Income From
House Property
1. Basis of Charge [Section 22]:
Income from house property shall be taxable under this head if following conditions are satisfied:
- The property of the house must consist of any building or land attached to it;
- The taxpayer must be the owner of the property;
- The property of the house should not be used for business or profession purposes carried out by the taxpayer.
2. Computation of income from house property:
Income from a house property shall be determined in the following manner:
| Particulars | Amount |
|---|---|
| Gross Annual Value | – |
| Less: Municipal Taxes Paid by Owner | – |
| Net Annual Value | *** |
| Less: Standard deduction at 30% [Section 24(a)] | – |
| Less: Interest on borrowed capital [Section 24(b)] | – |
| Income from house property | *** |
Gross Annual value [Sec. 23(1)]
Gross annual value i.e. reasonable rental value shall be computed in the manner given below:
- Compare Fair Rent and Municipal Valuation and select the higher.
- Compare the rent so selected with Standard Rent and the lower of the two shall be considered to be Expected Rent. (It is also called Annual Letting Value)
- Compare Expected Rent with Rent Received or Receivable and the higher shall be considered to be Gross Annual Value.
Fair rent i.e. the rent of similar types of buildings in the same locality.
Municipal valuation i.e. rental value determined by the municipality for the purpose of charging municipal tax. It is also called rateable value.
Standard rent i.e. the highest possible rent as per Rent Control Act. Rent received or receivable.
Property is let out throughout the financial year
| Example : | |
|---|---|
| Fair Rent (Rs 70000 * 12) | 840000 |
| Municipal Value (Rs 60000 *12) | 720000 |
| Standard Rent (Rs 50000 * 12) | 600000 |
| Actual Rent (Rs 90000 * 12) | 1080000 |
| Less: Interest on borrowed capital [Section 24(b)] | – |
| Solution | |
| a) Fair Rent | 840000 |
| b) Municipal Value | 720000 |
| c) Higher of a or b | 840000 |
| d) Standard Rent | 600000 |
| e) Expected Rent (Lower of c and d) | 600000 |
| f) Actual Rent | 630000 |
| Gross Annual Value (higher of e or f) | 630000 |
Property vacant for whole or part of financial year
| Example : | |
|---|---|
| Fair Rent (Rs 90,000 * 12) | 1080000 |
| Municipal Value (Rs 70,000 *12) | 840000 |
| Standard Rent (Rs 60,000 * 12) | 720000 |
Actual Rent | 900000 |
| Solution | |
| a) Fair Rent | 1080000 |
| b) Municipal Value | 840000 |
| c) Higher of a or b | 1080000 |
| d) Standard Rent | 720000 |
| e) Expected Rent (Lower of c and d) | 720000 |
| f) Actual Rent | 900000 |
| Gross Annual Value -Section 23(1)(b) | 900000 |
| 630000 |
Note: Section 23(1)(b) is applicable as actual rent received is Rs 9,00,000 per month whereas expected rent is Rs 8,40,000 per month