incm from house property

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Income from house property:

Income from house property House property for this purpose means. Any building which has the characteristics feature of the building. eg . Residential building, cinema theatres etc.


CHARGEABILITY (sec. 22) Income is taxable if the following condition are satisfied: The property should consist of any buildings or lands appurtenant thereto. The assessee should be the owner of the property. The property should not be used by the owner for the purpose of any business or profession carried on by him, the profit of which are chargeable to income tax.

Exception to the rule:

Exception to the rule That the rental income is taxable under house property(HP) Income from subletting- income from other sources since the assessee is not the owner. Composite rent- When a building has been let out along with the furnitures , then such letting out is called composite letting

Who is liable to pay ?:

Who is liable to pay ? As per Sec.27 of the Income tax Act, the following persons are to be treated as deemed owner of house property for the purpose of charging to tax income from house property: An individual who has transferred his house property to his spouse (otherwise than in connection with an agreement to live apart) or to a minor child (not being a married daughter); The holder of an impartible estate is deemed to be the individual owner of the properties of the estate;


Cont.... A member of a Co-operative Society, Company etc., to whom a building or part thereof has been allotted or leased under a house building scheme; A person having long-term lease rights in a property under a lease agreement extending to 12 years or more in the aggregate including the term for which the lease may be extended.

The concept of gross Annual Value::

The concept of gross Annual Value: The basis of calculating Income from House property is the “annual value”. This is the inherent capacity of the property to earn income and it has been defined as the sum for which the property might reasonably be expected to let from year to year. For example, in case of a house, whose municipal valuation is 100 and fair rent is 110 and standard rent is 95 and actual rent is 110 then the gross annual value will be 110.

Calculation of Gross annual value:

Calculation of Gross annual value Find out reasonable expected rent of the property. Find out rent actually received after excluding unrealized rent. Find out which is higher. Find out loss because of vacancy. Calculate gross annual value.

Income from let out property:

Income from let out property Gross annual value (-)municipal taxes NET ANNUAL VALUE (-)Deduction under section 24 Standard deduction Interest on borrowed capital Income from house property.

Determination of Annual Value of Self Occupied Property:

Determination of Annual Value of Self Occupied Property Having understood the concept of Annual Value, we can now go into the details of its actual determination.  Self-occupied house property does not generate any rent.  Yet notional income from it was liable to tax and causing hardship to tax payers.

Different situation of self occupied property:

Different situation of self occupied property If such property is used through out the previous year for own residential purpose, not let out. If such property could not be occupied through out the previous because employment, business or profession is situated at other place.

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When part of property is self occupied and other part is let out. When such property is self occupied for a part of the year and let out for other part of the year.

Annual Value of one house away from work place:

Annual Value of one house away from work place Before going into the final stage of calculation of income from house property, let us consider two more situations. A person may own a house property, in Bangalore, which he normally uses for his residence.  He is transferred to Chennai, where he does not own any house property and stays in a rental accommodation.  In such a case, the house property in Bangalore cannot be used for self-occupation and notional income, therefore, would normally have been chargeable although he derives no benefit from the property.

Co-ownership of property:

Co-ownership of property In case of joint ownership of any property, when the share of each co-owner is definite and ascertainable, it has been provided that each of the owners will be assessed individually in respect of share of income from the property. .

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