I

NCOMEFROM HOUSEPROPERTY

Thei ncomefrom houses,bui

ldi
ngs,bungal
ows,godownset c.istobecomput edand
assessedtot
axunderthehead“ I
ncomefrom housepr
opert
y”.Thei
ncomeunderthishead
i
snotbasedupont heactuali
ncomefrom theproper
tybutupontheannualval
ueoft he
propert
y.

Accordi ngSecti
on22oft heIncomet axAct,theannualval
ueofproper
tyconsi
sti
ngofany
buil
dingsorl andsappur
tenantther
eto,ofwhichtheassesseeistheownerandwhichi
snot
usedf orpurposesofassessee’sbusinessorprofessi
onshallbechar
geablet
oincometax
undert hehead‘ I
ncomefrom housepropert
y’.

Somei mpor tantpoints

1.Buildingorl andsappur tenantt her eto.Thescopeoft hisheadofi ncomei slimitedt o
thei ncomef r
om bui l
dingsorl andsappur t
enant( att
achedorsi t
uat edint hev i
cini
tyof
buil
di ng)tobui ldi
ngsonl y .I
ncomef rom thelandwhi chi snotappur tenanttoanybui lding
doesnotcomewi t
hint hescopeoft hissecti
on.I ncomef rom suchl andi staxableunder
thehead‘ Incomef r
om Ot herSour ces’ .Buil
dingsi ncluder esident
ialhouses,bungal ows,
warehouses,docks,audi toriums,ci nemahal ls,stadium,dancehal ls,musi chall
s,lecture
hall
set c.Butt empor aryhut ment si nthev acantl andar enoti ncludedi nbui l
dings.The
l
andsappur tenanttobui l
dingincludecompound,pl ay-ground,kit
chen- garden,courtyard
etc.Incaseofnon- residentialbuilding, carparkingspaces, dryi
nggr ounds, playgrounds
connect i
ngr oadsinf actoryareaet c.

EXCEPTI
ONS

(a)Bui ldingorst af fquar t

ersletoutt oempl oyeesandot hers.I ftheassesseel et
soutt he
buildingorst affquar ter stotheempl oy eesofbusinesswhoser esidencet hereisnecessi t
y
fort heef fi
cientconductofbusi ness, therentcoll
ectedf rom suchempl oy eesisassessabl e
asi ncomef rom busi nessandnotasi ncomef rom housepr operty.
(b)I fabui l
dingisl etoutt oaut horiti
esf orlocat
ingbank,postof fi
ce,pol i
cest ati
on,etc.,
i
ncomef rom suchbui ldingwi l
lbeassessabl easi ncomef r
om busi nessandnotasi ncome
from housepr operty.
(c)Composi t
el ettingofbui l
dingwi thotherasset s. Wher et heassesseel etsonhi r
e
machi nery,plantorf urniturebelongingt ohim andal sobui ldingsf oracomposi ter entand
ther ent,ofbui l
dingsi si nseparablef rom therentoft hesai dmachi nery,pl antort he
furniture,thei ncomef rom suchl etti
ngi snotchar geabl et oi ncomet axundert hehead
‘
Incomef rom HousePr operty’
buti ti
st axableundert hehead‘ Incomef rom Ot herSour ces’
orundert hehead“ Busi nessorPr ofession’,
ofsuchl etti
ngi shisbusi ness.

(d)Anassesseecompanyacquiri
ngpr
operti
estoearni
ncome:I fthemai
nobjectof
assesseecompanyasMPAi st
oacqui
reproper
ti
esandearnincomebylet
tingoutof
samepr oper
ty,saidi
ncomeistobebroughttotaxasbusinessincomeandnotas
i
ncomef rom housepr
oper
ty.
(
e)Pay
ing-
guestaccommodat
ion.I
tisassessabl
easbusi
nessi
ncome.

2.Onit
sAnnualValue:Theincomeiscomputedont hebasi
sofannualv
alueofbui
l
ding
andl
andappur
tenantt
her
etoandnotonit
srental
income.

3.Theassesseeshoul dbet heowneroft heproperty.I tisonl yt

heowneroft hehouse
propert
ywhocanbet axedundert hi
sheadofi ncome.Thet axunderthi
ssecti
oni sin
respectoft helegalorbenef ici
alownerandnott heoccupat i
onorpossessionofhouse
propert
y .Therefore,incomef rom sublet
ti
ngwi l
lbechar geableunderthehead‘Income
from othersour ces’andnotunderhousepr operty.Soonl ytheownermaybel egalor
deemedowner ,isli
ablet otaxundert hi
sheadofi ncome,unl essthehousepropertyis
usedbyhi mfort hepurposesofhisownbusi nessorpr ofession.
Thef ol
lowingar etheowner sofahousepr opert
y:

a.Theper
soni
nwhosenamet
hepr
oper
tyi
sregi
ster
ed

b.I
ncaseofmor
tgage,
iti
sthemor
tgagorandnotmor
tgagee

4.Iti
snotusedf orpurposesofAssessee’ sBusinessorProfession:Ifthepropert
yor
aportionofitisoccupiedbyt heassesseetotax,theannualval
uei nrespectofsuch
propertyorpor t
ionofi ti snottaxableasincomef rom housepr opert
yandal so
nothi
ngwi l
lbededuct ibleasexpenditur
eonr entofthispremisesincomput i
ngthe
profi
tsofbusinessorpr ofessi
on

Exempt
ionsr
egar
dingI
ncomef
rom HousePr
oper
ty:

Ther
ear
etwoki
ndsofexempt
ions.Theyare:
1.Ful
lyExemptedIncomes
2.Deduct
ibl
efrom G.
T.I
.

1.Full
yExempt edI ncomes:
1.Incomef r
om f arm house
2.Annual valueofonepal aceofex -
IndianRuler.
3.Incomef r
om pr opertyownedby :
(
a)Local Aut hor
ity
;
(
b)ScientificResearchAssoci at
ion;
(
c)TradeUni on;
(
d)Char it
abl eTrust;
(
e)Politi
cal Part
y;
(
f)Univ ersityorothereducat i
onalinsti
tuti
onexist
ingf oreducati
onalpur
poses
and
notforpur posesofpr ofi
ts;
(
g)Hospi talormedi calinst
itut
ionexistingforphi
lanthropicpurposesandnot
f
or
purposesofpr of
its.
4.Incomef r
om pr opertyusedforassessee’ sownbusi nessorprofessi
on.
 5.I ncomefrom onesel
f-
occupiedhouse.
6. I ncomefrom housemeantf orsel
f-resi
dencebutcouldnotbeoccupi ed
t
hroughout
theprevi
ousyearonaccountofhisser
vicebusinessorpr
ofessi
onatanyot
her
place.

2.Deducti
blefrom G.T.I
1.IncomeofaCo- oper
at i
vesocietyfr
om thelett
ingofgodownsorwar ehousesfor
storageofcommodi tiesmeantf orsale.
2.Incomeofaco- operati
vesoci et
yf r
om housepr opertyprovi
deditsgrosstotal
incomedoesnotexceedRs.20, 000andt hesoci et
yisnotahousi ngsociet
y,
urban consumer s’ co-operati
ve soci et
y,t ransport societ
y or soci ety
manuf actur
inggoodswi ththeaidofpower .

I
ncomef
rom housepr
oper
tyofamut
ual
concer
n(cl
ub)i
snotassessabl
e.

ANNUALVALUE
Thet
erm annualvalueisveryimpor
tantascalcul
ati
onofi ncomef r
om houseproper
ty
dependsuponcor r
ectl
ycalcul
atedannualval
ue.I
ttakesint
oconsi der
ati
onnotonl
ytherent
receiv
edbutalsotheexpectedrentahousecanfetchunderthegivensit
uat
ionandnotonly
oncebutfrom yeart
oy ear
.

Defini
tionofannualv alue[Sec. 23(1)
]. Theannualv alueofahousepr oper
tylet
-outshall
bedeemedt obe:
(a)thesum f orwhi chthepr oper t
ymightreasonablybeexpectedtobeletfr
om yeartoy ear
;
or
(b) wher et hepr operty oranypar tofpr opertyisletandt heactualrentreceivedor
receiv
abl ebyt heowneri si nex cessoft hesum r eferr
edtoi n(a)
,theamountofr ent
receiv
edorr eceivable;or
(c)wher ethepr opertyoranypar tort
hepr opert
yi sl
etandwasv acantduri
ngthewher eor
anypar toft hepr evi
ousy earandowi ngt osuchv acancyt heactualrentrecei
v edor
receiv
abl ebyt heowneri nr espectther
eofi slessthant hesum referr
edt oin( a),the
amountsor eceivedorr ecei
v able.

Determinati
onofGr ossAnnualValue
St
ep1:
Fai
rRentorMunicipalValue=(Whicheveri
shigher
)
St
ep2:
Resul
tofStep1orSt andardRent=whicheveri
slower(
Expect
edRent
)
St
ep3:ExpectedRentorActualRent

Act
ual
Rent>Expect
edRent Act
ual
Rent<Expect
edRent
 GAV=Act
ual
rent (
Unreal
i
sedr entcanbereducedfr
om Actual
Rentifcondit
ionofRul
e4ar esat
isf
ied)

Act
ual
Rent<Expect
edRent Act
ual
Rent<
Expect
edRent
becauseofVacancy becauseofanyot
her
f
act
or

GAV=Act
ual
Rent GAV=Expect
edRent

Prov idedthatt hetaxes( i

ncludingser vi
cet axes)leviedbyanyl ocalaut hori
tyand
paidbyt heownerdur ingthepr evi
ousy ear( i
rr
espectiveoft hepr evi
ousy eartowhi chsuch
taxesrelate)shallbededuct edindetermi ni
ngt heannual val
ueoft heproper ty.
Generally,
theser vicet axesincl
udef ir
et ax,watertax,conservancyt ax,educat i
oncess, etc.
Unreal
isedr entshal lnotform partofannualv al
uei fthefollowingcondi tionsaresat isf i
ed
(Rule4) :
1.t het enancyi sbonaf i
de;
2.t hedef aul
ti
ngt enanthasv acated, orstepshav ebeent akentocompelhi mt ov acat e
thepr oper
ty;
3.t hedef aul
ti
ngt enantisnotinoccupat i
onofanyot herpr opert
yoft heasessee;
4.t heassesseehast akenallreasonabl estepsofi nsti
tut i
nglegalpr oceedingsf ort he
recov eryoft heunpai drentorsat isf
iestheAssessi ngOf fi
certhatl egalproceedi ngs
woul dbeusel ess.

Deter
minat i
onofExpect edRent
(a)Wherest andar drenthasnotbeenf ixed.
1.Muni cipalvaluedeterminedbyt hel ocalauthori
tyforcharginghouset
axet
c.or
2.Fai rRent–Rentofsi mil
arpr oper t
iesint hesamel ocali
ty.
Whicheverishi ghershallbetreatedasexpect edrentofthebui l
ding.
(b)Wher est andardr enthasbeenf i
xed.
1.thev aluedet erminedunder( a);or
2.thest andardr entfi
xedunderRentCont rolActofaSt ate.
Whicheverisl essshallbetreatedasexpect edrentofthebui l
ding.

Incasest andardr enthasbeenf i

xed,t heex pect
edr entcannotexceedst andardrent
.So
fi
rstl
ycompar eMuni ci
palrentandf ai
rr entandf i
ndoutt hehigheroneandt heamountso
calcul
atedcannotexceedamountofst andar drent
.
Comput ati
onofAnnualVal ueofahouseunderdi fferentsi t
uat ions
1.Comput ationofAnnualVal uei ncaseofl et -
outhouse,whi chnei therremains
vacantdur i
nganypar tofpr evi
ousy earnott her eisanyunr eali
zedr ent.
Grossannual valueshallbetheex pectedr entoract ual rent,whichev erisgreater.
From thegrossannualv al
ue,themuni cipaltaxpaidbyt heownerdur i
ngt hepr evi
ousyear
shallbedeductedandt hebalanceshall bet heannual v alueoft hepr opertylet
-out.
2.Comput ationofAnnualVal uei ncaseofl et-outhousewhi chr emainsv acantfor
wholeoranypar toftheprev i
ousy ear.
(
A)Houser emai nsvacantforfullyear: Insuchacasegr ossannual val
uewi ll
benil
.
 (B) Houser emainsv acantf orapar toft hepr evi
ousy ear:
(
i)Ift heact ualr
entr ecei
v ed/receivablef orlet-outper iodismor ethantheexpected
r ent ,theactual rentreceived/ receivablewi llbet hegr ossannualvalue.
(i
i)Ift heact ualrentr eceived/r eceivablef orlet-outper iodislessthantheexpected
rent
owi ngt osuchv acancyt heact ualrentr eceived/ recei
vablewillbet hegross
annual
v alue.
3.Comput ationofAnnualVal uei ncaseofl et-outhouse, whi chdoesnotr emainvacant
duri
nganypar tofthepr evi
ousy earbutt her eisunr eali
zedr ent.
Thegr ossannualv alue ofsuchahousewi l
lbedet ermi nedasdi scussedin(1).Fr
om
the
GrossAnnualVal uet hef ol
lowingdeduct i
onswi llbeal lowedandt hebalancewi l
lbe
the
Annual v alue.
(a)Taxesact uall
ypaidbyt heownert olocal author it
y;
(b)Unr eal isedrent(I fconditionsofRul e4ar esat isfi
ed)

4.Computati
onofAnnualValueincaseoflet
-outhouse,
whi
chr
emai
nsv
acantdur
inga
par
tofprevi
ousyearandthereisunr
eal
izedrent.

GrossAnnual Valueshall
bet heexpectedrentorAct
ualrentwhicheveri
sgreater
.
Here,Actualrentalvaluei sreducedbyanamountofact ualrentinproport
ionof
vacancy.
From t
heGr ossAnnual Valuethefoll
owingdeducti
onswillal
l
owedandt hebal
ancewil
l
be
theAnnualvalue.
(a)Taxesactuallypai
dbyt heownert olocalaut
hori
ty;
(b)Unreali
sedr ent(I
fconditi
onsofRul e4aresati
sfi
ed).

Deduct i
onsf rom AnnualValue
1.Asum ofequal t
o30%ofannual valueasst
andarddeduct i
onforexpenses
2.Interestonloantakeninrespectofhousepropert
y.
Int
erestonl oantakenf orthepurposeofpurchasing,const
ruct
ing,r
econstr
uct
ingor
repairi
ngt hehousepropertyi
sallowableasadeducti
ononaccr ualbasi
s.

Note:1.Inter
estonunpaidint er
estisnotdeducti
ble.
2.I nt
erestonaf r
eshl oanr ai
sedmer el
ytor epaytheori
ginall
oant akenf orthe
above
purposesisal
lowableasadeduct ionundert hi
ssecti
on.
3.Anybr oker
ageorcommi ssionpai
dforraisi
ngt hel
oaninnotdeductibl
e
4.I nt
erestforpr
e-acquisit
ionorpre-
constr
uctionperi
odshallbedeductedinf i
ve
equalannualinstalment scommenci ngf r
om t heprevi
ousy earinwhi cht he
house
 wasacqui
redorconst
ruct
ed.

AnnualVal
uef
orsel
foccupi
edHousepr
oper
ty

Thebui l
dingssel f
-occupied byt heowner( an i
ndi
vidualorHUF)f orresi
dent
ial
pur
posescanbedi vi
dedasunder :
1.a)Houseorpar tofahouseoccupi edbytheownerforful
lprevi
ousyearfor
thepurposesofhisownr esidence,or
b)Unoccupi edhouse
2. Houseself-occupi
edf orpartoftheprevi
ousyearandlet-
outforpar
tofthe
prev
iousyear
3. Morethant wohousesi nt heoccupati
onoftheowner