Income from House Property

Shankar Bose

Inspector of Income-tax

MSTU, Puri

Assessed must be the owner or deemed owner.

Applicable to HPs not used by owner for his business.

In some situations income may be charged on notional basis.

Gross Annual Value is determined based on the earning capacity of the house property and not always on rent.

The occupant in case of part performance of contract (Sec. 53A of the Transfer of Property Act).

o Possessiono Rightso Paymento Legal Title

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If the house property is transferred to spouse without adequate consideration.

Except in case of legal separation.

If the house property is transferred to a minor child.

Except in cases of minor married daughter.

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House in a foreign country- Taxable.CIT vs R.VenugopalaReddiar,58 ITR 439 Mad. Property held as stock-in-trade -- Taxable

under the head H.P. Letting of houses can not be a business.CIT vs National Storage PLtd.48 ITR 577 Bom. Composite rent- Split up to H.P. income and

income from other source.

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Municipal Valuation

Comparable Rent

Higher

Standard Rent

Lower

Rent Received

Higher is the GAV

NAV = GAV – Municipal Taxes paid.

Fair Market Rent

Sheila Kaushish vs CIT 7 Taxman 1 SC.

1. One House Property

a. Self occupied

b. Not occupied owing to employment

2. More than one house property – All are self occupied.

3. House property (ies) – Let out.

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The Gross Annual Value will be NIL.

1. In case one owns a single HP and is occupied by himself.

2. In case one owns a single HP but cannot be occupied by him owing to his employment / business and the HP has not been let out.

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1. The assessee has the option to choose one HP as S.O.P. He may choose different HP as S.O.P. in different years.

2. For other HPs AV will be determined notionally.

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Gross Annual Value to be calculated

for each HP separately.

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Rent received will exclude unrealised rent if conditions of Rule-4 are satisfied:

Tenancy must be bona fide. The tenant has vacated the HP or steps

have been taken to compel him to do so. The defaulting tenant is not occupying

any other HP of the assessee. Legal proceeding have taken or the AO is

convinced about the futility of the same.

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1. Part of the HP is let out.

2. Let out but vacant during part of the year.

3. Let out but vacant during whole of the year.

4. Let out but self occupied during part of year.

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Calculate GAV proportionately.

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1. Calculate GAV per month .

2. Multiply such GAV by the no. of months for which it was occupied.

This will be the GAV of the HP.

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GAV is nil provided the HP has the

characteristic of a let out property.

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1. Calculate the GAV as if the property was let out for entire year.

2. No benefit for the period for which it was self occupied.

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Section 24(a) – 30% of Net Annual Value.

Section 24(b)- Interest on borrowed capital. Interest on capital borrowed for construction, acquisition, repair, renewal, reconstruction is allowed as deduction.

For let out property – No limit.

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For Self Occupied Property. Loan taken before 01-04-99, maximum

Rs.30,000/- Loan taken on or after 01-04-99, maximum

Rs.1,50,000/- Conditions apply. Loan taken on or after 01-04-1999 for

other purposes Maximum Rs. 30,000/- Interest for preconstruction period – in 5

equal installments.

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If the shares of the owners are definite and ascertainable

All parties will be treated as owners.

Not assessed as AOP.

All limits would apply separately.

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Such amount would be charged to tax under HP in the year of recovery, and deduction u/s 24 allowed.

Ownership of the property at the time of recovery is not relevant.

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Arrears of rent charged under HP head in the year of receipt .

Deduction u/s 24(a) available.

Ownership of the property at the time of receipt not relevant.

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THANK YOU

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