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CHAPTER – 8 INCOME FROM HOUSE PROPERTY

1. Conditions for chargeability – Section 22:
● The assessee should be the owner of the house (owner includes deemed owner)
● There should be a building or land connected with building
● The building should not be occupied by the assessee for his own business

2. Self-occupied property -- format:

Annual ValueNil
Less: Deductions under section 24
Interest on borrowed capital xxx
-----
Loss from self occupied property (xxx)
-----

note: The maximum amount deductible on account of interest on loan is Rs.30,000.

note: However, if the loan is borrowed on or after 1.4.1999 for PURCHASE or CONSTRUCTION
and the house is purchased or constructed within 5 years from the end of the relevant
previous year during which the loan was borrowed then Rs.2,00,000 (instead of
Rs.30,000) shall be allowed as deduction.

note: The above deduction is not available under the default tax regime.

3. Let-out property -- format:

Gross Annual Valuexxx
Less: Municipal taxesxxx
------
Net Annual Value xxx
Less: Deductions under section 24:
Standard deduction u.s.24(a) xxx
Interest on borrowed capital u.s.24(b) xxx
-----
Income from let out propertyxxx
-----

Determination of Gross Annual Value:

1. Municipal Valuation (rental value fixed by municipal authorities)
2. Fair Rent (rent of a similar property in the neighborhood)
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3. Rent receivable (rent charged by the owner)

4. Standard Rent (rent fixed under the Rent Control Act)

note: If 1, 2 and 3 are given then Gross Annual Value is the highest among the three.
If Standard Rent is also given then:
Step 1: Find out the maximum of 1, 2 and 3.
Step 2: Find out the maximum of 3 and 4.
Step 3: Gross Annual Value is the least of the two calculated above.

Unrealised Rent: A default made by the tenant in the payment of rent is unrealised rent.

Conditions to be satisfied (Rule 4):

a. The tenancy is bona-fide (claim is genuine);
b. Reasonable steps should be taken by the assessee making the tenant vacate the
property;
c. The defaulting tenant should not occupy any other property of the assessee;
d. The assessee has taken legal steps for its recovery.

note: RECOVERY OF URR. (to the extent it was allowed earlier) is treated as income of the year
in which it is recovered. Such recovery is taxed under this head irrespective of the fact
whether the assessee owns the house or not. Any amount spent on such recovery is
ignored. Standard deduction is allowed @ 30%. Section 25A

note: RENTAL ARREARS received by the assessee shall be taxed after allowing standard
deduction of 30% under the head “Income from house property”. Section 25A

Unrealised rent recovered Arrears of rent received

a. Taxable in the year in which the loss is Taxable in the year in which the arrears
recovered is received

b. Taxable (under IFHP) whether theTaxable (under IFHP) whether the

assessee owns the house or not assessee owns the house or not
c. Standard deduction @ 30% is allowedStandard deduction @ 30% is allowed

Where a let-out house remains vacant for some part of the previous year
Step 1: Compute gross annual value as if the house is let out for whole year.
Step 2: Reduce vacancy loss from the gross annual value computed in step 1.

Municipal taxes:Municipal taxes (including water tax and sewage tax) actually paid by the
owner during the previous year is allowed as deduction. Municipal tax paid
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by the tenant is not allowed as deduction.

DEDUCTIONS UNDER SECTION 24:

1. STANDARD DEDUCTION u.s.24(a): Compulsory deduction allowed @ 30% of net annual

value.

2. INTEREST ON BORROWED CAPITAL u.s.24(b):

a.Any interest paid or payable on loan borrowed for the purpose of purchase,
construction, reconstruction, renewal, repairs of house property is allowed as deduction.

b. The maximum amount of deduction allowed is Rs.2,00,000 in case of a self occupied

property (in certain cases Rs.30,000). No such limit is fixed for a let out property.

c. Any interest paid out of India without TDS. shall not be allowed as deduction.

d. Interest paid may relate to: i) post-construction period; or ii) pre-construction period.

i. Interest paid during the post construction period is fully allowed as deduction in the
respective years.

ii. Interest paid up to the date of completion or up to the date of repayment of loan
(whichever is earlier) is pre-construction interest. Such interest is allowed in FIVE
equal installments from the year of completion.

note: If date of completion of construction is earlier then pre-construction period is restricted

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to 31 March of the preceding year.

note: If date of repayment of loan is earlier then pre-construction period is up to the date of
repayment.

e. Interest paid on delay in payment of original interest due (penalty) is not deductible.

f. Where a fresh loan has been taken to repay the original loan, interest paid on the
second loan is also allowable as deduction.

g. Interest on loan borrowed from a friend or a relative is allowed as deduction u.s.24.

However, principal repayment of loans borrowed from friend or relative does not qualify
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for deduction u.s.80 C.

PARTLY SELF-OCCUPIED AND PARTLY-LET OUT:

Case A: Where a house is let for some part of the year and self-occupied for the
remaining part of the year.

“ANNUAL VALUE” IS COMPUTED AS IF THE HOUSE IS LET OUT FOR THE WHOLE YEAR.
for eg: X owns a house. Municipal valuation Rs.60,000 p.a.; Fair rent Rs.72,000 p.a.; The
house is let out for Rs.7,000 p.m. for 8 months and for the remaining period it remained self-
occupied. What will be the gross annual value of the property? What would be the answer if
the house is let for Rs.10,000 p.m. instead of Rs.7,000?

A.Municipal valuation Rs.60,000 p.a.

Fair rent Rs.72,000 p.a.
Rent received Rs.56,000 (7,000 x 8) (ignore self-occupied period)

Gross Annual Value in this case would be Rs.72,000 (i.e. whichever is higher)

B. In the second case GAV. would be Rs.80,000 (i.e. higher of 60,000; 72,000 and Rs.80,000)

Case B: Where a house consists of more than one unit:

Each unit is treated separately. (i.e. a self-occupied unit like a separate self-occupied
property and a let-out unit similar to a separate let-out property).

OTHER PROVISIONS:
a. Composite Rent:
Where the landlord receives rent for other amenities in addition to house rent then such a
rent is known as composite rent. In such a situation, house rent is to be separated from
the total (composite) rent and is assessed to tax under the head “IFHP”. Rent received for
providing other amenities shall be assessed under the head “IFOS”.

b. Deemed to be let out property – Annual value of two houses can be ‘NIL’:
Where the assessee owns more than two houses for self-occupation, then annual value of
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any two houses according to his choice shall be NIL and the remaining properties shall be
deemed as let out.

c. Property owned by co-owners:

Where a house owned by joint owners is self-occupied by each of the co-owner, the annual
value of the property will be nil and each co-owner shall be entitled to a deduction of
Rs.30,000 or Rs.2,00,000 as the case may be on account of interest on borrowed capital.

Where the house owned by co-owners is let out, the income shall be computed as if the
property is owned by one owner and thereafter the income so computed shall be divided
amongst each co-owner as per their respective share.

Problems:
1.In the following cases, state the head of income under which the receipt is to be assessed and
comment.

a. Mr.X lets out his property to Mr.Y. Mr.Y sublets it. How is sub-letting receipt to be
assessed in the hands of Mr.Y.

b. Mr.Y has built a house on a leasehold land. He has let out the property and claims the
rental income to be assessed under the head “Income from other sources”. Is he
correct?

c. Mr.Z occupies his property for his own business. Can he claim depreciation?

d. Income from a vacant land is taxable under the head ……………………………

e. Rental income from properties held as stock-in-trade is taxed under the head …………………

2.X owns a house. It is self-occupied. Municipal valuation is Rs.2,00,000, whereas Fair rent is
Rs.3,00,000 and Standard rent under the Rent Control Act is Rs.2,75,000. The following
expenses are incurred by Mr.X: Repairs Rs.20,000; Municipal tax Rs.7,000; Insurance
Rs.2,000.

Interest on borrowed capital to construct the property Rs.2,25,000; Interest on capital

borrowed by mortgaging the property for daughter’s marriage Rs.50,000 (in either case capital
is borrowed after April 1, 1999). Income of X from Salary (computed) Rs.12,00,000. Find out
his net income both under optional tax regime and default tax regime.

3.Choose the correct answer with reference to the provisions of the Income-tax Act, 1961:
The ceiling limit of deduction under section 24 in respect of interest on loan taken on 01.04.2009
for repairs of a self-occupied house is:
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a. Rs.30,000 per annum

b. Rs.2,00,000 per annum
c. No limit
d. 30% of NAV

4.Mr.R owns six houses in Chennai, details of which are as follows, compute GAV.

Particulars I II III IV V VI
Municipal valuation 20,000 24,000 56,000 42,000 48,000 45,000
Fair rental value 24,000 24,000 40,000 42,000 50,000 50,000
Rent received or receivable18,000 36,000 48,000 36,000 54,000 56,000
Standard rent ** 42,000 50,000 30,000 ** 48,000

5.Compute Gross Annual Value in the following cases:

ABC D
Municipal value60,000 60,000 60,000 1,12,000
Fair rent 68,000 68,000 68,000 1,17,000
Actual rent (before adjusting unrealised rent)66,000 66,000 72,000 1,20,000
Standard rent 62,000 62,000 70,000 1,15,000
Unrealised rent (conditions of Rule 4 satisfied)2,000 6,000 5,000 50,000

6.Compute Gross Annual Value in the following cases:

ABCD
Municipal value60,000 60,000 60,000 1,12,000
Fair rent 68,000 68,000 68,000 1,17,000
Actual rent (per annum)60,000 66,000 72,000 1,20,000
Standard rent 62,000 62,000 70,000 1,15,000
Vacancy period (in months)1 2 3 4

7.Compute Gross Annual Value in the following cases:

ABCD
Municipal value 1,40,000 1,40,000 1,40,0001,40,000
Fair rent 1,45,000 1,45,000 1,45,0001,45,000
Actual rent (before adjusting urr.) 1,68,000 1,68,000 1,68,000 1,68,000
Standard rent 1,42,000 1,42,000 1,50,0001,42,000
Unrealized rent (Rule 4 satisfied)14,000 42,000 42,000 70,000
Vacancy period (in months) 1 1 1 3

8.X owns 3 houses in Delhi, details of which are as under: Compute net annual value.
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Particulars House I House II House III

Municipal value 1,20,000 72,000 60,000
Fair rent 1,50,000 75,000 75,000
Rent per unit p.a. 70,000 84,000 21,000
Standard rent 1,30,000 80,000 72,000
No. of residential units 2 1 3
Municipal taxes Rs.12,000 Rs.8,000 for last Rs.60,000
(includes
(due but not year paid in this Rs.45,000 which
paid) year & Rs.9,000 of relates to last
three current year is due years paid
now)

9.Mr.A has a property whose municipal valuation is Rs.1,30,000 p.a. The fair rent is Rs.1,10,000
p.a. and the standard rent fixed by the Rent Control Act is Rs.1,20,000 p.a. The property was
let out for a rent of Rs.11,000 p.m. throughout the previous year. Unrealised rent was
Rs.11,000 and all the conditions prescribed by Rule 4 are satisfied. He paid municipal taxes
@ 10% of municipal valuation. Interest on borrowed capital was Rs.40,000 for the year.
Compute income from house property.

10.Mr.G has a property whose municipal valuation is Rs.2,50,000 p.a. The fair rent is Rs.2,00,000
p.a. and the standard rent under the Rent Control Act is Rs.2,10,000 p.a. The property was let
out for a rent of Rs.20,000 p.m. However, the tenant vacated the property on 31.01.2025.
Unrealised rent was Rs.20,000 and all the conditions prescribed by Rule 4 are satisfied. He
paid municipal taxes @ 8% of municipal valuation. Interest on borrowed capital was
Rs.65,000 for the year. Compute income from house property.

11.For the assessment year 25-26, X submits the following information:

House I House II
Municipal valuation 1,80,000 3,60,000
Fair rent 2,00,000 5,40,000
Standard rent 1,50,000 3,00,000
Actual Rent 2,40,000 6,00,000

Municipal taxes – paid 20,000 30,000

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Municipal taxes – outstanding 10,000 15,000

Interest on money borrowed – paid 60,000 20,000

Interest on money borrowed – outstanding 1,00,000 60,000
Housing loan principal repaid to bank 50,000 30,000

Nature of occupation Let out for Let out for

residence business
Compute Income from house property.

Property held by co-owners:

12.Ganesh and Rajesh are co-owners of a self-occupied property. They own 50% share each. The
interest paid by each co-owner during the previous year on loan (taken for acquisition of
property during the year 2005) is Rs.2,05,000. The amount of allowable deduction in respect
of each co-owner is:

a) Rs.2,05,000 c) Rs.2,00,000
b) Rs.1,02,500 d) Rs.1,00,000

13.Mr.Raman is a co-owner of a house property alongwith his brother:

Municipal value of the property Rs.1,60,000

Fair rent Rs.1,50,000
Standard Rent Rs.1,70,000
Rent received Rs.15,000 p.m.

The loan for the construction of this property is jointly taken and the interest charged by the
bank is Rs.25,000 has been paid. Interest on the unpaid interest is Rs.450. To repay this loan,
Raman and his brother have taken a fresh loan and interest charged on this loan is Rs.5,000.
The municipal taxes of Rs.5,100 have been paid by the tenant.

Compute income from house property in the hands of Mr.Raman for the A.Y.2025-26.

14.Ms.Aparna co-owns a residential house property in Calcutta along with her sister Ms.Dimple,
where her sister's family resides. Both of them have equal share in the property and the same
is used by them for self-occupation. Interest is payable in respect of loan of Rs.50,00,000 @
10% taken on 1.4.2023 for acquisition of such property. In addition, Ms.Aparna owns a flat in
Pune in which she and her parents reside. She has taken a loan of Rs.3,00,000 @ 12% on
1.10.2023 for repairs of this flat. Compute the deduction which would be available to
Ms.Aparna and Ms. Dimple under section 24(b) for A.Y.2025-26, if both exercise the option of
shifting out of the default tax regime provided u.s.115BAC(1A).
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15.Two brothers Arun and Bimal are co-owners of a house property with equal share. The house
was constructed during the financial year 1998-99. The property consists of eight identical
units and is situated at Cochin.

During the financial year 2024-25, each co-owner occupied one unit for residence and the
balance of six units were let out at a rent of Rs.12,000 per month per unit. The municipal
value of the house property is Rs.9,00,000 and the municipal taxes are 20% of municipal
value, which were paid during the year. One of the let out properties remained vacant for 4
months.

The other expenses were as follows:

Repairs Rs.40,000; Insurance paid Rs.15,000; Interest payable on loan Rs.3,00,000

Arun could not occupy his unit for six months as he was transferred to Chennai. He does not
own any other house.

The other incomes of Mr.Arun and Mr.Bimal are Rs.2,90,000 and Rs.1,80,000 respectively, for
the financial year 2024-25.

Compute total income of two brothers for A.Y. 2025-26 assuming they have opted out of default
tax regime. What will be the total income if they pay tax under the default tax regime.

Problems on Interest computation on borrowed capital:

16.Identify pre-construction period from the following information given below:

Date of borrowing Date of completion Date of repayment

a. 1.4.2022 1.4.2023 1.4.2037
b. 1.4.2021 1.4.2023 1.4.2037
c. 1.4.2018 31.8.2021 1.4.2037
d. 1.4.2019 31.10.2021 1.4.2037
e. 1.8.2020 1.12.2022 1.4.2037

17. Mr.R took a loan of Rs.15 lakhs @ 12% p.a. on 1.7.2022 for constructing a house. The
construction of the house was completed on 19.10.2024. Compute for A.Y. 2025-26 the
amount of interest deductible in computing the income from house property if the house is: (i)
let out; (ii) self-occupied.

18. The assessee took a loan of Rs.6,00,000 on 1.4.2021 from a bank for construction of a house
on a land he owns in Chennai. The loan carries an interest @ 10% p.a. The construction is
completed on 15.6.2023. The entire loan is outstanding as on 31.03.2025. Compute interest
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allowable for the previous year 2024-25.

19. Poorna has one house property at Bangalore. She stays with her family in the house. The rent
of similar property in the neighbourhood is Rs.25,000 p.m. The municipal valuation is
Rs.2,80,000 p.a. Municipal taxes paid is Rs.8,000.

The house construction began in April 2018 with a loan of Rs.20,00,000 taken from SBI
Housing Finance Ltd. @ 9% p.a. on 01.04.2018. The construction was completed on
30.11.2020. The accumulated interest up to 31.3.2020 is Rs.3,60,000. On 31.03.2025,
Poorna paid Rs.2,40,000 which included Rs.1,80,000 as interest. There was no principal
repayment prior to this date. Compute income from house property for A.Y. 2025-26
assuming that she has exercised the option of shifting out of the default tax regime.

Problems on Deemed to be let out property

20.Mr.R has three houses for self-occupation. What would be the tax treatment for A.Y.25-26 in respect of
income from house property?

(a) One house, at the option of Mr.R, would be treated as self-occupied. The other two houses would
be deemed to be let out.
(b) Two houses, at the option of Mr.R, would be treated as self-occupied. The other house would be
deemed to be let out.
(c) One house, at the option of Assessing Officer, would be treated as self-occupied. The other two
houses would be deemed to be let out.
(d) Two houses, at the option of Assessing Officer, would be treated as self-occupied. The other
house would be deemed to be let out.

21. Mr.Manas owns two house properties one at Bombay, wherein his family resides and
the other at Delhi, which is unoccupied. He lives in Chandigarh for his employment
purposes in a rented house. For acquisition of house property at Bombay, he has taken
a loan of Rs.30 lakh @ 10% p.a. on 1.4.2023. He has not repaid any amount so far. In
respect of house at Delhi, he has taken a loan of Rs.5 lakh @ 11% p.a. on 1.10.2023
towards repairs. Compute the deduction which would be available to him u.s.24(b) for
A.Y.2025-26 in respect of interest payable on such loan if he exercises the option of
shifting out of the default tax regime.

22.Ganesh has three houses, all of which are self-occupied. The particulars of the houses for the
P.Y. 2024-25 are as under:
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Particulars House I House II House III

Municipal valuation p.a. Rs.3,00,000 Rs.3,60,000 Rs.3,30,000
Fair rent p.a. Rs.3,75,000 Rs.2,75,000 Rs.3,80,000
Standard rent p.a. Rs.3,50,000 Rs.3,70,000 Rs.3,75,000

Date of completion/purchase 31.3.200031.3.200201.4.2016

Municipal taxes paid during the year 12% 8% 6%

Interest on money borrowed for repair

of property during the current year - 55,000

Interest for current year on money

borrowed in April, 2017 for purchase 1,75,000
of property

Compute Income from house property and suggest which houses should be opted to be
assessed as self-occupied so that his tax liability is minimum.

Problem on recovery of Unrealised rent:

23.Mr.X received Rs.90,000 in May, 2024 towards recovery of unrealized rent, which was deducted
from actual rent during the P.Y.2022-23 for determining annual value. Legal expenses
incurred in relation to unrealized rent is Rs.20,000. The amount taxable u.s.25A for
A.Y.2025-26 would be:
a) Rs.70,000 c) Rs.90,000
b) Rs.63,000 d) Rs.49,000

Problem on arrears of rent collected:

24.Mr.Anand sold his residential house property in March, 2024.

In June, 2024, he recovered rent of Rs.10,000 from Mr.Gaurav, to whom he had let out his
house for two years from April 2018 to March 2020. He could not realise two months rent of
Rs.20,000 from him and to that extent his actual rent was reduced while computing income
from house property for A.Y.2020-21.

Further, he had let out his property from April, 2020 to February, 2024 to Mr. Satish. In April,
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2022, he had increased the rent from Rs.12,000 to Rs.15,000 per month and the same was a
subject matter of dispute. In September, 2024, the matter was finally settled and Mr.Anand
received Rs.69,000 as arrears of rent for the period April 2022 to February, 2024.

Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr.Anand,
and if so in which year?

Problems on partly self-occupied and partly let-out

25.X owns a property at Chennai (Municipal valuation Rs.1,64,000 p.a.; Fair rent Rs.2,16,000 p.a.;
Standard rent Rs.1,80,000 p.a.). The house is let out up to 31.01.2025 (monthly rent being
Rs.14,000). From 01.02.2025 the property is self-occupied for own residential purposes.

Expenses incurred by X are: Municipal tax Rs.6,000 (actually paid); Repairs Rs.2,000; Interest
on capital borrowed (date of borrowing 10.6.98) for acquiring the property: Rs.1,23,000.
Compute income from house property.

26.Smt.Rajalakshmi owns a house property at Adyar in Chennai. The municipal value of the
property is Rs.5,00,000, fair rent is Rs.4,20,000 and standard rent is Rs.4,80,000. The property
was let-out for Rs.50,000 p.m. up to December 2024. Thereafter, the tenant vacated the
property and Smt.Rajalakshmi used the house for self-occupation. Rent for the months of
November and December 2024 could not be realised in spite of the owner’s efforts. All the
conditions prescribed under Rule 4 are satisfied.

She paid municipal taxes @ 12% during the year. She had paid interest of Rs.25,000 during
the year for amount borrowed for repairs for the house property. Compute her income from
house property for the A.Y.2025-26.

27.You are required to compute Income from House Property for assessment year 25-26 of Mrs.R
from her house property at T.Nagar in Chennai. The Municipal value of the property is
Rs.7,50,000. Fair rent of the property is ₹6,30,000 and Standard rent is ₹7,20,000 per annum.
The property was out for ₹80,000 per month for the period, April 2024 to November 2024.

Thereafter, the tenant vacated the property and Mrs.R used the house for self-occupation.
Rent for the months of October and November 2024 could not be realized from the tenant.
The tenancy was bonafide but the defaulting tenant was in occupation of another property of
the assesse, paying rent regularly. She paid municipal taxes at 12% during the year and paid
interest of ₹50,000 during the year for amount borrowed towards repairs of the house property.
Problems on Part of the house is let out and the other part is self-occupied
rd
28.Prem owns a house in Chennai. During the previous year 2024-25, 2/3 portion of the house
rd
was self occupied and 1/3 portion was let out for residential purposes at a rent of Rs.8,000
p.m. Municipal value of the property is Rs.3,00,000 p.a., fair rent is Rs.2,70,000 p.a. and
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standard rent is Rs.3,30,000 p.a. He paid municipal taxes @ 10% of municipal value during the
previous year.

A loan of Rs.25,00,000 was taken by him during the year 2020 for acquiring the property.
Interest on loan paid during the previous year 2024-25 was Rs.1,20,000. Compute IFHP under
both tax regimes.

29.X owns a residential house property. It has two equal residential units-Unit I and Unit 2. While
Unit I is self-occupied by X for his residential purpose, Unit 2 is let (rent being Rs.6,000 p.m.,
rent of 2 months could not be recovered).

Municipal value of the property is Rs.1,30,000 p.a., Standard rent is Rs.1,25,000 p.a. and Fair rent
is Rs.1,40,000 p.a. Municipal tax is imposed @ 12% which is paid by X. Other expenses being
repairs Rs.9,000; insurance Rs.600; interest on capital borrowed during 1998 for constructing
the property Rs.63,000. Compute his taxable income assuming his income from other
sources is Rs.10,00,000.

Additional Problems:
30.Mr.X owns one residential house in Mumbai. The house is having two identical units. First
unit of the house is self-occupied by Mr.X and another unit is rented for Rs.8,000 p.m. The
rented unit was vacant for 2 months during the year. The particulars of the house for the
previous year 2024-25 are as under:

Standard rent Rs.1,62,000 p.a. Municipal valuation Rs.1,90,000 p.a.

Fair rent Rs.1,85,000 p.a. Municipal tax (paid by Mr.X) 5% of M.V.
Light and water charges Rs.500 p.m.Interest on borrowed capital Rs.1,500 p.m.
Lease money Rs.1,200 p.a. Insurance charges Rs.3,000 p.a.
Repairs Rs.12,000 p.a.

31.Mr.Vikas owns a house property whose Municipal Value, Fair Rent and Standard Rent are
Rs.96,000, Rs.1,26,000 and Rs.1,08,000 (per annum), respectively. During the financial year
2024-25, one-third of the portion of the house was let out for residential purpose at a monthly
rent of Rs.5,000. The remaining two-third portion was self-occupied. Municipal tax @ 11% of
municipal value was paid during the year.

The construction of the house began in June, 2017 and was completed on 31.5.2020. Vikas
took a loan of Rs.1,00,000 on 1.7.2017 for the construction of building. He paid interest on
loan @ 12% per annum and every month such interest was paid. Compute IFHP. under old
tax regime.
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32.Mr.Ganesh owns a commercial building whose construction got completed in June 2020. He
took a loan of Rs.15,00,000 from his friend on 01.08.2019 and had been paying interest
calculated at 15% p.a. He is eligible for pre-construction interest as deduction as per the
provisions of Income-tax Act.

Mr.Ganesh has let out the commercial building at a rent of Rs.40,000 p.m. during the financial
year 2024-25. He paid municipal tax of Rs.18,000 each for the f.y. 2023-24 and 2024-25 on
01.05.2024 and on 05.04.2025 respectively. Compute “IFHP” of Mr.Ganesh for A.Y.2025-26.

33.Mr.Aditya, is a resident but not ordinarily resident in India for the A.Y.2025-26. He owns two
houses, one in Dubai and the other in Mumbai. The house in Dubai is let out there at a rent of
DHS 20,000 p.m. (1 DHS = INR 18). The entire rent is received in India. He paid property tax
of DHS 2,500 and sewerage tax DHS 1,500 there, for the financial year 2024-25.

The house in Mumbai is self-occupied. He had taken a loan of Rs.25,00,000 to construct the
st st
house on 1 June, 2021 @ 12%. The construction was completed on 31 May, 2023 and he
st st
occupied the house on 1 June, 2023. The entire loan is outstanding as on 31 March, 2025.
Property tax paid in respect of the second house is Rs.2,400 for the financial year 2024-25.
Compute the income chargeable under the head “IFHP” for A.Y.2025-26. DHS = Dirhams

34.Mr.Nitin completed construction of a residential house on 01.04.2024.

Interest paid on loans borrowed for the purpose of construction during the 30 months prior to
completion was 60,000. The house was let out on a monthly rent of 18,000.

Annual corporation tax paid is 35,000. Interest paid during the year is 25,000;
Amount spent on repairs is 6,000 The property was vacant for 4 months.

Annual letting value as per corporation records is Rs.1,50,000. Fire insurance premium paid
Rs.3,000. He owns another house in Kerala. In respect of this house, he had received arrears
of rent of Rs.36,000 during the year, which had not been charged to tax in the earlier year.
Compute the income from “Income from House Property” for the Assessment Year 25-26.

35.Mr.Ramesh constructed a big house (construction completed in previous year 2012-13) with 3
independent units. Unit-1 (50% of floor area) is let out for residential purpose at Rs.15,000
p.m. A sum of Rs.3,000 could not be collected from the tenant and a notice to vacate the unit
was given to the tenant. No other property of Mr.Ramesh is occupied by the tenant. Unit-1
remains vacant for 2 months when it is not put to any use. Unit-2 (25% of the floor area) is
used by Mr. Ramesh for the purpose of his business, while Unit 3 (the remaining 25%) is
utilized for the purpose of his residence.
 15

Other particulars of the house are as follows:

● Municipal valuation – Rs.1,88,000
● Fair rent – Rs.2,48,000
● Standard rent under the Rent Control Act – Rs.2,28,000
● Municipal taxes – Rs.20,000 and
● Interest on capital borrowed for the construction of the property – Rs.60,000, ground
rent Rs.6,000, repairs – Rs.5,000 and fire insurance premium paid – Rs.60,000.

● Income of Mr.Ramesh from the business is Rs.1,40,000 (without debiting house rent
and other incidental expenditure).

Determine the taxable income of Mr.Ramesh for the A.Y. 2025-26 if he opts for optional tax
regime.

36.Mr.Ravi, a resident and ordinarily resident in India, owns a let out house property having
different flats in Kanpur which has municipal value of Rs.27,00,000 and standard rent of Rs.
29,80,000. Market rent of similar property is Rs.30,00,000. Annual rent was Rs.40,00,000
which includes Rs.10,00,000 pertaining to different amenities provided in the building. One
flat in the property (annual rent is Rs.2,40,000) remains vacant for 4 months during the
previous year. He has incurred following expenses in respect of aforesaid property:

Municipal taxes of Rs.4,00,000 for the financial year 2024-25 (10% rebate is obtained for
payment before due date). Arrears of municipal tax of financial year 2023-24 paid during the
year of Rs.1,40,000 which includes interest on arrears of Rs.25,000.

Lift maintenance expenses of Rs.2,40,000 which includes a payment of Rs.30,000 which is

made in cash. Salary of Rs.88,000 paid to staff for collecting house rent and other charges.

Compute the total income of Mr.Ravi for the assessment year 2025-26 assuming that Mr. Ravi
has opted for optional tax (old) regime.

CASE SCENARIOS:
37.For the assessment year 2025-26, Mr.Sonu submits the following information:

Particulars Building at Building at

Chennai (Rs.) Kochi (Rs.)
Municipal Valuation 35,000 80,000
Standard Rent 36,000 70,000
Fair Rent 31,000 82,000
Rent received 38,000 68,000
Municipal taxes paid by tenant Mr.Ramu for building at Chennai and
paid by Mr.Sonu for building at Kochi. 3,000 4,000
Repairs paid by tenant Mr.Ramu for Chennai building and Mr.Sonu
 16

paid for Kochi building 500 18,000

Land revenue paid 2,000 16,000
Insurance premium paid 500 2,000
Interest on loan borrowed for payment of municipal tax 200 400
Nature of occupation Let out for Let out for
residence business
Date of completion of construction 1.4.1998 1.7.2010
Mr.Sonu is constructing one more building in Mumbai. During the previous year, Mr.Raju, a film director,
took on rent the building under construction in Mumbai at Rs 5,000 per month for his film shooting. The
construction of the said building would be completed by April 2025. Mr.Sonu is a real estate developer and
letting out properties is not the business of Mr.Sonu.

Based on the facts of the case scenario given above, choose the most appropriate answer to the following
questions:

1. Which of the building’s income is chargeable to tax under the head “IFHP” in the hands of
Mr.Sonu?
(a) Building at Chennai only
(b) Building at Kochi only
(c) Both buildings at Chennai and Kochi
(d) All the three buildings at Chennai, Kochi and Mumbai

2. Which of the following payments/expenditure is allowable as deduction while computing income

under the head “Income from house property” incurred in respect of the building at Chennai and
Kochi?
(a) Municipal taxes paid by Mr.Sonu and Mr.Ramu
(b) Municipal tax, land revenue, insurance premium, interest on loan borrowed for payment of
Municipal tax paid by Mr.Sonu
(c) Only municipal tax paid by Mr.Sonu
(d) Both municipal tax and repairs paid by Mr.Sonu

3. Under which head of income, the amount received from Mr.Raju would be chargeable to tax?
(a) Income from house property
(b) Profits and gains from business or profession
(c) Income from other sources
(d) Income from house property or Income from other sources, at the option of Mr.Sonu

4. What is the amount chargeable to tax under the head IFHP in the hands of Mr.Sonu for the P.Y.
2024-25?
(a) Rs.72,800
(b) Rs.81,200
(c) Rs.1,14,800
(d) Rs.70,700

38.Mr.Ganesha (a salaried person) has three houses. One in Thane (Maharashtra), second in Jaipur
 17

(Rajasthan) and third in Ratlam (Madhya Pradesh). Details of the flats/houses are as follows:

-Thane flat: 3 BHK flat purchased in April, 2006 for Rs.90 lakhs. Afterwards, interior work done in 2009
of Rs.15 lakhs. Mr.Ganesha took loan of Rs.65 lakhs for purchase of this flat in 2003 and settled
full loan in 2022.

-Jaipur house: Purchased in July, 2022 of Rs.63.21 lakhs and interior work done in September, 2023 of
Rs.15.85 lakhs. Loan taken for purchase of this house of Rs.15 lakhs in June, 2022. As per interest
certificate, he paid Rs.12,00,000 and Rs.43,500 towards principal and interest, respectively.

-Ratlam house: Purchased in December 2023 for Rs.70 lakhs (stamp duty value of Rs.65 lakhs). For
acquiring this house, he took loan of Rs.40 lakhs from Canara Bank. Loan was sanctioned on
1.8.2023. He pays EMI of Rs.38,100 per month. As per interest certificate, for the previous year 202
4-25, he paid Rs.60,900 and Rs.3,96,300 towards principal and interest, respectively.
Mr.Ganesha is working in WinDoor Exports Pvt Ltd, Mumbai and self-occupied Thane flat. He earned salary
of Rs.22,50,350 for the previous year 2024-25.

Particulars Thane House Jaipur House Ratlam

(Apr-24 to Dec-24) House
Municipal Taxes paid 18,574 8,090 6,909
Municipal value (p.m.) 30,500 6,800 7,200
Fair Rent (p.m.) 33,000 7,000 7,500
Standard Rent (p.m.) 32,000 8,000 7,300

Other details are as follows:

a) He has no other income from any source for the P.Y. 2024-25.

b) He has given Ratlam house on rent for F.Y. 2024-25 to Mr.Pratap on a monthly rent of Rs.8,500.

c) He has given Jaipur house on rent for the period of April, 2024 to June, 2024 to Mrs.Madhura on
monthly rent of Rs.7,100 and vacant for remaining period from July, 2024 to December, 2024. He
th
sold Jaipur house on 5 January, 2025.

d) Mr.Ganesha would like to opt for optional tax regime.

Based on the facts of the case scenario given above, choose the most appropriate answer to the following
questions:

1. What would be Net Annual Value of each house for the previous year 2024-25?
a) Thane – Nil; Jaipur – Rs.13,210; Ratlam – Rs.95,091
b) Thane – Nil; Jaipur – Rs.54,910; Ratlam – Rs.95,091
c) Thane – Nil; Jaipur – Rs.21,300; Ratlam – Rs.1,02,000
d) Thane – Nil; Jaipur – Rs.13,210; Ratlam – Rs.80,691

2. What would be income/loss under the head “IFHP” in the hands of Mr.Ganesha?
a) Loss of Rs.1,67,689
b) Loss of Rs.2,86,236
 18

c) Loss of Rs.3,20,489
d) Loss of Rs.3,63,989

3. How much amount will be carried forward as loss from HP for the subsequent AY 2026-27?
a) Rs.3,63,989
b) Rs.1,63,989
c) Rs.2,00,000
d) Rs.1,50,000

39.Ananya Gupta, a citizen of India, lives with her family in New York since the year 2001. She
th
visited India from 21st March, 2022 to 28 September, 2024 to take care of her ailing mother.
In the last four years, she has been visiting India for 100 days every year to be with her
mother. She owns an apartment at New York, which is used as her residence. The expected
rent of the house is $ 32,000 p.a. The value of one USD ($) may be taken as Rs.75.
Municipal taxes paid in New York in January, 2025 are $ 2,000.
th
She took ownership and possession of her house in New Delhi on 25 March, 2024, for self-
occupation, while she is in India. The municipal valuation is Rs.4,20,000 p.a. and the fair rent
is Rs.4,50,000 p.a. She paid property tax of Rs.22,000 to Delhi Municipal Corporation on 21st
March, 2025. She had taken a loan of Rs.16 lakhs @ 10% p.a. from IDBI Bank on 1st April,
2020 for constructing this house and the construction got completed on 20th March, 2024.
No amount has been paid towards principal repayment so far. The house is vacant for the
rest of the year i.e., from October 2024 to March 2025.

She had a house property in Mumbai, which was sold on 28th March, 2024. In respect of this
house, she received arrears of rent of Rs.3,00,000 on 4th February, 2025. This amount has
not been charged to tax earlier.

She does not have any income under any other source in India during previous year in
2024-25.
Ananya Gupta wants to opt for the optional tax regime for A.Y. 2025-26.

Based on the facts of the case scenario given above, choose the most appropriate answer to
the following questions:

1. What would be the residential status of Ananya Gupta for A.Y.2025-26?

 19

(a) Resident and ordinarily resident

(b) Resident but not ordinarily resident
(c) Deemed resident but not ordinarily resident in India
(d) Non-resident

2. Ms. Ananya Gupta can claim benefit of “Nil” Annual Value under section 23(2) in
respect of:-
(a) Her Delhi house
(b) Her New York house, since it is more beneficial; her Delhi house will be deemed to be
let out and expected rent would be the annual value.
(c) Her Delhi house alone; her New York house will be deemed to be let out and expected
rent would be the annual value.
(d) Both her Delhi house and New York house, since benefit of Nil Annual value u/s 23(2)
is available in respect of two house properties.

3. What is the income chargeable under the head “IFHP” of Ananya Gupta for A.Y.
2025-26?
(a) Rs.15,65,000
(b) Rs.3,09,600
(c) Rs.1,00,000
(d) Rs.10,000

4. Assuming that, for the purpose of this question alone, Ananya Gupta has let out her
flat in New York during the six months (April to September) when she is in India, for a
sum of $ 6,000 p.m. Such rent was received in a bank account in New York and then
remitted to India through approved banking channels. What would be the IFHP
chargeable to tax in her hands in India for A.Y. 2025-26?
(a) Rs.10,000
(b) Rs.17,85,000
(c) Rs.17,95,000
(d) Rs.18,85,000

Property held as STOCK-IN-TRADE (in the case of a realestate developer) and remains vacant
for whole year. Can Annual Value be Nil?

The ANNUAL VALUE of properties held as stock-in-trade can be ‘Nil’ for a period of two years
from the end of the financial year in which certificate of completion of construction of the
property is obtained from the competent authority.

40.Ram Builders & Developers is the sole-proprietorship concern of Mr.Ram. The main business
 20

of the concern is the construction, development and sale of residential and commercial units.

Ram Builders & Developers developed a project named “Grand Heaven”, which has both
residential and commercial units with its own funds. It obtained certificate of completion for
the said project with effect from 31.03.2024. Ram sold majority of its residential units and
commercial units in the F.Y. 2024-25. However, around 30 residential units and 15
commercial units were held by him as stock in trade as on 31.3.2025.

During this period, there was a slump in the real estate sector. In order to earn some income
from these units, Ram incidentally lets out some of the units held as stock-in-trade. The
details of units constructed, sold and held as stock-in-trade are given hereunder:

Particulars Total Units Units Units held Units let Units Actual
constructe sold as stock-in- out vacant rent per
d trade during during unit p.m. [in
as on P.Y. the respect of
31.3.2025 2024-2 whole of let out
[(2) – (3)] 5 out P.Y.2024-25 units
of mentioned
(4) [(4) – (5)] in (5)]

(1) (2) (3) (4) (5) (6) (7)

Residential 100 70 30 10 20 10,000 pm.
Units
Commercial 40 25 15 5 10 18,000 p.m.
Units
140 95 45 15 30

Based on the facts of the case scenario given above, choose the most appropriate answer to
the following questions:

1. While computing the total income of Mr.Ram, the income from residential and
commercial units let out during the P.Y.2024-25 will be taxed under head:
(a) Income from house property
(b) Profits and gains of business or profession
(c) Income from let out residential units will be taxed under the head “IFHP” and income
from let out commercial units will be taxed under the head “business or profession”
(d) Income from other source.

2. What would be the tax treatment of vacant residential and commercial units held as
stock in trade as on 31.3.2025?
 21

(a) The vacant residential units would be deemed to be let out and expected rent would
be deemed as the annual value chargeable to tax under the head “IFHP” for A.Y.
2025-26.
(b) The vacant units, both residential and commercial, would be deemed to be let out and
expected rent would be deemed as the annual value chargeable to tax under the head
“IFHP” for A.Y. 2025-26.
(c) The annual value of both vacant residential and commercial units would be Nil for
A.Y.2025-26. Hence, no income is chargeable for such units under the head “IFHP” for
A.Y. 2025-26.
(d) Vacant units held as stock-in-trade can never be deemed as let out at any point of time