1. For GONSALO GARCIA TY B.COM STUDENTS 2011-12 BATCH From Jose George

2. HEADS OF INCOME INCOME FROM HOUSE PROPERTY

3. INCOME FROM HOUSE PROPERTY Charging Section S. 22, Annual Value of any property consisting of any building or land appurtenant thereto of which, the assessee is the owner is chargeable to tax under the head Income from House Property Charging Section S. 22, Annual Value of any property consisting of any building or land appurtenant thereto of which, the assessee is the owner is chargeable to tax under the head Income from House Property

4. INCOME FROM HOUSE PROPERTY following three conditions: following three conditions: property consists of buildings or lands appurtenant thereto property consists of buildings or lands appurtenant thereto the assessee should be the owner of the property the assessee should be the owner of the property the property should not be used by th owner for his own business the property should not be used by th owner for his own business

5. INCOME FROM HOUSE PROPERTY Owner includes legal as well as deemed owner Owner includes legal as well as deemed owner Deemed owner as per section 27 includes: Deemed owner as per section 27 includes: Transfer to spouse without an agreement to live apart or to a minor, not a married daughter Transfer to spouse without an agreement to live apart or to a minor, not a married daughter Holder of an impartible estate Holder of an impartible estate Property held by a member of a co-operative society / company / AOP Property held by a member of a co-operative society / company / AOP A person who has acquired a property under power of attorney A person who has acquired a property under power of attorney Person acquired a right on a property under lease Person acquired a right on a property under lease

6. INCOME FROM HOUSE PROPERTY Owner includes legal as well as deemed owner Owner includes legal as well as deemed owner Deemed owner as per section 27 includes: Deemed owner as per section 27 includes: Transfer to spouse without an agreement to live apart or to a minor, not a married daughter Transfer to spouse without an agreement to live apart or to a minor, not a married daughter Holder of an impartible estate Holder of an impartible estate Property held by a member of a co-operative society / company / AOP Property held by a member of a co-operative society / company / AOP A person who has acquired a property under power of attorney A person who has acquired a property under power of attorney Person acquired a right on a property under lease Person acquired a right on a property under lease

7. INCOME FROM HOUSE PROPERTY Exempted property Exempted property income from farm house (u/s 2(1A) (10(1)) income from farm house (u/s 2(1A) (10(1)) annual value of any one palace of an ex-ruler Se. 10(19A) annual value of any one palace of an ex-ruler Se. 10(19A) property income of a local authority (10( 20) property income of a local authority (10( 20) property income of an approved scientific research association (10(21) property income of an approved scientific research association (10(21) property income of an educational institution (10(20C) property income of an educational institution (10(20C)

8. INCOME FROM HOUSE PROPERTY Exempted property Exempted property property income of a trade union (10(24) property income of a trade union (10(24) house property held for charitable purpose (11) house property held for charitable purpose (11) property income of a political party (13A) property income of a political party (13A) property used for own business or profession (22) property used for own business or profession (22) one self-occupied property Sec 23(2) one self-occupied property Sec 23(2)

9. computation of income from house property depends on the type of property computation of income from house property depends on the type of property let out House property let out House property self -occupied property self -occupied property let out property remain vacant let out property remain vacant partly let out and partly self occupied partly let out and partly self occupied deemed to be let out deemed to be let out property owned by co-owners property owned by co-owners Computation of Annual Value

10. let out House property let out House property Annual Value XXX Annual Value XXX Less Muncipal Tax XXX Less Muncipal Tax XXX Adj. Annual Valuexxx Adj. Annual Valuexxx less Deduction u/s 24XXX less Deduction u/s 24XXX Income from House Property XXX Income from House Property XXX Tax under the head income from House property is not a tax upon rent of a property. It is tax on the capacity of a building to yield income. The measure of such income is called Annual Value Tax under the head income from House property is not a tax upon rent of a property. It is tax on the capacity of a building to yield income. The measure of such income is called Annual Value Computation of Income from House property

11. Annual value is the estimated value of Income expected if the property is rented. Annual value is the estimated value of Income expected if the property is rented. Annual value is the Annual value is the reasonable letting Value or reasonable letting Value or Actual Rent of the property which ever is higher. Actual Rent of the property which ever is higher. Reasonable letting value is the Municipal value or Fair rent which ever is higher restricted to Standard rent a per Rent Control Act Reasonable letting value 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

12. reasonable letting value is: reasonable letting value is: Municipal value or Municipal value or Fair rent Fair rent Which ever greater restricted to Standard rent Which ever greater restricted to Standard rent Municipal Valuation is the ratable value fixed by the municipality for charging municipal tax. 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 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. Standard rent is the maximum rent which a person can legally recover from his tenant under the Rent Control Act. Computation of Annual Value of Let –out

13. COMPUTATION OF ACTUAL RENT ACTUAL RENT ACTUAL RENT 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 unrealised rent, if it fulfills the conditions, is allowed to deduct from actual rent receivable 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 unrealised rent, if it fulfills the conditions, is allowed to deduct from actual rent receivable Actual Rent = Actual rent received or receivable – allowable unrealised rent Actual Rent = Actual rent received or receivable – allowable unrealised rent

14. Loss due to vacancy If the let out property remain vacant for a period, the loss due to vacancy is allowed to be deducted from the highest value, arrived after comparing reasonable letting value with Annual Rent. The balance after the deduction of loss due to vacancy, if any, is the Annual Value If the let out property remain vacant for a period, the loss due to vacancy is allowed to be deducted from the highest value, arrived after comparing reasonable letting value with Annual Rent. The balance after the deduction of loss due to vacancy, if any, is the Annual Value

15. Find out the annual Value Find out the annual Value H1H2H3H4H5 Municipal Value105 Fair rent107 Standard rentNA88 135 Actual Rent1031128611497 Unrealised rent (condition fulfills) 12121 Period of the previous year (in months) 12 Period for which property remain vacant Nil

16. Answer Reasonable letting value 107 Reasonable letting value 107 (fair rent -107, MV- 105 St Rent nil) (fair rent -107, MV- 105 St Rent nil) Actual Rent (103-1)102 Actual Rent (103-1)102 AR -103; allowable unrealised rent 1 The Highest RLV or AR107 Less loss due to vacancyNil Less loss due to vacancyNil Annual Value107

17. Answer Reasonable letting value88 Reasonable letting value88 (fair rent -107, MV- 105 St Rent 88) (fair rent -107, MV- 105 St Rent 88) Actual Rent (112-2) 110 Actual Rent (112-2) 110 AR -112; allowable unrealised rent 2 The Highest RLV or AR 110 Less loss due to vacancy Nil Less loss due to vacancy Nil Annual Value 110

18. Answer Reasonable letting value88 Reasonable letting value88 (fair rent -107, MV- 105 St Rent 88) (fair rent -107, MV- 105 St Rent 88) Actual Rent (86-1)85 Actual Rent (86-1)85 AR -86; allowable unrealised rent 1 The Highest RLV or AR88 Less loss due to vacancyNil Less loss due to vacancyNil Annual Value88

19. Answer Reasonable letting value 107 Reasonable letting value 107 (fair rent -107, MV- 105, St Rent 135) (fair rent -107, MV- 105, St Rent 135) Actual Rent (97-1) 96 Actual Rent (97-1) 96 AR -97; allowable unrealised rent 1 The Highest RLV or AR 107 Less loss due to vacancyNil Less loss due to vacancyNil Annual Value 107

20. Question X owns a house property (municipal Valuation. 1,45,000, fair rent1,36,000 standard rent Rs. 1,24,000 it is let out throughout the previous year(rent being 8000 per month upto November 15, 2010 and Rs. 14000 per month thereafter) X transfer the property to Y on Jan 31 2011, Find out the annual Value of the property in the hands of Mr. X for the assessment year 2011 - 12 X owns a house property (municipal Valuation. 1,45,000, fair rent1,36,000 standard rent Rs. 1,24,000 it is let out throughout the previous year(rent being 8000 per month upto November 15, 2010 and Rs. 14000 per month thereafter) X transfer the property to Y on Jan 31 2011, Find out the annual Value of the property in the hands of Mr. X for the assessment year 2011 - 12

21. Answer Reasonable letting value1,03,333 Reasonable letting value1,03,333 (fair rent -1,36,000/12X10=113,333, MV- 145000/12X 10=120,833, St Rent 124000/12X10=1,03,333) (fair rent -1,36,000/12X10=113,333, MV- 145000/12X 10=120,833, St Rent 124000/12X10=1,03,333) Actual Rent (8,000X7 1/2 +14000X2 1/2 ) 95000 Actual Rent (8,000X7 1/2 +14000X2 1/2 ) 95000 The Highest RLV or AR1,03,333 Less loss due to vacancyNil Less loss due to vacancyNil Annual Value1,03,333

22. Loss due to vacancy If the Annual Rent is less than the Reasonable letting Value only because of the loss due to vacancy, then the Annual Rent is to be taken as Annual Value If the Annual Rent is less than the Reasonable letting Value only because of the loss due to vacancy, then the Annual Rent is to be taken as Annual Value

23. Loss due to vacancy Fair Rent Rs. 24000, Municipal Valuation Rs 28000, Actual Rent Rs. 36,000 (for 12 month) property remain vacant for 1 month) calculate the annual Value Fair Rent Rs. 24000, Municipal Valuation Rs 28000, Actual Rent Rs. 36,000 (for 12 month) property remain vacant for 1 month) calculate the annual Value

24. Answer Reasonable letting value28000 Reasonable letting value28000 (fair rent –25000, MV- 28000, (fair rent –25000, MV- 28000, Actual Rent 36000 Actual Rent 36000 The Highest RLV or AR36000 Less loss due to vacancy3000 Less loss due to vacancy3000 Annual Value33000

25. Answer Fair rent Rs. 26,000, Municipal Valuation Rs. 30000, Rent Rs. 2000 pr month, 1 month the property remain vacant and rs. 2000 unrealised rnt ulfils conitions. Fair rent Rs. 26,000, Municipal Valuation Rs. 30000, Rent Rs. 2000 pr month, 1 month the property remain vacant and rs. 2000 unrealised rnt ulfils conitions.

26. Answer Reasonable letting value30000 Reasonable letting value30000 (fair rent –26000, MV- 30000, (fair rent –26000, MV- 30000, Actual Rent (2000 X 12) 24000 Actual Rent (2000 X 12) 24000 Less Unrealised 2000 22000 Less Unrealised 2000 22000 The Highest RLV or AR30000 Less loss due to vacancy(2000X1) 2000Annual Value 28000 Less loss due to vacancy(2000X1) 2000Annual Value 28000

27. 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 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

28. Deduction u/s 24 Standard deduction Standard deduction Interest on borrowed Interest on borrowed

29. Deduction u/s 24 Standard deduction Standard deduction Interest on borrowed Interest on borrowed

30. 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 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 30 % of the adjusted annual value is deductible irrespective of expenses incurred by the taxpayer

31. 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 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 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 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 of a fresh loan taken for the repayment of the earlier loan is allowed as deduction

32. 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 installments. 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 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 installments. 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

33. Question Mr. Jeevan has a house in Mumbai, which he used for his residence in the previous year 2009-10. Due to to his transfer to Nagpur he could not occupy this house in the previous year 2010-11. he stays in a rented house in Nagpur, He has let out his mumbai house property @ Rs. 12000 per month. He spend Rs. 2000 for insuring the property and 2000 for repairs. Fair rent of the house property comes Rs. 13000 per month. The property remain vacant for 2 months and the unrelised which fulfills conditions Rs. 10000 calculate the income from HP of Mr. JEEVAN for the assessment year 2011-12 Mr. Jeevan has a house in Mumbai, which he used for his residence in the previous year 2009-10. Due to to his transfer to Nagpur he could not occupy this house in the previous year 2010-11. he stays in a rented house in Nagpur, He has let out his mumbai house property @ Rs. 12000 per month. He spend Rs. 2000 for insuring the property and 2000 for repairs. Fair rent of the house property comes Rs. 13000 per month. The property remain vacant for 2 months and the unrelised which fulfills conditions Rs. 10000 calculate the income from HP of Mr. JEEVAN for the assessment year 2011-12

34. Answer Let-out House Let-out House Annual Value30000 Annual Value30000 (Fair rent- 13000 X 12=156000 or MV (Fair rent- 13000 X 12=156000 or MV Nil, thus RLV =156000, Actual Rent Rs. 12000 X 12 =1,44000 – Unrealised rent Rs. 10, 000 Actual Rent = 144000-10000=134000) RLV or Actual rent which ever is higher = 156000 Less Loss due to Vacancy (12000 X 2) 24000 Annual Value 132000

35. Answer Let-out House Let-out House Annual Value132000 Annual Value132000 Less Municipal TaxNil Less Municipal TaxNil Adjusted Annual Value132000 Adjusted Annual Value132000 Less deduction U/S 24 Less deduction U/S 24 1. Standard deduction 1. Standard deduction 30% of Adjusted Annual Value39600 2.Interest on Borrowed Capital 2000 41600 Income From House Property 90400