GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

CHAPTER 5 INCOME FROM HOUSE PROPERTY

(U/S 22 TO 27)
Essential Conditions for taxing income under this head: (Sec 22)

1) The property must consist of building and lands appurtenant thereto.

2) The assessee must be the owner of such property.
Subletting is not covered under section 22.
Ownership includes deemed ownership.

Deemed Ownership
The following persons though not the legal owners of a property are deemed to be the owners
of property:
a) In the case of gift to spouse (except when they agree to live apart) or minor child (not
being minor married daughter), transferor shall be deemed owner.
b) Holder of an impartiable estate is deemed as owner.
c) Member of a co-operative society.
d) Person in possession of the property.
e) Person having right in a property for a period not less than 12 years
3) The property may be used for any purpose, but it should not be used by the owner for the
purpose of any business or profession carried on by him, the profit of which is chargeable to
tax.

COMPOSITE RENT
If apart from recovering rent of the building, the owner gets rent of other assets (like furniture)
or he charges for different services provided, then the amount so recovered is known as
"composite rent". The tax treatment of the composite rent is as follows –

1) Where composite rent includes rent of building and charges for different services (like lift,
air conditioning): If the owner of a house property gets a composite rent for the property as
well as for services rendered to the tenants, composite rent is to be split up and the sum
which is attributable to the use of property is to be assessed in the form of annual value u/s
22 of house property. The amount which relates to the services (such as electricity supply,
provision of lifts, supply of water, arrangement for scavenging, watch and ward facilities,
etc.) is charged to tax under the head "Profits and gains of business or profession" or
under the head "Income from other sources".
2) Where composite rent is rent of letting out of building and letting out of other assets (like
furniture) and the two lettings are not separable - then such income is taxable either as
business income or income from other sources. This rule is applicable even if sum
receivable for the two lettings is fixed separately.
3) Where composite rent is rent of letting out of building and letting out of other assets and
the two lettings are separable - then income from letting out of building is taxable under the

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

head "Income from house property" and income from letting out of other assets is taxable
either as business income or income from other sources.
Property Income Not Chargeable to Tax:
1) Income from farm house [sec.2 (1A)(c) read with sec. 10(1)]
2) Annual value of anyone palace of an ex-ruler [sec.10 (19A)]
3) Property income of a local authority [sec. 10(20)]
4) Property income of an authority constituted for the purpose of planning, development or
improvement of cities, towns and villages [sec. 10(20A)]
5) Property income of an approved scientific research association [sec. 10(21)]
6) Property income of a games association [sec. 10(23)]
7) Property income of an educational institution and hospital [sec. 10(23c]
8) Property income of a trade union [sec. 10(24)]
9) Property income in the case of a person resident of Ladakh [sec. 10(26A)]
10) Any income derived from letting of godowns or warehouses for storage, processing or
facilitating the marketing of commodities by an authority constituted under any law for the
time being in force for the marketing of commodities [sec. 10(29)]
11) House property held for charitable purposes [sec. 11]
12) Property income of a political party [sec. 13A]
13) Property used for own business or profession [sec. 22]
14) One self-occupied property [sec. 23(2)]

Computation of Income from House Property

Gross Annual Value (GAV) = XXX

Less Municipal Taxes (paid by owner) = XXX
----------------
Net Annual Value (NAV) = XXX
Less Deduction u/s 24 (a) = XXX
Less Deduction u/s 24 (b) = XXX
-----------------
Income from House Property = XXX

GROSS ANNUAL VALUE

TERMS USED FOR CALCULATION OF GAV

Municipal Valuation (MV) - Value determined by the local authority for the purposes of levying
local taxes.
Fair Rent (FR) - It is the rent of similar properties in the same locality.
Standard Rent (SR) - It is the rent fixed by the Rent Control Act.
Annual Rent (AR) - It is the actual rent which is payable by tenant.

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Property is let out for full year / Deemed to be let out (No unrealised rent
and vacancy). – (L.O.P.)

(A) When Standard Rent is not Applicable, then

GAV = MV or FR or AR (Whichever is more)

(B) When Standard Rent is Applicable, then

Step 1: MV or FR (whichever is higher)

Step 2 : Higher value ( from step 1)

Or
SR (whichever is lower) = ER (expected rent)
Step 3 : ER or Actual rent received/receivable (whichever is higher) = GAV

Problem 1 Compute the gross annual value of the following houses:

Particulars I II III IV V VI
Municipal Value 20,000 24,000 36,000 42,000 48,000 45,000
Fair Rent 24,000 24,000 40,000 42,000 50,000 50,000
Standard Rent N.A. 24,000 50,000 30,000 N.A. 48,000
Actual Rent 18,000 36,000 48,000 36,000 54,000 42,000
GAV

House Property is let out and there is unrealised Rent (L.O.P + UR Rent)
Rule same as above, deduct unrealised rent from GAV

Note: Unrealised rent shall be deducted from Annual Rent only if the following conditions are
satisfied –
a) The tenancy is bona fide,
b) The Defaulting tenant has vacated, or steps have been taken to compel him to vacate the
property.
c) The Defaulting tenant is not in occupation of any property of the assessee.
d) The assessee has taken all reasonable steps to institute legal proceeding for the recovery
of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.

House Property is both let out and Self occupied (L.O.P + S.O.P)
Rule same as above
Note: Actual Rent Received /Receivable (ARR) = AR – Rent for the period when it was
self-occupied

Illustration 1: R has a house property in Delhi whose Municipal Value is Rs.1,00,000 and the
Fair Rental Value is 1,20.000. It was self-occupied by R. from 1.4.2022 to 31.7.2022. W.e.f.

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

1.8.2022 it was let out at Rs.9,000 p.m. Compute the annual value of the house property for
the assessment year 2023-24 if the municipal taxes paid during the year were 20,000.

Solution: The gross annual value shall be higher of the following two—

Rs.
(a) Expected rent (Municipal value 1,00,000 or FRV 1,20,000
whichever is higher) 1,20,000
(b) Actual rent received/receivable for let out period i.e. 9.000 x 8 72,000
Gross annual value 1,20,000
Less: Municipal taxes 20,000
Net annual value 1,00,000

Illustration 2: Take Illustration No. 1. Determine the annual value assuming that the standard
rent is fixed at Rs.1,08,000.

Solution: Gross annual value shall be higher of the following two:

Rs. Rs.
(a) Expected rent shall be limit to standard rent 1,08,000
(b) Actual rent received or receivable 72,000
Gross annual value 1,08,000
Less: Municipal taxes 20,000
Net annual value 80,000

House Property is let out and there is vacancy(L.O.P + Vacancy)

SITUATION 1: Where property is let out and was vacant for part of the year and actual rent
received or receivable (for let out period) is more than the Expected Rent (ER)

GAV = Actual rent received or receivable

OR
Expected Rent, whichever is higher

SITUATION 2: Where property is let out and was vacant for whole or part of the year and
actual rent received or receivable (for let out period) owing to such vacancy is less than the
Expected Rent (ER)

GAV = Actual rent received or receivable

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Problem 2 Compute the gross annual value of the following houses:

Particulars I II III IV V VI
Municipal Value 20,000 24,000 36,000 42,000 48,000 45,000
Fair Rent 24,000 24,000 40,000 42,000 50,000 50,000
Standard Rent N.A. 24,000 50,000 30,000 N.A. 48,000
Annual Rent 18,000 36,000 48,000 36,000 54,000 42,000
Unrealised Rent --- 2,000 1,000 10,000 1,000 12,000
Rent forVacancy 3,000 ------- 2,000 ------- --------- --------
GAV

Illustration 3: Municipal value of a house is Rs.90,000, Fair rent, Rs.1,40,000, Standard rent
Rs.1,20,000. The house property has been let for Rs.12,000 p.m. and was vacant for one
month during the previous year 2022-23. Municipal taxes paid during the year were
Rs.40,000. Compute the annual value for assessment year 2023-24.
Solution
Step I: Compute Gross Annual Value (which shall be higher of the following two)

(a) Expected rent which shall be municipal value (90,000) or fair rent
(1,40,000) but limited to standard rent (1,20,000) 1,20,000
(b) actual rent received or receivable 12,000 x11 1,32,000
Gross annual value shall be 1,32,000
Step II

Less: Municipal Taxes paid 40,000

Net annual value 92,000

Self –occupied Property (S.O.P)

Self –occupied property for residential purposes for full year {Sec. 23(2) (a)}:- One self-
occupied property is exempt from tax, therefore
NAV NIL
Less: Interest on borrowed capital upto 30,000 / 2,00,000
--------------------------
Income from house property (Loss) upto 30,000 / 2,00,000
==============
House Property which could not actually be self- occupied owing to employment /
Business at some other place and no other benefit is derived from that property - {Sec.
23(2) (b)}
 Considered as Self –occupied property (taking NAV - NIL)

Net Annual Value (NAV)

Gross Annual Value (GAV)
Less: Municipal Taxes including Service taxes
(Deductible on Payment basis and which is paid by landlord)

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Deduction under section 24

1) Statutory Deduction {U/S 24(a)}: 30% of positive NAV
2) Interest on Borrowed Capital {u/s 24(b)} - Deductible on Due basis

LOANS WHICH ARE GOING TO QUALIFY FOR DEDUCTION

a. For the purpose of purchase of house property.

b. For the purpose of construction of house property.
c. For the purpose of repairs & renovation of house property.
d. Loan taken for the purpose of repaying first loan.

LOANS WHICH ARE NOT GOING TO QUALIFY FOR DEDUCTION

a. Loan taken for the purpose of payment of municipal taxes.

b. Loan taken for the purpose of paying interest on loan.
c. Loan taken from outside India if interest paid without deducting tax.

DEDUCTION
(a) Interest for pre-construction period deductible in five equal installments in five years
commencing from the previous year in which the house is constructed or acquired.
Start End
Date of loan 31-3 preceding completion or Repayment of loan (whichever is earlier)

(b) Interest for post-construction period Interest for relevant P/Y (2021-22)

MAXIMUM CEILING:
a. In the case of Let out/Deemed Let-out property – No Limit.
b. In case of self-occupied house {Sec. 23(2) (a) & Sec. 23(2) (b)}, Interest on Borrowed
Capital is deductible subject to maximum ceiling given below –

1. If loan is taken on or after 1.4.1999 for construction or Up to maximum of

acquisition of property and construction or acquisition Rs.2,00,000
is completed within that year or 5 years subsequent
to the year of loan.
2. In any other case Up to maximum of
Rs.30000

Illustration 4: The assessee took a loan of Rs.6,00,000 on 1.4.2020 from a bank for
construction of a house on a piece of land he owns in Delhi. The loan carries an interest @
10% per annum. The construction is completed on 15.6.2022. The entire loan is still
outstanding.
Compute the interest allowable for the assessment year 2023-24.

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Solution

(i) Interest for the previous year 2022-23 on 6,00,000 @ 10% 60,000
(ii) Interest for the pre-construction period i.e. from 1.4.2020 to 24,000
31.3.2022 (1/5th of 1,20,000)
Total interest allowable 84,000

Although the property is completed on 15.6.2022, the interest for the entire previous
year i.e. 1.4.2022 to 31.3.2023 will be treated as current years expenditure.

Problem3
The assessee took a loan of Rs.300000 on 1-4-17 from a bank for construction of a house in
Delhi. The loan carries interest @ 20% per annum. The construction is completed on 15-6-20.
The entire loan is still outstanding. Compute interest allowable for the P/Y 2022-23.

Problem4
What will be your answer if in problem 1, loan is taken on 1-9-17.

Problem5
What will be your answer if in problem 1, house is completed on 15-6-22.

Problem6
The assessee took a loan of Rs.500000 on 1-7-18 from a bank for construction of a house in
Delhi. The loan carries interest @ 12% per annum. The construction is completed on 1-5-21.
Rs.2,00,000 is repaid on 30-11-2021 and remaining is still outstanding. Compute interest
allowable for the P/Y 2022-23. What will be your answer if the property is self-occupied?

Recovery of Unrealised Rent

(a) The amount so recovered is taxable in the previous year in which it is recovered.
(b) It is taxable even if house is not owned by the Assessee in the year of Recovery.
(c) Expenditure incurred for recovery of unrealised rent is not to be considered.

Case I Case II Case III

Unrealised Rent Unrealised Rent Unrealised Rent
10000 10000 10000

Deduction Allowed Deduction Not Allowed Deduction Allowed Deduction Not Allowed
7,000 3,000
Recovered in
P/Y 2016-17 8,000 8,000 8,000
Taxable Not Taxable 3,000 Not taxable & 5,000 taxable

Arrears of Rent Received (Sec. 25B)

(a) The amount so received (which is not charged to tax earlier) is taxable in the PY in which it is
received.
(b) This amount will be taxable after deducting a sum equal to 30% of such amount.
(c) It is taxable even if the assessee is not the owner of that property in year of received.

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Losses under the head “IFHP” (Sec. 74)

Till Financial Year 2016-17, for let out property, the entire loss from the said property could be
adjusted against Other Income (without any limit).
But from Financial Year 2017-18, the set-off of losses from House property, whether self occupied
or let out, in a year is restricted to Rs. 2 Lakhs, to be adjusted against any other income.
Balance loss can be carried forward for set off against House Property Income in future till next 8
years.
Practice Questions on House Property
PROBLEM 1: R owns a house property in Delhi. From the particulars given below compute
the income from house property for the assessment year 2023-24.
Rs.
Municipal value 2,00,000
Fair rent 2,52,000
Standard rent 2,40,000
Actual rent (per month) 23,000
Municipal taxes 20% of municipal
value
Municipal taxes paid during the year 50% of tax levied
Expenses on repairs 20,000
Insurance premium 5,000
R had borrowed a sum of 12,00,000 @ 10% p.a. on 1.7.2020 and the construction of
the property was completed on 28.2.2022.

Solution: Gross annual value shall be higher of the following two:

Rs. Rs,
(a) Expected rent
[Municipal value (2,00,000), Fair rent (2,52,000)
whichever
is higher, but limited to standard rent (2,40,000) 2,40,000

(b) Actual rent received/receivable (23,000 x 12) 2,76,000

Gross annual value 2,76,000

Less: Municipal taxes paid [50% of (20% of 2,00,000)] 20,000
2,56,000
Less: Deductions u/s 24
(a) Statutory deduction @ 30% 76,800
(b) Interest on borrowed money (see note below) 1,38,000 2,14,800
Income from house property 41,200

Notes.—
(1) Interest for pre-construction period
Pre-construction period shall be from 1.7.2020 to
31.3.2021 i.e. 9 months
Interest for 9 months = 12,00,000 x 10 x 9 = 90,000
100 12
1/5 of 90,000 18,000

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

(2) Interest for previous year (10% of 12,00,000) 1,20,000

1,38,000

PROBLEM 2: R has a house property in Delhi whose particulars are as under:

Rs.
Municipal value 3,00,000
Standard rent 3,12,000
Municipal taxes paid 50,000
Interest on money borrowed for acquiring the house after 1.4.2019 1,60,000
Period of occupation for own residence 2 months
Actual rent for 10 months 35,000 p.m.
Compute the income from house property for assessment year 2023-24.

Solution
Computation of income from house property

Gross annual value shall be higher of following two

(a) Expected rent (Municipal value 3,00,000 or FRV
4,20,000 whichever is higher i.e.
4,20,000 but restricted to standard rent i.e. 3,12,000) 3,12,000
(b) Actual rent received or receivable (35,000 x 10) 3,50,000 3,50,000
Less: Municipal taxes paid 50,000
Net annual value 3,00,000
Less: Deduction u/s 24
(a) Statutory deduction @ 30% 90,000
(b) Interest on money borrowed for acquisition of house 1,60,000 2,50,000
Income from house property 50,000

FRV has been determined on the basis of actual rent i.e. 35,000*12 = 4,20,000.

PROBLEM 3: Take problem 2. What will be the answer if standard rent is not applicable?

Solution
Computation of income from house property

Gross annual value shall be higher of following two

(a) Expected rent
(Municipal value 3,00,000 or FRV 4,20,000 whichever 4,20,000
is higher i.e. 4,20,000)
(b) Actual rent received or receivable (35,000 x 10) 3,50,000 4,20,000
Less: Municipal taxes paid 50,000
Net annual value 3,70,000
Less: Deduction u/s 24
(a) Statutory deduction @ 30% 1,11,000
(b) Interest on money borrowed for acquisition of house 1,60,000 2,71,000
Income from house property 99,000

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

PROBLEM 4: R owns 3 house properties situated in Delhi.

The particular of the houses are as under:

House I House II House III

Rs. Rs. Rs.
Municipal value 1,00,000 1,50,000 2,00,000
Fair rent 1,40,000 1,80,000 2,40,000
Standard rent 1,20,000 2,00,000 21,000
Actual rent (per month) 12,000 17,500 6
months
Period of vacancy Nil 1 month —
Municipal taxes for the year 20% of municipal 40,000 50,000
value
Municipal tax paid during the year 20,000 80,000 30,000
Compute the income under the head house property of all the 3 properties.
Solution
House I: As the house property is let throughout the previous year the annual value shall be
determined as per clauses (a) and (b) of section 23(1).
Step I: Compute gross annual value

The GAV shall be higher of the following 2:

Rs.
(a) 1,00,000 or 1,40,000 whichever is higher but 1,20,000
subject to maximum 1,20,000 i.e.
(b) Actual rent received or receivable i.e. 12,000 x 12 1,44,000
Grossannual value 1,44,000
Step II: Deduct Municipal tax paid during the previous
year
Net annual value 20,000
Less: Statutory deduction @ 30% 1,24,000
Income from house property 37,200
86,800
House II
Step I: Determination of value as per section 23(1)(a) Rs.
Municipal value 1,50,000
Fair rent 1,80,000
Standard rent 2,00,000
Value as per section 23(1)(a) 1,80,000
Step II: Actual rent received/receivable (17,500 x 11) = 1,92,500
Since the actual rent received/receivable, inspite of vacancy is more than the value
determined as per clause (a), section 23(1)(c) will not be applicable and the gross annual
value shall be 1,92,500 being higher of the amount determined as per section 23(1 )(a) and
section 23(i)(b).
Rs.
Gross annual value 1,92,500
Less: Municipal tax paid 80,000

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Net annual value 1,12,500

Less: Statutory deduction @ 30% 33,750
Income from house property 78,750
House III
Computation of Gross Annual Value
Step I: Determination of value as per section 23(1)(a)
It will be 2,00,000 or ?2,40,000 whichever is higher as standard rent is not applicable in this
case
Rs.
Value as per section 23(1)(a) 2,40,000
Step II: Actual rent received/receivable (21,000 x 6) 1,26,000
Since the property is let and was vacant for part of the year and the actual rent received
is less than the value determined u/s 23(1)(a), section 23(1)(c) is applicable.

Therefore, the gross annual value shall be the actual rent received or receivable,

Rs.
Gross annual value 1,26,000
Less: Municipal tax paid 30,000
Net annual value 96,000
Less: Statutory deduction @ 30% 28,800
Income from house property 67,200

PROBLEM 5:
R has occupied two houses for his residential purposes, particulars of which are as follows:
House I House II
Rs. Rs.
Municipal valuation 2,30,000 1,70,000
Fair rent 2,90,000 2,00,000
Standard rent under Rent Control Act 2,42,000 2,30,000
Municipal taxes paid 15% 15%
Five insurance 2000 1000
Interest on capital borrowed for construction of house
(20,00,000 is borrowed @ 12% p.a. on 15.4.2021, 2,40,000 Nil
construction is completed on 28.3.2022 and loan is yet to
be repaid)
Income of R from other sources is Rs.5,40,000. Determine the taxable income for the
assessment year 2023-24 on the assumption that he contributes Rs.1,20,000 towards the
public provident fund.
Solution:

Assume house I self-occupied

Income from House I (—)
2,00,000
Income from House II (See working note) 1,22,150
Income from house property (—) 77,850
Assume house property 2 self-occupied

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Income from house I (Deemed let) (See working note) (—) 94,750
Income from house II (Self-occupied) Nil
Income from house property (—) 94,750
It will be better to opt house II as self-occupied as income from house (—) 94,750
property shall be
Income from other sources 5,40,000
Gross total income 4,45,250
Less: Deduction 80C 1,20,000
Total Income 3,25,250

*Working Note
Assume both the houses are deemed to be let out

House 1 House 2
Gross annual value
(Municipal value or Fair rent, whichever is higher but 2,42,000 2,00,000
subject to maximum of standard rent)
Gross annual value
Less: Municipal taxes (i.e., 15% of 2,30,000/1,70,00O) 34,500 25,500
Net annual value 2,07,500 1,74,500
Less: Deductions under section 24
(Statutory deduction (30% of2,07,500/1,74,500) 62,250 52,350
Interest 2,40,000 —
Income from house property (—) 94,750 1,22,150

PROBLEM 6: R owns a house property in Delhi. 60% of the property is let out for 15,000 p.m.
and 40% portion is self occupied by him.
Compute his income from house property from the following information submitted to you:
Rs.
Municipal value of the house 2,00,000
Fair rent 22,000p.m.
Standard rent 20,000p.m.
Municipal taxes paid 30,000
Interest on money borrowed for purchase of house property which was
acquired in 2012 1,80,000

Solution: Since 60% of the property is let and the balance self-occupied we shall compute the
income separately.

(A) House property let:

Compute expected rent
It shall be 60% of municipal value or fair rent whichever is higher.
Hence, it shall be (60% of 2,64,000) = 1,58,400
However, if cannot exceed 60% of standard rent i.e. 1,44,000.
Expected rent is 1,44,000
Actual rent = 15,000 x 12 = 1,80,000
Hence, GAV shall be higher of the above two i.e.
1,80,000.
Compute net annual value
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Gross annual value 1,80,000

Less: 60% of Municipal tax paid 18,000
Net annual value 1,62,000
Less: Deductions
Standard deduction @ 30% 48,600
Interest on money borrowed (60% of 1,80,000) 1,08,000 1,56,600
Income from portion let 5,400

(B) Self-occupied portion

Annual value Nil
Less: Deduction 40% of interest of 1,80,000 72,000
Income from self occupied portion (—) 72,000
Income from house property 5,400 —72,000 = 66,600

PROBLEM 7: Three brothers A, B and C having equal share are co-owners of a house
property consisting of six identical units, the property was constructed on 31.5.1996. Each of
them occupies one unit for his residence and the other three units are let out at a rent of 5,000
per month per unit. The Municipal Value of the house property is 3,00,000 and the Municipal
Taxes are 40% of such Municipal Value, which were paid during the year. The other expenses
were as follows:

Rs.
(i) Repairs 20,000
(ii) Collection charges 5,000
(iii) Insurance Premium (paid) 11,000
(iv) Interest payable on loan taken for construction of house 1,20,000
One of the let out units remained vacant for three months during the year. A could not occupy
his unit for six months as he was transferred to Mumbai. He does not own any other house.
The other income of A. B and C are 50,000; 60,000; and 70,000 respectively.
Compute the income under the head “Income from House Property” and the total income of
the three brothers for assessment year 2023-24.
Solution

Rs. Rs.
Let out Property (50% i.e. 3 units)
Gross annual value
(a) Municipal value (50% of 3,00,000) 1,50,000
(b) Actual rent (5,000 x 12 x 3)1,80,000 — 15.000 1,65,000 1,65,000
(vacancy of one unit for 3 months)
Less: Municipal taxes paid (50% of 1,20,000) 60,000
Net annual value 1,05,000
Less: Deductions u/s 24
(a) Statutory deduction @ 30% 31,500
(b) Interest on loan (50%) 60,000 91,500
Income from let out property 13,500
Therefore, share of each co-owner is 1/3rd of 13,500 4,500

Self occupied property

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A B C
Rs. Rs. Rs.
Annual value Nil Nil Nil
Less: Deduction u/s 24(b)
Interest on loan (60,000 ÷3 = 20,000)
restricted to maximum 30,000 for each
co-owner 20,000 20,000 20,000
Income from self occupied property (—) 20,000 (—) 20,000 (—) 20,000

Computation of the total income of the three brothers

A B C
Income from House Property Rs. Rs. Rs.
Let out portion 4,500 4,500 4,500
Self occupied portion (—) 20,000 (—) 20,000 (—) 20,000
Net income from house property (—) 15,500 (—) 15,500 (—) 15,500
Other Income 50,000 60,000 70,000
Total Income 34,500 44,500 54,500

Interest on borrowed capital is allowable subject to maximum of 30,000/2,00,000; even

if the assessee could not occupy the house property for part/entire previous year due to
his employment elsewhere, provided he does not own any other house property.

PROBLEM 8: X has a house which has two identical units. One of the units is self-occupied
throughout the previous year and the other unit is let out throughout the previous year on a
rent of 5,000 p.m. Municipal taxes for the complete house amounting to 6,000 have been paid
during the previous year. The construction of the property was completed on 1.1.1996.
Determine the income from house property for assessment year 2023-24.
Solution

Unit I Unit II
(Let out) (Self occupied)
Rs. Rs.
Gross Annual Value 60,000 Nil
Less: Municipal Taxes 3,000 —
Net Annual Value 57,000 Nil
Less: Statutory deduction @ 30% 17,100 Nil
39,900 Nil

Illustration 9: In problem 8 if the self-occupied portion was let out for three months then what
will be the income from house property?
Solution: In this case, the self-occupied property has been let out for part of the year and as
such annual value shall not be nil. It will be determined as if the property is let, as per
provisions of section 23(1).
Unit I Unit II
Gross annual value 60,000 60,000
Less: Municipal value 3,000 3,000

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Net annual value 57,000 57,000

Less: Statutory deduction @ 30% 17,100 17,100
Income from house property 39,900 39,900

PROBLEM 10: X is the owner of a house which consists of two identical units each of which
has been given on rent of 2,000 p.m. The municipal value of the house is Rs.36,000 while the
fair rental value is 42,000. One of the units was vacated by the tenant on
31.12.2022 and from 1.1.2023 to 31.3.2023, this unit was occupied by the owner for his own
residence. The municipal taxes paid 8,000. The construction of the house was completed on
1.2.2002.
Compute the income from house property for the assessment year 2023-24.
Solution
Unit I (let out)
Gross annual value
Gross annual value shall be the higher of the following
two:
(a) Expected rent i.e. Municipal value (18,000) Fair rent
(21 ,000) whichever is more 21,000
(b) Actual rent received or receivable (2,000 x 12) 24,000
Therefore, gross annual value 24,000
Less: Municipal taxes paid (50%) 4,000
Net annual value 20,000

Unit II (Part of the year let and part of the year self-occupied, therefore benefit of self-
occupation for residential purposes shall not be allowed. The annual value shall be determined
as per section 23(1))

Gross annual value 21,000

Less: Municipal taxes (50%) 4,000
Net annual value 17,000
Total annual value of two units (20,000 + 17,000) 37,000
Less: Statutory deduction @ 30% 11,100
Income from house property 25,900

PROBLEM 11: R is a Sales-tax Officer at Jaipur. He owns two residential houses. The first is
in Delhi and was constructed on 31.12.1994. This has been let out on a rent of 3,000 p.m. to a
company for its office. The second house is in Jaipur which was constructed on 1.3.2022 and
has been occupied by him for his own residence since then. He took a loan of Rs.90,000 on
1.8.2020 @ 8% per annum interest for the purpose of construction of this house. The entire
loan is still outstanding.
Other relevant particulars in respect of these houses are given below:
1st house 2nd house
Rs. Rs.
Municipal valuation 24,000 18,000
Municipal tax 10% of Municipal 8% of Municipal
Value Value

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Expenses on repairs 2,000 6,000

Fire insurance premium 200 —
Ground rent 175 130
Land revenue 1,000 650
Interest on loan — 7,200
The ground rent of the Delhi house and the municipal tax and land revenue of the Jaipur
house are unpaid.
R was transferred to Mumbai on 1.12.2022 where he resides in a house at a monthly rent of
4,000 and his house at Jaipur was let out on the same day on a rent of 2,000 per month.
Compute the “Income from house property” in respect of Mr. R for the assessment year 2023-
24.
Solution

Rs. Rs. Rs.

1st house (let out)
Gross Annual Value (Rent received) 36,000
Less: Municipal taxes 2,400
Net Annual Value 33,600
Less: Deductions u/s 24
Statutory deduction @ 30% 10,080 23,520
lInd house (part of the year let and part of the
year self occupied)
Gross Annual Value higher of the following two:
(a) Municipal value or Fair rent whichever is
more i.e. 18,000 or 24,000 24,000
(b) Actual rent received or receivable 2,000 x 4 8,000 24,000
Less: Municipal taxes —
Net annual value 24,000
Less: Deductions u/s 24
(a) Statutory deduction @ 30% 7,200
(b) Interest on Loan (7,200 + 960) 8,160 15,360 8,640
Income from house property 32,160

1. The second house has been et out @ 2 000 pm therefore in the absence of other
information the expected rent or fair rent shall be 2,000x12=24,000.
2. Interest for pie construction period i.e. from 1.8.2020 to 31.3.2021 amounting to
4,800 is allowable in five installments i e 960 for five years.

PROBLEM 12: R has a house property situated in Delhi which consists of two units. Unit A
has 60% floor area, whereas Unit B has 40% floor area. Unit A was self-occupied by R for 8
months and w.e.f. 1.12.2022, it was let out for 10,000 p.m. Unit B was also meant for self-
occupation but it was also let out w.e.f. 1.10.2022 for Rs.8,000 p.m. The other particulars of
the house property were as under:
Rs.
Municipal taxes paid 40,000
Insurance premium 4,000

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GIBS INCOME TAX LAW & PRACTICE BBA INCOME FROM HOUSE PROPERTY

Interest on money borrowed 20,000

Compute income from house property for the assessment year 2023-24.

Solution: In the above question, both house properties are part of the year self occupied and
part of the year let out Hence, benefit of self-occupied for residential purpose shall not be
allowed due to provisions of section 23(3). In this case, annual value of both the house
properties shall be determined as per section 23(1).
Computation of income of house properties:
Unit A: Gross annual value, higher of the following two:
(a) Expected rent which shall be 10,000 x 12 =
1,20,000
(b) Actual rent received or receivable 10,000 x 4 =
40,000
Gross annualvalue 1,20,000
Less: Municipal tax paid (60% of 40,000) 24,000
96,000
Less: Deductions u/s 24
(a) Statutory deduction @ 30% 28,800
(b) Interest on money borrowed (60% of 20,000) 12,000 40,800
55,200
Unit B: Gross annual value, higher of the following two:
(a) Expected rent which shall be 8,000 x 12 = 96,000
(b) Actual rent received or receivable 8,000 x 6 =
48,000
Gross annual value 96,000
Less: Municipal tax paid (40% of 40,000) 16,000
80,000
Less: Deductions u/s 24
(a) Statutory deduction @ 30% 24,000
(b) Interest on money borrowed (40% of 20,000) 8,000 32,000
48,000
Income from house property 55,200 + 48,000 = 1,03,200
Note.—In the absence of information, actual rent has been taken as expected rent.

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