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INCOME FROM HOUSE PROPERTY

Below whitepaper is devoted to CA & CS aspirants for revising “House Property Income” Head quickly. All the Exam related aspects have been tried to cover with respective case laws.

 

1.

Gross Annual Value

XXXX

Higher of Municipal Valuation and Fair rent, but restricted to Standard Rent= ALV (Annual Letting Value)

GAV = ALV & Actual Rent, whichever is higher.

(However, if actual rent is lower than ALV on account of vacancy, then actual rent will be taken as GAV)

2.

Minus : Municiple taxes paid ( Municple taxes are paid on Municple valuation of property)

(xxx)

3.

Net Annual Value

XXXX

4.

Less : Deduction u/s 24

(i) 30% standard deduction

(ii) Interest on borrowed capital

(xxx)

5.

Income from House Property

XXXX


 

· Interest on borrowed capital

o Interest on borrowed Capital would be allowed as deduction u/s 24 (b) without any ceiling limit in case of Let out property and Deemed to be let out property.

o Interest on borrowed Capital taken for acquistion or construction of house property would be allowed u/s 24(b) upto 1,50,000 /- (2,00,000 from FY 2014-15 onwards) and if taken for repairs/ reconstruction only 30,000/- would be allowed as deduction in case of Self ocuupied Property.

· Income from letting out of vacant land is taxable under the head ‘ Income from other sources’ .

· Income from property charged to tax under house property income head must be owned by the assessee.

· However, Section 22 spcifically excludes the property occupied for the purpose of own business or profession of the assessee; the profit of which is chargeable to tax.

· Even if property held as Stock-in-trade, income derived from it would be taxable under Income from house Property. (New Delhi Hotels Ltd. V. ACIT (2014) 360 ITR 0187 Delhi )

· Income arising on account of display of advertisement hoardings of various corners on the roof of the building would be considered as income from Other sources. - Mukherjee Estate P Ltd. V. CIT (2000) 244 Itr 1 (Calcutta high court)

· Self occupation of house Property Can not be denied to HUF on the grounds that HUf is a fictional entity and it can not occupy the house. Because, HUF is a group of individual related to each-other i.e. a family comprising of group of natural persons. The said family can reside and occupy the house property.

· Unrealized Rent : Unrealized rent is deducted from actual rent in calculation of GAV. It is taxed in the year of receipt without any deduction.

· Arrears of Rent : It is taxed in the year of receipt with 30% standard deduction. Also read Treatment of unrealized and arrears rent under Income under the head Income from House property

· Sub-letting would be treated as Income from other sources or Profits and gains from Business or Profession.

· Circumstances when Notional income is charged to tax instead of Real income under income from House Property:

1. Where assessee owns more than one house property , NAV of one of them would be considered NIL at the option of assessee and others will be considered as deemed to be Let out.

2. In case of Let out property, Where ALV exceeds Actual rent, the ALV is taken as

 

EXAMPLES :