MFM-MHRDM

III Semester

“The Annual Value of a Property consisting of buildings or lands appurtenant thereto of which the assessee is the owner is chargeable to tax under the head Income from House Property”—Sec 22

The Property should consist of any buildings or lands appurtenant thereto – rental income of vacant property not

included. The assessee should be the owner of the property The property should not be used for own business

whose profits are chargeable to tax Company dealing in properties

Residential Commercial/office Music hall Cinema hall Vacant plot Factory Store/warehouse

Owner includes deemed owner What if rent is NOT received by owner? Ownership of building v/s land Income from subletting

• Transfer to spouse or minor child– An arrangement to live apart– Married minor daughter– Wife buys house with cash gifted

• Holder of impartible estate• Property help as member of co-op

society/company/AOP• Property acquired under power of attorney

transaction– u/s 53A of Transfer of Property Act

• Right in bldg acqd u/s 269UA(f)– Not LT 12 yrs

Income is determined as follows: Rs.Gross annual value ….Less Municipal taxes ….Net annual Value ….Less Deduction U/S 24 - Standard deduction …. -Interest on borrowed capital ….Income from House Property ….

Step I Find out reasonable expected rent of the propertyStep II Find out rent actually received/ receivable [ exclude unrealised rent]Step III Select the higher of the aboveStep IV Compute loss due to vacancyStep V Gross annual value = Step III – Step IV

Rent received or receivable does not include rent of the period for which the property remains vacant. It is calculated as-Rent of the P.Y. for which the property isavailable for letting out …. Less: unrealised rent( vacated or defaulted) ….Rent received /receivable before deducting loss due to vacancy ….Conditions for deducting unrealised rent

Unrealized rent or rent of vacant period is deductible only if certain conditions are fulfilled-1.The tenancy is bonafide2.The defaulting tenant has vacated or steps have been taken to get him vacated3. The defaulting tenant is not in occupation of any other property of the assessee.4. Proper legal proceedings against the tenant is initiated

Municipal Taxes are allowed as deduction only if :

1.The taxes are borne by the owner

2.Taxes are actually paid by him during the P.Y.

Gross Annual Value - Municipal Taxes= Net Annual Value

a)Standard deduction [Sec 24(a)]30% of net annual value is allowed

b)Interest on borrowed capital [Sec 24(b)]

30 percent of Net Annual Value is deductible irrespective of any expenditure

Incurred by the tax payer

“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”

Can be claimed on accrual basisBrokerage or commission on loan is not allowed as deductionInterest on borrowed capital is allowed as deduction without any ceiling in case of let out property• Interest on loan rollover allowed

Deduction is allowed in 5 equal installments

“pre-construction period” means the date commencing on the date of borrowing and ending on :March 31st immediately prior to the date of

completion of construction or date of acquisition OR

Date of repayment of loan whichever is earlier

A property occupied for own business purposes

More than one property is occupied for own residential purposes1 house treated as self occupiedRest deemed to be let out

The Annual Value of Self occupied House property is taken as NIL if-

Used for residential purposes The property is not let out during any

part of the year No other benefit is derived

Income is determined as follows: Rs.Gross annual value NilLess Municipal taxes NilNet annual Value Nil Less Deduction U/S 24 - Standard deduction Nil -Interest on borrowed capital DeductibleIncome from House Property XXXX

Used throughout PY for own residential purposes and not let out or put to any other use

Unable to occupy property because employment/business/profession of owner is in some other place

Where a part of property (being independent residential unit) is occupied and remaining part let out

Property let out for part of year and self occupied in remaining part

Max amount is Rs.1,50,000 Capital borrowed on or after 1st

April,1999 for acquiring or constructing a property

The acquisition should be complete within 3 years from end of FY in which capital is borrowed

If capital is borrowed for extension or renovation,deduction is Rs.30,000

Capital borrowed before 1.4.99 for purchase, extension or renovation is Rs.30,000

Thankyou