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Income from house property is one of the five heads of income from which total taxable income is calculated.
Following are the five heads of Income from which total taxable income is calculated.
Following are the points which are very important and to be taken care of while calculating income from house property are :
When we are calculating under this head there are four situations
Income from house property is calculated keeping in mind some of the concepts such as;
Before going to the calculation of Tax under various types of assessee you need to understand the deductions that can be claimed. Following are the major Deductions that an assessee can claim;
This deduction can be claimed by all assessees. This deduction is given so as to compensate for all the repairs and expenditure that assessee has incurred on the house in previous year. This includes repairs, ground rent, insurance and these cannot be deducted once again. Standard deduction given is 30% of Net Annual Value, irrespective of whether amount spent is more or less than standard deduction calculated. This deduction is nil if the house is self-occupied.
If an assessee has borrowed to build that particular house then the interest that he is liable to pay is given as a deduction. Capital borrowed before 1/4/1999 is given a maximum interest limit of 30,000 whereas capital borrowed after this period has interest upper limit up to Rs. 1,50,000 this is applicable for self occupied property. In case of let out property the whole of interest amount on borrowed capital is given as deduction.
Income from House which is let-out in the previous year is taken for consideration here. Even if the property is let-out for certain period say 6 or 8 months and then occupied by assessee, income from such house is taken as let-out property for the whole previous year. If the house is rented even for one day in the previous year then it is taken as let-out property and income taxable is calculated. As told above the assessee can claim unrealized rent and vacancy period for which house was unoccupied.
Example1: Income from house property that Mr. X gets if Municipal value= Rs 1,60,000 Fair Rent=Rs.1,80,000. Standard rent=Rs.1,70,000.Actual rent= Rs 20,000 per month (20000*12months=Rs.2,40,000) Municipal tax paid by owner= Rs 25,000 unrealized rent=Rs.30,000.
Expenses on repairs= Rs 25,000
In this case there is unrealized rent hence the actual rent will be 2,10,000 (2,40,000-30,000)
Calculation of Gross Annual Value
Step 1: 1,60,000 or 1,80,000-----------------------------1,80,000
Step 2: 1,80,000 or 1,70,000-----------------------------1,70,000
Step 3: 1,70,000 or 2,10,000* --------------------------- 2,10,000
Gross Annual Value = 210000
* 210000 = 240000 – 30000 (Actual rent – unrealized rent)
In case of income from self occupied property Gross Annual Value, Municipal taxes, Net Annual Value, Standard Deduction is taken as zero or nil, Simple reason is that self occupied property does not generate any income or rent. Only the interest on borrowed capital is taken into consideration.
Example 2: Mr. X owns a house and resides in the same then compute income fromsuch house property. If, Municipal value= Rs 3,00,000Fair Rent= Rs 2,75,000.Standard rent= Rs 2,88,000.Municipal tax paid = Rs 30,000.Interest on the loan taken in 2006 to construct the house is 1,50,000 for previous year.
|Gross Annual Value Less:Municipal taxes paid by assessee during previous year||Nil
|Net Annual Value Less:Deductions under Section 24||Nil
|Income from House Property||-1,50,000|
* 150000 is the interest paid on the capital borrowed
In case of borrowed capital for self occupied property, income from house property will no doubt be a loss.