 11000 pm throughout the previous year. Unrealised rent
was Rs 11,000 and all conditions prescribed by Rule 4 are satisfied. He paid municipal taxes @
10% of municipal valuation. Interest on borrowed capital was Rs 40,000 for the year. Compute
the income from house property of Anirudh.
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Question 107: Ganesh has a property whose municipal valuation is Rs 2,50,000 p.a. The fair
rent is Rs 2,00,000 p.a. and the standard rent fixed by Rent Control Act is Rs 2,10,000 p.a. The
property was let out for a rent of Rs 20,000 pm. However, the tenant vacated the property on
31.1.2014. Unrealised rent was Rs 20,000 and all conditions prescribed by Rule 4 are satisfied.
He paid municipal taxes @ 8% of municipal valuation. Interest on borrowed capital was Rs
65,000 for the year. Compute the income from house property of Ganesh for AY 2014-15.
Question 108: Poorna has one house property at Indira Nagar in Bangalore. She stays with her
family in the house. The rent of similar property in the neighbourhood is Rs 25,000 pm. The
municipal valuation is Rs 23,000 pm. Municipal taxes paid is Rs 8,000. The house was
constructed in the year 2005 with a loan of Rs 20 lacs taken from SBI Housing Finance Ltd. The
construction was completed on 31.11. 2009. The accumulated interst upto 31.3.2009 is Rs
1,50,000. During the previous year 2013-14, Poorna paid Rs 1,88,000 which included Rs
1,44,000 as interest. Compute Poornas income from House property for AY 2014-15.
Question 109: Smt Rajalakshmi owns a house property at Adyar in Chennai. The municipal
valuation of the property is Rs 5,00,000, fair rent is Rs 4,20,000 and standard rent is Rs
4,80,000. The property was let out for Rs 50,000 pm upto December 2013. Thereafter, the
tenant vacated the property and Smt Rajalakshmi used the house for self occupation. Rent for
the months of Nov & Dec 2013 could not be realized in spite of owners efforts. All the conditions
prescribed by Rule 4 are satisfied. She paid municipal taxes @ 12% during the year. She paid
interest of Rs 25,000 during the year for amount borrowed for repairs for the house property.
Compute her income from house property for AY 2014-15.
Question 110: Ganesh has two houses, both of which are self-occupied. The particulars of the
houses for the PY 2013-14 are as under:
Particulars
House 1
House 2
Municipal Valuation p.a.
1,00,000
1,50,000
Fair rent p.a.
75,000
1,75,000
Standard rent p.a.
90,000
1,60,000
Date of completion
31.3.2001
31.3.2003
Municipal taxes paid during the year
12%
8%
Interest on money borrowed for repair of property during the
55,000
current year
Compute Ganeshs income from house property for AY 2014-15 and suggest which house
should be opted by Ganesh to be assessed as self-occupied so that his tax liability is minimum.
Question 111: Prem owns a house in Madras. During the previous year 2013-14, 2/3rd portion
of the house was self-occupied and 1/3rd portion was let out for residential purpose at a rent of
Rs 8000 p.m. Municipal value of the property is Rs 3,00,000 p.a., fair rent is Rs 2,70,000 p.a.
and standard rent is Rs 3,30,000. He paid municipal taxes @ 10% of municipal value during the
year. A Loan of Rs 25,00,000 was taken by him during the year 2009 for acquiring the property.
Interest on loan paid during the previous year was 2013-14 was Rs 1,20,000. Compute Prems
income from house property for the AY 2014-15.
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QUESTIONS BASED ON PRACTICE MANUAL

Question 112: Two brothers Arun and Bimal are co-owners of a house property with equal
share. The property was constructed during the financial year 1999-2000. The property consists
of eight identical units and is situated at cochin.
During the financial year 2013-14, each co-owner occupied one unit for residence and the
balance six units were let out at a rent of Rs 12,000 p.m. per unit. The municipal value of the
house property is Rs 9,00,0000 and the municipal taxes are 20% of municipal value, which were
paid during the year. The other expenses are as follows:
(i)
Repairs
Rs 40,000
(ii)
Insurance Premium (Paid)
15,000
(iii)
Interest payable on loan taken for construction of house
3,00,000
One of the let out units remained vacant for four months during the year.
Arun could not occupy his unit for six months as he was transferred to Chennai. He does not
own any other house. The other income of Mr Arun and Mr Bimal are Rs 2,90,000 and Rs
1,80,000, respectively for financial year 2013-14.
Compute the income under the head Income from House Property and the total income of two
brothers for the assessment year 2014-15.
Question 113: Mr Raman is co-owner of a house property alongwith his brother.
Municipal value of the property
Rs 1,60,000
Fair rent
Rs 1,50,000
Standard rent under the Rent control act
Rs 1,70,000
Rent received
Rs 15,000 pm
The loan for the construction of this property is jointly taken and the interest charged by the
bank is Rs 25,000, out of which Rs 21,000 has been paid. Interest on the unpaid interest is Rs
450. To repay this loan, Raman and his brother have taken a fresh loan and interest charged on
this loan is Rs 5,000.
The municipal taxes of Rs 5,100 have been paid by the tenant.
Compute the income from this property chargeable in the hands of Mr Raman for the
AY 2014-15.
Question 114: Mrs Rohini Ravi, a citizen of USA is a resident and ordinarily resident in India
during the financial year 2013-14. She owns a house property at Los Angeles, USA which is
used as her residence. The annual value of the house is $ 20,000. The value of one USD ($)
may be taken as Rs 45.
She took ownership and possession of a flat in Chennai on 1.7.2013, which is used for selfoccupation, while she is in India. The flat was used by her for 7 months only during the year
ended 31.3.14. The municipal value is Rs 32,000 pm and the fair rent is Rs 4,20,000 p.a. She
paid the following to Corporation of Chennai:
Property Tax
Rs 16,200
Sewerage Tax
Rs 1,800
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She had taken a loan from Standard Chartered Bank for purchasing this flat. Interest on loan
was as under:
Period prior to 1.4.2013
Rs 49,200
1.4.2013 to 30.6.2013
Rs 50,800
1.7.2013 to 31.3.2014
Rs 1,31,300
She had a house property in Bangalore, which was sold in March, 2011. In respect of his house,
she received arrears of rent of Rs 60,000 in March, 2014. This amount has not been charged to
tax earlier.
Compute the income chargeable from house property of Mrs Rohini Ravi for the assessment
year 2014-15, exercising the most beneficial option available.
v
Question 115: Mr A and B constructed their house on a piece of land purchased by them at
New Delhi. The built up area of each house was 1000 sq ft ground floor and an equal area in
the first floor. A started construction on 1.4.2012 and completed the construction on 01.4.13. B
started the construction on 1.4.12 and completed the construction on 30.6.13. A occupied the
entire house on 1.4.13. B occupied the ground floor on 1.7.13 and let out the first floor for a rent
of Rs 15,000 pm. However, the tenant vacated the house on 31.12.2013 and B occupied the
entire house during the period 1.1.2014 to 31.3.2014. Following are the other information:
(i)
Fair rental value of each unit (GF / FF)
Rs 1,00,000 p.a.
(ii)
Municipal value of each unit (GF / FF)
Rs 72,000 p.a.
(iii)
Municipal taxes paid by
A Rs 8,000
B Rs 8,000
(iv)
Repair and maintenance charges paid by
A Rs 28,000
B Rs 30,000
A has availed a housing loan of Rs 20 lacs @ 12% on 1.4.12. B has availed a housing loan of
Rs 12 lacs @ 10% on 1.7.12. No repayment was made by either of them till 31.3.2014.
Compute income from house property for A and B for the previous year 2013-14 (AY 2014-15).
Question 116: Mr Kalpesh borrowed a sum of Rs 30 lacs from the National Housing Bank
towards purchase of a residential flat. The loan amount was disbursed directly to the flat
promoter by the bank. Though the construction was completed in May 2014, repayments
towards principal and interest has been made during the year ended 31.3.2014.
In the light of above facts, state whether Mr Kalpesh can claim deduction u/s 24 in respect of
interest or Deduction u/s 80C for assessment year 2014-15.
Question 117: Mr X owns one residential house in Mumbai. The house is having two identical
units. First unit of the house is self occupied by Mr X and another unit is rented for Rs 8000 pm.
The rented unit was vacant for 2 months during the year. The particulars of the house for the
previous year 2013-14 are as under:
Standard rent
Rs 1,62,000 p.a.
Municipal Valuation
Rs 1,90,000 p.a.
Fair rent
Rs 1,85,000 p.a.
Municipal tax (paid by Mr X)
Rs 15% of Municipal valuation
Light and water charges
Rs 500 pm
Interest on borrowed capital
Rs 1500 pm
Lease money
Rs 1200 p.a.
Insurance charges
Rs 3,000 p.a.
Repairs
Rs 12,000 p.a.
Compute income from house property of Mr X for the AY 2014-15.
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Question 118: Mrs Indu, a resident individual, owns a house in USA. She receives a rent @ $
2,000 pm. She paid municipal taxes of $ 1500 during the financial year 2013-14. She also owns
a two storied house in Mumbai, ground floor is used for her residence and first floor is let out at
a monthly rent of Rs 10,000. Standard rent for each floor is Rs 11,000 pm and fair rent is Rs
10,000 pm. Municipal taxes paid for the house amounts to Rs 7,500. Mrs Indu had constructed
the house by taking a loan from a nationalized bank on 20.6.2009. She repaid the loan of Rs
54,000 including interest of Rs 24,000. The value of one dollar is to be taken as Rs 45.
Compute total income from house property of Mrs Indu.
LAST YEAR EXAMINATION QUESTIONS INCOME FROM HOUSE PROPERTY
IPCC MAY 2012

Question 119.
(4 Marks)
Explain the treatment of unrealized rent and its recovery in subsequent years under the
provisions of Income Tax Act, 1961.
PCC MAY 2012

Question 120.
(5 Marks)
Mr. A owns five houses at Cochin. Compute the gross annual value of each house from the
information given below:
`
House-I
House-II
House-III
House-IV
House
V
Municipal value
1,20,000
2,40,000
1,10,000
90,000
75,000
Fair rent
1,50,000
2,40,000
1,14,000
84,000
80,000
Standard rent
1,08,000
N.A.
1,44,000
N.A.
78,000
Actual rent received/
1,80,000
2,10,000
1,20,000
1,08,000
72,000
receivable
IPCC NOV 2010

Question 121.
(2 Marks each )
Explain briefly the applicability of section 22 for chargeability of income tax for:
(i) House property situated in foreign country and
(ii) House property with disputed ownership.
IPCC NOV 2009

Question 122.
From Practice Manual : Already covered Question number 113 of the assignment.
(6 MARKS)
PCC NOV 2009

Question 123.
From Practice Manual. Question number 118 of the assignment.
(7 Marks)
PCC NOV 2008

Question 124.
From Practice manual: Question number 117 of the assignment.
(9 Marks)
PCC MAY 2008

Question 125.
From practice manual. Question 116 of the assignment.
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(6 Marks)
Page 40
TEST SERIRES - INCOME FROM HOUSE PROPERTY

Q No
Question
01
Basic charging section of income from house property
02
IFHP deals with all kinds of rental incomes T/F
03
IFHP deals with rental income of residential buildings only T/F
04
In IFHP, actual rental income is not that much important as is the

annual rent earning capacity of the building T/F
05
Municipal tax paid by tenant is also deductible from GAV T/F
06
How much is standard deduction
07
Section of NAV computation
08
If NAV is Nil or Negative, standard deduction is not allowed T/F
09
Municipal tax is also known as House tax, water tax, fire tax,
education tax, Scavenging tax, sewage tax, General tax, local tax etc
. T/F
10
Municipal tax is calculated based on Municipal value T/F
11
How to calculated ERV
12
How to calculate GAV
13
Treatment of UR of current year
14
Treatment of UR of last years
15
4 conditions to be satisfied for deduction of UR
16
Vacancy allowance is deductible from.
17
If property is vacant throughout the year as the landlord does not

want to let out than GAV is .
18
If property is vacant throughout the year as a suitable tenant is not

available than GAV is ..
19
If letting of building is inseparable from letting of machineries etc,

then whole rent goes to
20
HP loss can be adjusted against other HP income of same year as

per section -----------
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Answer
Page 41
21
Net HP loss can be adjusted against income from other heads as per
section ..
22
Net Loss from House property can be carried forward to

..years as per section ..In
subsequent years HP loss can be adjusted only against
.income.
23
Interest on Loan u/s 24(b) can be taken for Purchase, construction,

repair and reconstructions/renewal/alterations etc T/F
24
24(b) is deductible on due basis T/F
25
Interest on unpaid interest is deductible T/F
26
If capital is borrowed for purchase of Plot, still deduction u/s 24(b) is

available T/F
27
If original loan is interest free, but fresh loan taken to repay the
original loan, then also deduction for interest payable is available.
T/F
28
Brokerage/Commission paid for arranging the loan is deductible

T/F
29
As per Sectionif interest is paid outside India, it must be

paid after TDS.
30
Pre construction Period means
31
PCP interest installment starts from the year
32
PCP interest is deductible in equal annual installments.
33
Section for Self occupied house.
34
Limit of 24(b) for self occupied houses
35
Treatment if self owned house is given to company on lease which is

allotted to owner to self occupy for his residential purpose
36
Section for house non-occupied due to employment
37
Section for Deemed Let out properties
38
Limit of 24(b) in case of deemed let out properties
39
Only owner is taxable under the head IFHP. State its exceptions
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Page 42
40
Legal expenses incurred on recovery of UR or arrears is ignored

T/F
41
Section for recovery of UR pertaining to AY 2004-05
42
Section for recovery of arrears (not taxed earlier)
43
Section of Deemed ownership
44
When no deemed ownership if property is transferred by owner to

wife
45
When no deemed ownership if property is transferred by owner to

minor children
46
A property given for lease of years or more attracts

deemed ownership provisions.
47
A Ltd is engaged in business of developing commercial markets and

earning rental incomes. Still they are taxable under the head IFHP
T/F
48
Rent of residential quarters is treated under the head
49
Limit u/s 24(b) in case of co-owner of a property
50
Income from rent of land is taxable as
51
Income from sub-letting is treated like
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NEERAJ GUPTA CA IPCC TAX CLASSES

INCOME FROM HOUSE PROPERTY

Income from house property basis of charge

Section 23(1)(a),(b)& (c)

Annual value of let-out property

Annual value of self-occupied (residential) property

Annual value of a property

Section 23(4)(a)& (b)

Deemed to be let out houses

Deduction for interest on borrowed capital

Amount not deductible from income from house property

Section 25A & 25AA

Recovery of unrealised rent

Taxation of Arrears of rent

Property owned by co-owners

Question 1. Explain the concept of Annual Value ?

Annual value is the amount

for which the property

expected to let during the year.

Assessment Year 2014-15

For sms only 9810139214

NEERAJ GUPTA CA IPCC TAX CLASSES

not on the rent received,

on the inherent capacity

to receive rental income.

Thus here income is taxable on notional basis.

INCOME FROM HOUSE PROPERTY

Assessment Year 2014-15

For sms only 9810139214

NEERAJ GUPTA CA IPCC TAX CLASSES

INCOME FROM HOUSE PROPERTY

Insurance of the property

Compute taxable income from house property.

House tax payable for year

15,000 (60% paid by owner and 40% paid by tenant)

Annual repair expense

Interest on housing loan

Annual insurance premium

Compute income from house property?

Assessment Year 2014-15

For sms only 9810139214

NEERAJ GUPTA CA IPCC TAX CLASSES

INCOME FROM HOUSE PROPERTY

Compute NAV in following situations if GAV is Rs. 60,000

Municipal tax paid by owner is Rs. 6,000.

Municipal tax is paid by tenant Rs. 6,000

Municipal tax due is Rs. 6,000

Municipal tax paid is Rs. 6,000 (including Rs. 2,000 by tenant).

Municipal Tax is paid by owner

Municipal Tax is paid by tenant

Municipal Tax is outstanding

Generally at all places, these days municipalities or municipal corporations

impose house tax

and for that purpose

annual value of the properties is determined.

The rental value so fixed

by these local bodies

is known as municipal value, which forms the basis of annual value.

Assessment Year 2014-15

For sms only 9810139214

NEERAJ GUPTA CA IPCC TAX CLASSES

INCOME FROM HOUSE PROPERTY

Fair rental value / Market rental value :