Income From House Property Notes – Inocme TaxPe

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Income From House Property Notes

The person must have to pay tax if he/she is eligible under the head of income from house property. It is the income from building and lands.

The income arising from house property either in the form of a rental income or on its transfer is referred to as ‘income from house property’. House property means any property such as house, building, office, warehouse is treated as ‘house property’ under the Income Tax Act. The ‘House Property income’ is one of the five heads of income that is taken into account for calculating the gross total income (GTI) of an assessee during the year.

{House property income = annual value of building – deduction u/s 24}

Income From House Property Notes


Income is taxable if the condition given below will satisfied

  •         Property must consist of building and lands appurtenant thereto.
  •         Assessee must be the owner of the property
  •         Property should not use a business and profession

Building and lands appurtenant thereto;-

  1. Residential house , commercial buildings such as cinema hall, godown, factory, office buildings, lecture hall, dock etc.
  2. Lands appurtenant roads, back – yards, play grounds, parking space etc.

Assessee must be owner of the property:-

  1. Ownership may be free hold, lease hold, and deemed ownership
  2. Deemed ownership;-
  3. Transfer of property of spouse or minor
  4. Holder of an impartiable estate
  5. Member of cooperative society
  6. Person in possession of a property
  7. Person acquiring lease right for not less than 12 years
  8. Dispute ownership

 The property should not be used for own business and profession:-

If the profession is used for owner business profession then the income is not chargeable to tax

The income is not taxable to tax.

The income is not taxable as income from HP rather chargeable as business income, if satisfied the following criteria

  1. Property let out to employee
  2. Property let out to the government
  3. Paying guest accommodation

Exempted income from house property:-

  1. Agricultural house property sec 2(1)c
  2. Self occupied but vacant house sec 23(3)
  3. For charitable purpose sec11
  4. Property held by resister trade union10(24)
  5. Own business profession
  6. Held by local authority, scientific research, political party, educational institution, hospital and medical institution etc.
  7. Owner by former ruler of Indian state
  8. One self occupied house
  9. Held stock in trade and not let out during the previous year.

  BASIS OF CHARGE u/s 28

v   “Annual value” of any house property of which the assessee is the owner is taxable u/h

“Income from house property”. [Note: Annual value is taxable & not Rental Income].

v   House property shall include all types of house properties i.e. residential houses, shops,

godowns, cinema building, workshop building, hotel buildings etc.

v   Income from Sale of House Property → Taxable u/h “ Capital Gains”.

 

Calculation of House Property Income :-

A. Gross Annual Value (GAV)                                                      xxx

B. Less: Municipal tax paid by the owner during the PY.            (xxx)

C. Net Annual Value (NAV) [A – B]                                             xxx

D. Less: Deduction u/s 24                                                             (xxx)

24(a): Standard deduction (30% of NAV)                                     (xxx)

24(b): Interest on borrowed Capital                                              (xxx)

 

Notes:

1. Municipal value: Rent fetching capacity of the house determined by the municipal authorities.

2. Fair rent: Rent fetching capacity of similar property in the same locality.

3. Standard Rent: Maximum rent which can be taken from a tenant legally under Rent Control Act.

4. Expected Rent: Higher of (a) MV or (b) FR subject to Maximum of SR.

 

 Computation of income from house property for ay 2020-21

1

Gross annual value, i.e.  expected rent/actual rent receved or receivable, whichever is higher, however, in case of vacancy, expected rent or actual rent.

 

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2

 (-): (i) the amount of rent, which could not be realized

       (ii)taxes actually paid and borne by owner to local authority

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Net annual value(NAV)

 

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3

(-): Deduction allowed under section 24

(i) standard [email protected]% of NAV

(ii)intrest on borrowed capital[section24](1)(vi)]

 

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                                Total

 

 

 

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4

Income chargeable under the head’’ income from house property(2-3)”

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Also read: Multiple choice Questions on Income from House Property
Author
Manturanjan Sa
Founder of Income TaxPe . Professionally a Lecturer, by passion a Writer, Dancer, lyricist. fitness lover. Also a social worker co-founder of Kartabya Foundation & Digital Entrepreneur.

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