1.

Section 22 - Basis of Charge

2. Section 23 - Annual Value
 Section 23(1) - Building Let Out
 Section 23(1)(a) - Determination of Expected Rent
 Section 23(1)(b) - Determination of Actual Rent
 Section 23(2) - Building Self-Occupied for Residential Purposes
 Section 23(3) - House Self-Occupied for part of the P.Y. and Let
Out for
part of P.Y.
 Section 23(4) - More than two Houses in the occupation of owner
 Section 23(5) - Property held as Stock-in-trade
3. Section 24 - Deduction from Annual Value
 Section 24(a) - Standard Deduction @30% from Annual Value
 Section 24(b) - Deduction for Interest on Home Loan
4. Section 25 - Interest not deductable
 Section 25A - Unrealised Rent realized
5. Section 26 - Property of Co-Owners
6. Section 27- Deemed Owners
  Under the head Income from House Property' the basis of charge
is the Annual Value of property:
a) Consists of any buildings or lands appurtenant thereto,
 Exceptions:
 Building or staff quarters let out to employees and others.
 Building is let out to authorities for locating bank, post
office, police station, etc.
 Composite letting of building with other assets.- Paying guest
accommodation.
b) Of which the assessee is the owner,
 The person in whose name the property is registered.
 In case of a mortgage, it is the mortgagor and not the
mortgagee.
 Deemed Owners. (Sec. 27)
c) Which is not used for purposes of assessee's business or
profession.
 The following are deemed to be the owners of the
property:
1. An individual who transfers any house property to his
or her spouse, without adequate consideration or not
being a transfer in connection withan agreement to
live apart, or to a minor child not being a married
daughter shall be deemed to be the owner of the
house property to transferred.
2. A member of a Co-operative Society, Company or an
Association ofPersons to whom a building or its part
is allotted or leased under a housebuilding scheme of
the society, company or association shall be deemed
tobe the owner of that property.
3. A person who is allowed to retain possession of any
building in part performance of a contract shall be
deemed to be the owner of building.
4. A person having lease rights in the property under a lease
extending to 12years or more in the aggregate including
the term for which the lease maybe extended shall be
deemed to be the owner of the property.
5. If a person takes land en lease and constructs a house
upon it, he will be deemed to be it's owner.
6. Disputed Ownership: If the title of ownership is disputed
in a court of law, the recipient of rental income or the
person who is in possession of the property as the owner
is treated as the owner.
  There are two kinds of exemptions regarding income from house property.
1) Income is not included in gross total income, i.e., fully exempt, and
2) Income is included in assessee's gross total income but the deduction is allowed
from gross total income.
1. Fully Exempted Income.
a) Income from farm house
b) Annual Value of one palace of ex-Indian Ruler.
c) Income from property owned by:-
 Local Authority
 Political Party
 Trade Union
 Scientific Research Association
 Charitable Trust
 University or other educational institution existing for educational purposes
not for purposes of profit
 Hospital or medical institution existing for philanthropic purposes and not
for purpose of profits.
d) Income from property used for assessee's own business or
profession
e) Income from two self-occupied house.
f) Income from the house meant for self-residence but could not be
occupied throughout the previous year an account of his service
business or profession at any other place.
2. Deducted from Gross Total Income
a) Income of a co-operative society from the letting of godowns or
warehouses for storage of commodities meant for sale.
b) Income of a co-operative society from house property, provided
its gross total income does not exceed Rs.20,000 and the society
is not a housing society, urban consumers' co-operative society,
transport society or society manufacturing goods with the aid of
power.
 Income from house property situates abroad: Income from House Property situated in a foreign
country is taxable only in the case of residents. If a foreign property is taxed in India it will be
taxable under the head 'Income from House Property' and its annual value shall be computed as
if the property is situated in India.
 Property owned by co-owners (Sec. 26): Where a property is owned by two or more persons
jointly and their respective shares are definite and ascertainable, income from such property
shall not be assessed on such persons as an association of persons, but the share of each such
person from the property shall be included in his respective total income, If any portion of the
house belonging to a co-owner is occupied by him for his own-residence, that portion will be
treated as self-occupied house and its annual value will be Nil, i.e., it will be exempt from tax
and each Co-Owner will be allowed deduction of Rs.30,000/2,00,000 on account of interest on
Loan for House Property.
 Composite Rent: If a building is let out to a person along with other facilities(e.g., electricity,
cooler, lift, water pump, water tax, etc.) for a composite rent and if the rent of the building can
be separated from the rent of such facilities, the two rents will be separated and that belonging
to the building only will be taxed under the head 'House Property' and that which belongs to
other facilities will be taxed under the head 'Income from other Sources'. If the composite rent
cannot be split up it will be taxed under the head 'Income from other sources'.
 The tenancy is bonafide.
 The defaulting tenant has vacated, or steps have been
taken to compel him to vacate the property.
 The defaulting tenant is not in occupation of any other
property of the assesse.
 The assessee has taken all reasonable steps of instituting
legal proceedings for the recovery of the unpaid rent or
satisfies the Assessing Officer that legal proceedings
would be useless.
 Income from house property does not mean rental income, but it
means the sum for which the building might reasonably be
expected to be let from year to year. An assessee's income from
house property is computed on the basis of its "Annual Value".
Annual Value of the house property is determined on the basis of
the following:)
1. Building Let-Out
2. Building Self-Occupied for Residential Purposes
a) House or part of a house occupied by the owner for full
previous year for the purpose of his own residence, or
b) Unoccupied House
3. House Self-Occupied for part of the P.Y. and Let Out for part of
P.Y.
4. More than two Houses in the occupation of owner
5. Property held as Stock-in-trade
• The annual value of a house property let out
shall be deemed to be:
• The sum for which the property might
reasonably be expected to be let from year to
year (Expected Rent),
• Actual Rent > Expected Rent → Actual Rent will
be the Gross Annual Value, or
• Actual Rent < Expected Rent:
• Due to Vacancy → Actual Rent will be the Gross Annual Value
• Due to any other Factor → Expected Rent will be the Gross
Annual Value
Solution
Expected 90,000
Rent
GAV=1,32,000
Actual Rent 1,32,000
(-)MT= 10,000
Municipal 10,000 Annual Value=1,22,000
Tax

Expected Rent 1,60,000

E.R=1,60,000
Actual Rent 20,000 p.m. A.R=2,40,000(20,000x12)
Municipal Tax 30,000 GAV= 2,40,000
Unrealised Rent Rs.40,000. (-)MT= 30,000
(Conditions of Rule 4 are Satisfied) (-) UR= 40,000
Annual Value=1,70,000
 Expected Rent 1,00,000 (i) (ii
Actual Rent (i) 10,000 monthly E.R=1,00,000 ER=1,00,000
(ii) 8,000 monthly A.R=1,100,000(10,000x11) A.R= 88,000(8,000x11)
Municipal Tax 9,000 GAV= 1,10,000 GAV=1,00,000
(-)MT= 9,000 (-)MT= 9,000
House remained vacant for 1 month
Annual Value=1,01,000 Annual Value=81,000
**Full year vacant → GAV = Nil

Expected Rent 2,00,000 E.R=2,00,000

Actual Rent 30,000p.m A.R=3,00,000(30,000x10)
GAV= 3,00,000
Municipal Tax 15,000 (-)MT= 15,000
•House remained vacant for 2 month (-)UR= 30,000
•Unrealised Rent Rs. 30,000 Annual Value=2,55,000
(Condition of Rule 4 are Satisfied)
1. A sum equal to 30% of the annual value as the
standard deduction for expenses (except interest).
i. Standard deduction@ 30% of annual value
shall be deducted whether any expenditure is
incurred or not.
ii. If the owner of the house occupies more than
two houses for his residential purposes, except
two houses all other self-occupied
house/houses are deemed as let-out. In such a
case standard deduction@30% of annual value
shall be allowed.
 In standard deductions is not allowed respect of two
houses which are treated as self-occupied house, the
2. Interest on loan taken in respect of house
property:
 Interest on loan taken for the purpose of
purchasing, constructing, reconstructing or
repairing the house property is allowable as a
deduction on the accrual basis.
i. Interest on unpaid interest is not deductible.
ii. Interest on a fresh loan raised merely to repay
the original loan taken for the above purposes
is allowable as a deduction under this section.
iii. Any brokerage or commission paid for raising
the loan is not deductible
iv. INTEREST FOR PRE-ACQUISITION OR PRE-CONSTRUCTION
PERIOD:
Interest payable in respect of funds borrowed for:
 acquisition or construction of house property
 pertaining to the period prior to the previous year in which such
property has been acquired or constructed shall be,
 deducted in five equal annual instalments.
 commencing from the previous year in which the house was acquired
or constructed.
The amount of interest shall not include any amount of such interest
allowed as a deduction under any other provision of the Act.
The interest for the previous years prior to the current year, which is to be
deducted in five equal annual instalments, shall be deducted in
addition to interest of the current year i.e., the interest allowable shall
be the interest the for the current previous year+ 1/5th of interest for
the previous years prior to the year in which the house is constructed
or purchased.
 Unrealised rent realized shall be charged to
Income tax in the year in which such rent is
realized but after allowing a deduction of
Standard Deduction of 30% on it. Any
expenditure incurred in realizing it shall not be
allowed as deduction.
 Example:
During the P.Y 2021-22, X realized Rs. 10,000
realized rent (Unrealized rent allowed as
deduction in P.Y. 2018-19- Rs. 15,000) and Rs.
2,000 in its realization. Compute the Taxable
portion of this realized rent.
 Q. Mr. Karan owes a house in Delhi which he has Let-Out. From
the following information compute the Taxable income of Mr.
Karan from House Property for the A.Y. 2022-23.
 Municipal Value: Rs.2,00,000
 Fair Rent: Rs.3,00,000
 Standard Rent: Rs.2,80,000
 Actual Rent: Rs.20,000 p.m.
 Municipal Taxes paid by owner @ 10%
 Repair charges borne by Tenant: Rs.10,000
 House remained vacant for 2 months
 Unrealised rent: Rs.10,000Loan of Rs.12,00,000 @10% interest
was taken on 01/03/2017 to construct the house.
 Construction was completed on 30/06/2021 and loan was repaid
after 3 months of construction.
 Unrealised rent relating to the P.Y. 2018-19 realized: Rs.5,000
 E.R=FR/MV/SR
=2,80,000
 A.R=2,00,000(20,000x10)
 GAV= 2,80,000
 (-)MT= 20,000
 (-) UR= 10,000
 ________
 Annual Value=2,50,000
(-)30% S.D of AV= 75,000
(+)UR Realized= 3,500
________
1,78,500
(-)Pre Period Interest= 98,000
(-) Post Period Interest=60,000
Taxable Income from Let-Out House Property=20,500
Working Note:
i) Realized Rent= 5,000-30% of 5,000 (1,500)=3,500
ii)Pre Period Interest= 1/3/2017 to 31/3/2021
=49 Months
=12,00,000 x 10% x 49/12=4,90,000
=4,90,000 x 1/5= 98,000
iii) Post Period Interest=1/4/2021 to 30/9/2021
=6 Months
=12,00,000 x 10% x 6/12= 60,000
 Where the property consists of a house or part of
a house which:
1. is in the occupation of the owner for the
purposes of his own residence, or
2. cannot actually be occupied by the owner by
reason of the fact that owing to his
employment, business or profession carried on
at any other place, he has to reside at that
other place in a building not belonging to him.
 The Annual Value of such house or part of the
house shall be taken to be 'NIL'
i. The self-occupied house or part of it should not be
let-out during the whole or any part of the P.Y.
ii. The municipal taxes paid by the owner regarding
such property are not deductible from gross annual
value to arrive at the net annual value.
iii. In such a case the question of this house remained
vacant or unrealised rest does not arise
iv. If the construction of the building is completed at
any time during the previous year and thereafter it is
self-occupied, it will be taken as the house in self-
occupied for the whole previous year.
 The annual value of self-occupied house shall
not be NIL
(a) the house or part of the house is actually let
during the whole or any part of the P.Y.,
(b) any other benefit there from is derived by
the owner
 In such a case the house will be treated as
let-out house and the annual value will be
determined u/s 23(1)
 Where the owner of the houses occupies more than two houses
for his residence for full previous year, except two houses (which
he chooses or for which he exercises an option) all other houses
are deemed as let-out.
 The income from the deemed let-out house(s) shall be computed
in the same manner as discussed u/s 23(1)
 The question of the house remained vacant or unrealised
rent does not arise.
 The question of actual rent does not arise.
 The fall amount of interest on loan taken for acquisition,
construction, repairs, renewal of the house will be allowed as
deduction.
 The expected rent will be the gross annual
 The assessee should choose the houses in such a manner
that his taxable income house property is the minimum.
Such an option can be changed from year to year
 Where the property consisting of any building or
land appurtenant thereto is held as stock-in-
trade and the property or any part of property is
not let during the whole or any part of the
previous year the Annual Value of such property
or part of the property, for the period up to two
year from the end of the financial year in which
the certificate of completion of construction of
the property is obtained from the competent
authority, shall be NIL.
 Deductions from Annual Value of Self-Occupied House

Up to Rs.2,00,000 Up to Rs.30,000

If any 1 or all these

•Loan is taken after 31/03/1999
conditions are not fulfilled
•For Purchase OR Construction.
•Purchase OR Construction is completed
within. 5 years from the end of P.Y. in which
loan was sanctioned.

**Maximum possible loss for a Self-Occupied House is Rs.2,00,000

 Loss from house property in the current A.Y. can be set-off
first against income from any other house property and
the balance if any can be set-off against income from any
other head (maximum Rs.2,00,000) in the same A.Y.
 However if there is still left any unabsorbed loss from
House Property from the current A.Y., it can be carry
forward for 8 A.Y. to be set-off against income from House
Property only.

 For more practice of Practical Questions Refer

the Book also.