Income from House Property

Income from House Property

Income from House property

Under income tax act 1961 the owner of a house property is taxed on income earned in form of rent under the head of Income from House property. Any income from building and land appurtenant thereto is taxable as property income under this head. Rental income from vacant land or plot is taxable under head income from other sources. In case of composite rent received the same will be taxable under income from house property.

Who is considered as legal owner

Owner is a person who is chargeable to tax in respect of house property. The following persons shall be deemed to be owners for the purpose of calculating income from house property

1. Individual who transfers house property otherwise than for adequate consideration

2. The holder of impartial estate is treated as deemed owner

3. A member of co operative society

4. A person having control over property in part performance of a contract of the nature referred in section 53A of the transfer of House property

Computation of income from house property

1. Income from let out of House property

Particulars Amount

Gross Annual Value xxxxxx

Less: Municipal Taxes Xxxxx

Net Annual value Xxxxxxx

Less: deduction under section 24

standard deduction of 30% Xxxxx

Interest on borrowed capital Xxxxx

Income from House property Xxxxxxx

2. Income from self occupied property



Particulars Amount

Net Annual value xxxxx

Less: Interest on Borrowed Capital xxxxx

Income from House property xxxxxx

Calculation of Gross annual Value

There are five steps involved in calculation of Gross annual value

Step - 1: Find Reasonable expected rent of property

Step - 2: Find Rent actually received

Step - 3: Higher of step 1 and step 2

Step - 4: Find amount of loss due to vacancy

Step - 5: Step 3 minus Step 4 is gross annual value

Deduction under section 24

1. Standard deduction: 30 percent of annual value is deductible irrespective of any expenditure

2. Interest on Borrowed capital: Interest on borrowed capital is allowable as deduction on accrual basis I.e., you can claim these deduction even though actually not paid in cash.It is allowed if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of house property.However interest of pre-construction period is not allowed as deduction it is accumulated and allowed only after completion of construction and it is allowed in five equal annual installments.The limit of deduction under this section is Rs 2,00,000.

In case of two House properties

If a person has two house properties for his residence only one house of his own choice is treated as self occupied and all other houses are deemed to let out. Tax exemption applies only in case of one self occupied property house and not in the case of deemed to let out properties.