Tax on Income from House Property-General Rules and how to calculate
Tax on Income from House Property
The general concepts and FAQS regarding Taxation on Housing property are presented here, note that these are general points and may not satisfy your specific requirements. However using these points you can compute the Chargeable income of your house property.
1. Chargeability [Section 22]
The process of computation of income under the head “Income from house property”
starts with the determination of annual value of the property. The concept of annual value and
the method of determination is laid down in section 23.
(ii) The annual value of any property comprising of building or land appurtenant thereto, of which the assessee is the owner, is chargeable to tax under the head “Income from house property”.
Conditions for Chargeability
Property should consist of any building or land appurtenant thereto.
Income from letting out of vacant land is, however, taxable under the head “Income
from other sources”.
Assessee must be the owner of the property
The property may be used for any purpose, but it should not be used by the owner for the
purpose of any business or profession carried on by him, the profit of which is chargeable to
Even if property is held as Stock in Trade or the business of the assessee is to letout the property, than also the Income should be taxed under the head Income From House Property.
Exceptions for Chargeability
Letting out is supplementary to the main business
Letting out of building along with other facilities
2. Annual Value of Property
This involves three steps :
Step 1 - Determination of Gross Annual Value (GAV).
Step 2 – From the gross annual value computed in step 1, deduct municipal tax paid by the
- owner during the previous year.
Step 3 – The balance will be the Net Annual Value (NAV), which as per the Income-tax Act is
the annual value.
Gross Annual value is higher of Actual Rent received or Annual Letting Value. And Annual Letting value is higher of fair rent (FR) and municipal value (MV), but restricted to standard rent (SR).
3. Deductions from Annual Value [Section 24]
(i) There are two deductions from annual value. They are –
(1) 30% of NAV; and
(2) interest on borrowed capital
(1) 30% of NAV is allowed as deduction under section 24(a)
(a) This is a flat deduction and is allowed irrespective of the actual expenditure incurred.
(b) In case of self-occupied property where the annual value is nil, the assessee will not
be entitled to deduction of 30%, as the annual value itself is nil.
(2) Interest on borrowed capital is allowed as deduction under section 24(b)
(a) Interest payable on loans borrowed for the purpose of acquisition, construction,
repairs, renewal or reconstruction can be claimed as deduction.
(b) Interest payable on a fresh loan taken to repay the original loan raised earlier for the
aforesaid purposes is also admissible as a deduction.
(c) Interest relating to the year of completion of construction can be fully claimed in that
year irrespective of the date of completion.
(d) Interest payable on borrowed capital for the period prior to the previous year in
which the property has been acquired or constructed, can be claimed as deduction
- over a period of 5 years in equal annual installments commencing from the year of
acquisition or completion of construction.
Format of Computation
Mr. A who is staying in his own house and one more house he has let out.
Mr. A is Paying Interest on housing loan for the own house is Rs. 1000000/- & for the house which he has let out Rs. 250000/-.
Mr A can claim interest paid on housing loan for the self occupied which is restricted upto Rs. 150000/- ( from the year 2013-14 on wards Rs 200000/-). for the let out property Mr. A can claim Full interest what he has paid to bank i.e. Rs. 250000/-
now Mr. A Changed house i.e. he started staying in the house which he had let out & let out the house in which he was staying.
Now can Mr. A claim interest as per the concept of house property therefore self occupied & let out.
I am not able to understand. You are informing about the provisions or asking something?