Income Under the Head of House Property in New Delhi India

Income under the head of house property

Income is taxed under the head “Income from house property” ?

Rent and other income from any flat, building or lands appurtenant thereto are generally taxed under the head „Income from house property‟.

As per Sec. 22 “House Property” does not include vacant land. Income derived from a vacant land is charged either under the head „Income from Business or Profession” or under the head “Income from other sources”, depending upon its nature. However, if the owner occupies the house property for the purposes of his own business or profession, no tax is to be paid under this head in respect of such property.

Factors taken into consideration in determining the annual value of a property?

In determining the annual value there are four factors which are normally taken into consideration. These are as follows:

Actual rent received or receivable: - Actual rent received/receivable is an important factor in determining the annual value of a property.
Municipal Value: - This is the value as determined by the Municipal authorities for levying Municipal taxes on house property. Municipal authorities normally charge house tax/Municipal taxes on the basis of annual letting value of such house property.
Fair rent of the property: - Fair rent is the rent which a similar property can fetch in the same or similar locality, if it is let out for a year.

Standard Rent: - The standard rent is fixed under the Rent Control Act. If the standard rent has been fixed for any property under the Rent Control Act, the owner cannot be expected to get a rent higher than the standard rent fixed under the Rent Control Act.

How to determination of annual value

Deductions from income from house Property [Sec.24]

Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:-

Standard deductions :- From the net annual value computed, the assesses shall be allowed a standard deduction of a sum equal to 30% of the net annual value.
Interest on borrowed capital :- Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital is allowed as a deduction.
Interest on pre-construction period :-interest payable on borrowed capital for the period prior to the previous year in which the property has been acquired or constructed, can be claimed as deduction over a period of 5 years in equal annual investment commencing from the year of acquisition or completion of construction.

S.No.	conditions	amount of deduction
(a)	Loan borrowed before 1.4.99 where the property has been acquired construction, repaired, renewed or reconstructed with borrowed capital before 1.4.99	Actual interest payable subject to maximum of Rs 30,000
(B)	Loan borrowed on or after 1.4.99 1. Where the property is acquire Or constructed with capital borrowed on or after 1.4.99 and such construction is completed within 5 years from the end of the financial year in which the capital was borrowed	Actual interest payable subject to maximum of Rs 2,00,000
(c)	Where the property is required renewed or reconstructed with capital borrowed on or after 1.4.99	Actual interest payable subject to a maximum of Rs 30,000

Inadmissible Deduction (section 25)

Interest chargeable under this act which is payable outside India shall not be deducted if –

Tax has not been paid or deducted from such interest and
There is no person in India who may be treated as an agent

Provision for arrears of rent and unrealized rent received subsequently (Section 25A)

As per section 25A (1) the amount of rent received in arrears from a tenant or the amount of unrealized rent realised subsequently from the tenant by an assessee shall be deemed to be income from house property in the financial year which such rent is received or realised, and shall be included in the total income of the assessee under the head income from house property whether the assessee is the owner of the property or not in that financial year.

Section 25A (2) provided a deduction of 30% of arrears of rent or unrealised rent realised subsequently by the assessee.

Treatment of income from co-owned property (section 26)

Meaning of co-owner

Sometimes the property consisting of buildings or the buildings and land appurtenant thereto is owned by two or more persons, who are known as co-owners. In such cases, if their representative shares are definite and ascertainable, such persons shall not be assessed as an Association of Persons (AOP)

A) Where house property is self occupied by each co-owner:-

Where the house property owned by the co-owners is self occupied by each of the co-owner, the annual value of the property for each of such of co-owner shall be nil and each of the co-owner shall be entitled to the deduction of Rs. 30,000/ 1,50,000 under Sec. 24(b) on account of interest on borrowed money.

b) Where the entire or part of the property is let out:-

As regard, the property or part of the property which is owned by co-owners is let out, the income from such property or part thereof shall be first computed as if this property or part thereof is owned by one owner and thereafter the income so computed shall be apportioned amongst each co-owner as per their definite share.

Can Annual Value (Net Annual Value) be negative?

The Annual Value (NAV) can be negative only when Municipal taxes paid by the owner are more than the gross annual value.

Can there be any loss under the head income from house property?

This brings us to the question as to whether there can be any loss under this head.

In so far as income from a self-occupied property is concerned, the annual value is taken as nil. No deductions are allowed except for interest on borrowed funds up to a maximum of Rs. 30,000/1, 50,000. Naturally, therefore, there may be a loss in respect of such property up to a maximum of Rs. 30,000/1, 50,000, as the case may be.
In so far as income from a self-occupied property is concerned, the annual value is taken as nil. No deductions are allowed except for interest on borrowed funds up to a maximum of Rs. 30,000/1, 50,000. Naturally, therefore, there may be a loss in respect of such property up to a maximum of Rs. 30,000/1, 50,000, as the case may be.

Sub-Letting of house property (section 56)

If a person is sub let any house property, any income received shall be taxable shall be taxable under the head other sources.

Ex Mr. Gupta has taken one house on rent Rs 20,000 p.m. and he has sub-let 50% of the house for a rent of 12000 P.m. and he has incurred Rs 500 p.m. for collection of rent .in this case his income shall be considered to be –

Rent rec.(12000*12)	=1,44,000
Less expenses incurred (500*12)	= (6,000)
Less rent paid (200001250%)	= (1, 00,000)
Income under the head other sources	38,000

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House Property

Income under the head of house property

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