HEADS OF INCOME

INCOME FROM HOUSE PROPERTY

INCOME FROM HOUSE
PROPERTY
 Charging Section S. 22
Annual Value of any property consisting of any
building or land appurtenant (belonging)
thereto of which, the assessee is the owner is
chargeable to tax under the head “Income from
House Property”
INCOME FROM HOUSE
PROPERTY
 following three conditions:
 property consists of buildings or lands
appurtenant thereto (belonging to)
 the assessee should be the owner of the property
 the property should not be used by th owner for
his own business
 Owner includes legal as well as deemed owner
 Deemed owner as per section 27 includes
Owner (transferor) would be deemed owner:
 Transfer to a spouse or child without consideration:
 Transfer to spouse without an agreement to live apart or to a minor, not
a married daughter
 Holder of an impartible estate
 Property held by a member of a co-operative society / company / AOP
 A person who has acquired a property under power of attorney
Section 53A – Given a scenario where, under a contract for transfer of immovable
property, the buyer has made the required payments, and has taken possession of the
property even though the transfer deed or conveyance hasn’t been registered.
 Person acquired a right on a property under lease less than 12 years
 Exempted property
 income from farm house (u/s 2(1A) (10(1))
 annual value of any one palace of an ex-ruler Se.
10(19A)
 property income of a local authority (10( 20)
 property income of an approved scientific research
association (10(21)
 property income of an educational institution
(10(20C)
INCOME FROM HOUSE
PROPERTY
 Exempted property
property income of a trade union (10(24)
 house property held for charitable purpose (11)
 property income of a political party (13A)
property used for own business or profession (22)
 one self-occupied property Sec 23(2)
 Composite Rent
In certain cases, the owner charges rent from
the tenant not only on account of rent for the
house property but also on account of service
charges for various facilities provided with the
house. Such rent is known as composite rent.
The said composite rent can fall under 2
categories:
(a) Composite rent on account of rent for the
property and service charges for various
facilities provided along with the house like
lift, gas, water, electricity, watch and ward, air
conditioning etc. In this case such composite
rent should be split
Composite Rent
up and the portion of rent attributable to
the letting of the premises shall be
assessable as “Income from house
property”. The other portion of the
composite rent received for rendering
services shall be assessable as “Income from
other sources”.
Composite Rent
 (b) Composite rent on account of rent for the
property and the hire charges of machinery,
plant or furniture belonging to the owner. In
this case if the letting of the property is
separable from the letting of the other assets,
then the portion of the rent attributable to the
letting of the premises shall be assessable as “
Income from house property” and the other
portion of the composite rent for letting other
assets shall be assessable either as “business
income” or as “other sources”.
 On the other hand, if the letting of the property
is inseparable from the letting of other assets
like machinery, furniture, the entire income
would be taxable as “business income” or as
“other sources”.
Computation of Annual Value
 computation of income from house
property depends on the type of
property
 let out House property
 self -occupied property
let out property remain vacant
 partly let out and partly self occupied
 deemed to be let out
 property owned by co-owners
Determination of Income from
House Property
Gross Annual Value *******
Less: Municipal Taxes *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rent (sec 25B) (unrealised rent recovered)
less: 30% of arrears
*******
Income from House Property *********
Computation of Annual Value of Let –out
 Annual value is the
estimated value of Income
expected if the property is
rented.
 Annual value is the
reasonable letting Value / Expected rent ( ER )or
Actual Rent (AR) of the property which ever is higher.
 ER is the Municipal value or Fair rent which ever is
higher restricted to Standard rent a per Rent Control Act
Computation of Annual Value of
Let 
–out
reasonable letting value / ERis:
reasonable letting value / ERis:
 Municipal value MV or
 Fair rent FR
Which ever greater restricted to Standard rent SR

 Municipal Valuation is the ratable value fixed by the municipality for charging municipal tax .
 Fair rent is the rent fetched by a similar accommodation in the same or similar locality
 Standard rent is the maximum rent which a person can legally recover from his tenant under the Rent
Control Act.
COMPUTATION OF ACTUAL RENT

ACTUAL RENT AR
 Actual rent is applicable only to let out
houses. Actual rent is rent received or
receivable. Actual rent is the rent of the previous
year for which the property was available for
letting out. The unrealized rent, if it fulfills the
conditions, is allowed to deduct from actual rent
receivable
Actual Rent = Actual rent received or receivable
– allowable unrealised rent/loss due to vacancy
Loss The
due to vacancy
property remained vacant for some time
period, it will be deducted from the annual
rent and the figure come to be the actual
rent receivable.
Unrealized rent
The rent which has not been recover from the
tenant. It is also deducted from GAV.
The following conditions must satisfied:
He tenancy is bonafide
The steps has been taken to recover the rent
Steps has been taken to compel him to
vacate the property
Deduct Municipal Taxes
From the annual Value
deduct Municipal Taxes levied
by any local authority in
respect of the house property.
This tax is deductible only if it
is actually paid by the owner
and only to the extent it is
paid during the year
Deduction u/s 24
Standard deduction
 Interest on borrowed
Deduction u/s 24
Standard deduction
 Interest on borrowed
Standard deduction
 No deduction can be claimed by an
assessee other than mentioned in
section 24. Standard deduction is
allowed irrespective of expenses
incurred by the assessee
 30 % of the adjusted annual
value is deductible irrespective of
expenses incurred by the taxpayer
Interest on Borrowed Capital
 Interest on Borrowed capital is allowed as
deduction if capital is borrowed for the purpose of
purchase, construction, repair, renewal or
reconstruction of the property
 It is deductible on accrual basis. It can be
deductible as yearly, it is deductible even if it is
not actually paid during the previous year
 No deduction for any brokerage or any expenses

for arranging the loan is allowed

 interest of a fresh loan taken for the repayment of
the earlier loan is allowed as deduction
Interest Payable for pre-
construction period
 If interest on Borrowed capital is paid prior to
the acquisition or completion of construction,
the interest paid during that period is allowed
as deduction in five equal instalments . But if
such amount is allowed as deduction under
any other provision earlier the amt. so
deducted is not allowed as deduction under
this provision
 (a) Where the property is acquired or
constructed with capital borrowed on or
after 01/04/1999 and such acquisition or
construction is completed within 5 years of
the end of the financial year in which the
capital was borrowed: Actual interest
payable subject to maximum of Rs
Interest
2,00,000 Deduction in respect
if relevant certificate is
obtained*
of one self-occupied house
where annual value is Nil
 (b) In any other case, i.e. borrowed for
repairs or renewal or conditions mentioned
in clause (a) are not satisfied: Actual
interest payable subject to a maximum
of Rs 30,000

Interest Deduction in respect

of one self-occupied house
where annual value is Nil
Sec 25AA : Recovery of Arrears of Rent or
Unrealised Rent
(1) The amount of arrears of rent received from a
tenant or unrealized rent realised subsequently
from a tenant,by an assessee shall be deemed to
be the income from house property in respect of
the financial year in which such rent is received or
realised, and shall be included in the total income
of the assessee under the head “Income from
house property”, whether the assessee is the
owner of the property or not in that financial year.
(2) A sum equal to 30% of the arrears of rent or
the unrealised rent referred to in sub-section (1)
Determination of Income from
House Property
Gross Annual Value *******
Less: Municipal Taxes *******
Net Annual Value *******
Less: Deduction under section 24
Standard Deduction (@30%) *******
Interest on borrowed capital *******
Add : Arrears of rentsec 25B (unrealised rent recovered)
less: 30% of arrears
*******
Income from House Property *********
Illustration 1
R owns a property in Delhi. From the particulars given
below compute the income from house property for the
assessment year 2024-25. (in Rs.)
 Muncipal Value: 240000
 Fair rent: 292000
 Standard rent: 280000
 Actual rent : 28000 p.m
 Municipal taxes :20% of municipal value
 Municipal taxes paid during the year: 50% of tax levied
 Expenses on repairs: 40000
 Insurance premium: 10000
R borrowed a sum of Rs. 12,00,000@10% p.a. on 1.7.
2024 and the construction of property was completed
on 28.2. 2024
Illustration 2
Three brothers A,B,C having equal share are co-
owners of a house property consisting of six
identical units. Each of them occupies one for his
residence and the other three are let out at Rs.5000
p.m per unit
M.V: Rs. 300000
Municipal taxes: 40% of Municipal value, paid during
the year
Interest payable on construction: 120000
this property was constructed on 31.5.2023. each of
them occupies one unit .
Calculate total income of three brothers for AY 2024-
25