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MMM-MIM
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
a)Income from farm houseb)Annual value of any one palace of an ex-rulerc)Property income of a local authorityd)Property income of an educational institutione)Property income of a trade unionf)House property held for charitable purposesg)Property of a political partyh)Property used for own business or professioni) One self occupied house property
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
Property Used for Own Business Property held as Stock in trade is
chargeable under the head Income from House Property thou it is his /her Business Income
Composite rent received like receipt for rent, furniture, airconditioner, etc is taken as income from other sources where it is not possible to separate rent receipt
Income from subletting is not income from house property
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