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 house b)Annual value of any one palace of an ex-ruler c)Property income of a local authority d)Property income of an educational institution e)Property income of a trade union f)House property held for charitable purposes g)Property of a political party h)Property used for own business or profession i)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 property Step II Find out rent actually received/ receivable [ exclude unrealised rent] Step III Select the higher of the above Step IV Compute loss due to vacancy Step 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 is available 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 bonafide 2.The defaulting tenant has vacated or steps have been taken to get him vacated 3. 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 basis  Brokerage or commission on loan is not allowed as deduction  Interest 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 31 st 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 purposes  1 house treated as self occupied  Rest 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 Nil Less Municipal taxes Nil Net annual Value Nil Less Deduction U/S 24 - Standard deduction Nil -Interest on borrowed capital Deductible Income 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 1 st 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 for purchase, extension or renovation is Rs.30,000