Direct Indirect Tax


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It’s deals with income, which falls under the head ‘Income from house property’. The scope of income charged under this head is defined by section 22 of the Income Tax Act and the computation of income falling under this head is governed by sections 23 to 27. All the provisions relating to tax treatment of income from house property are explained.

Types of House Properties:

Types of House Properties 1. Fully let out house property 2. Fully self occupied house property which also includes a deemed to be let out house property. 3. An entire House Property, which is let out for some time during the previous year and self, occupied for the remaining period of the previous year 4. A house property where some area is let out on rent and the remaining area is self occupied.

Section 22 to 27:

Section 22 to 27 Sections 22 & 23 lay down that incomes which are taxable under this head and house it is to be calculated. Section 24 lay down the deduction which are allowable while computing income under this head. Section 25 lay down that deduction which are not allowed under this head. Section 25A,25AA and 25B lay down the special treatment for unrealised rent and for arrears of rent.


Continue… Section 26 lay down the special treatment which is to be given when the house property is owned by more than one co-owner. Section 27 define various term for the purpose of this head of income.

Conditions must be apply…:

Conditions must be apply… Firstly the property must consist of a building or land attached to or connected with such building. Secondly, the assessee must be the owner of the house property. Thirdly, the property should not have been occupied by the assessee for the purpose of carrying on his business or profession. Lastly is ‘annual value’ of the house property which is taxed under the head ‘Income from House property’.


COMPUTATION OF INCOME FROM LET OUT HOUSE PROPERTY Gross Annual Value xxxxxxx Less: Municipal Taxes xxxxxxx Net Annual Value xxxxxxx Less: Deductions under Section 24 - Statutory Deduction (30% of NAV) xxxxxxx - Interest on Borrowed Capital xxxxxxx Income From House Property xxxxxxx

Gross Annual Value [sec 23(1)]:

Gross Annual Value [sec 23(1)] Various adjustment or deduction are permitted depending upon whether the house is rented(let out) or self occupied. four factors have to be taken into consideration while determining the Gross Annual Value of the property:

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1. Fair rental value: It is the rent normally charged for similar house properties in the same locality. Although two properties cannot be alike in every respect, the evidence provided by transactions of other parties in the matter of other properties in the neighborhood,

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2.Municipal valuation: Municipal or local authorities charge house tax on properties situated in the urban areas. For this purpose, they have to determine the income earning capacity of the property so as to calculate the amount of house tax to be paid by the owner of the property.

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3.Standard rent: Standard Rent is the maximum rent which a person can legally recover from his tenant under a Rent Control Act. This rule is applicable even if a tenant has lost his right to apply for fixation of the standard rent.

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4. Actual Rent: It is the most important factor in determining the annual value of a Let out house property. It does not include rent for the period during which the Property remains vacant. Moreover, it does not include the rent that the tax payer is unable to realise.

Deduction u/s 24:

Deduction u/s 24 1. Statutory Deduction: 30 per cent of the net annual value will be allowed as a deduction towards repairs and collection of rent for the property, irrespective of the actual expenditure incurred.

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2. Interest on borrowed capital: Interest on borrowed capital is allowable as deduction on accrual basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property.

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Prepared By : Mahek Limbani Akshay Lase Guided By: Prof. Sandesh Tambe Special thanks to..

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