INCOME FROM HOUSE PROPERTY

Presented by - Abhijeet Soni

 Chargeability
 Any income from the house property & land
apparent there to. However the dueling
house adjacent to the firm will be exempted
as the agricultural income.
 Who is taxable-
 Real owner
 Deemed Owner
 Transfer of House to spouse (except with an
agreement to live appart)/ minor child except a
married daughter without proper consideration- the
transferor.
 Holder of an Inpartiable Property of HUF- Karta will
be Taxable
 Members of Co-operative Society.
 Tenant having tenancy right more than 12 years
 Chargeability
 Residential Property is not taxable. Only one property can
be exempted in case of ownership of more than one
Property.
 Rent from vacant land and from hiring of building along
with the machinery will be taxable under Other source.
 The rent from business of renting of House property will
be taxable under house Property.
 House partly self occupied & partly rented needed to
considered as separate premises.
 House kept as mortgage in the money laundering
business will also be taxable under H.P.
 Residents having Income from Foreign Estates are taxable
.
 Non Residents having Income from Foreign Estates are
taxable only when received in India.
 Composite rent when not separable for benefits provided
will be taxable under H.P. (Separable- facilities- Other
PROPERTY INCOMES EXEMPT
FROM TAX
 Income from a farm house [section 2(1A) (c) and
section 10(1)].
 Property of an ex-ruler [section 10(19A)].
 Property income of a local authority [section 10(20)].
 Property income of an approved scientific research
association [section 10(21)].
 Property income of an educational institution and
hospital [section 10(23C)].
 Property income of a registered trade union [section
10(24)].
 Income from property held for charitable purposes
[section 11].
 Property income of a political party [section 13A].
 Income from property used for own business or
profession [section 22].
Computation of income under
h.p.
A. Fair Market Value (FMV) XXX
B. Municipal Value XXX
C. Take the Higher XXX
D. Standard Rent XXX
E. Take the Lower (ERV)(Expected XXX
Rental Value
F. Actual Rent- Unrealized rent XXX
G. Take the Higher (Gross Annual XXX
Value)
Less: Municipal Taxes XXX
Net Annual Value XXX
Less: Deductions under Section 24 XXX
Statutory Deduction (30% of NAV)
XXX
Interest on Borrowed Capital
XXX
 Unrealized Rent
 Conditions for non Taxability
1.Bonafide tenancy
2. The Defaulting tenant has vacated the
House.
3. He is not in possession of any other house
property of the owner
4. Legal Proceedings has been commenced for
the recovery of the unrealized rent.
Unrealized Rent Realized subsequently will be
Taxable in the year in which it will be realized.
 Vacancy rent
 The Vacancy rent is allowed as deduction
in the case
 Actual rent is lesser than the ERV.
 Calculation-
A. Fair Market Value (FMV) XXX
B. Municipal Value XXX
C. Take the Higher XXX
D. Standard Rent XXX
E. Take the Lower (ERV)(Expected XXX
Rental Value
ERV for Non vacancy period
F. Actual Rent for Non vacancy period - XXX
Unrealized rent
G. Take the Higher (Gross Annual XXX
Value)
 DEDUCTIONS UNDER SEC
24
 Statutory deduction: 30 % of NAV irrespective of
the repair & maintenance Expenses.
INTEREST ON HOUSING LOAN
 In case the property is let out, the entire amount
of interest accrued during the year is deductible.
The borrowals may be for
construction/acquisition or repairs/renewals.
 A fresh loan may be raised exclusively to repay
the original loan taken for purchase/
construction etc., of the property. In such a case
also, the interest on the fresh loan will be
allowable.
 Interest payable on interest will not be allowed.
INTEREST ON HOUSING LOAN
 Brokerage or commission paid to arrange a loan
for house construction will not be allowed.
 When interest is payable outside India, no
deduction will be allowed unless tax is deducted
at source or someone in India is treated as agent
of the non-resident
 Should be taken from Banks
 The Deduction is only available to the borrower
not to his successors.
 Non refundable loan from Provident fund will be
allowed only on the portion of owner’s
contribution.
 Purchase of house Property on Installments- The
Interest can be deductable only.
Deduction in case of self
Occupied House property
 The Property purchased Before 1999-2000
 Pre Construction Interest(PCI)/5 < Rs30,000/-
 Current year Interest < Rs30,000/-
 The Property purchased After 1999-2000
 {Pre Construction Interest(PCI) + Current year
Interest }/5 < Rs1,50,000/-
 Both Should be limited to Rs1,50,000/- in case
both the category loans are taken by one
assessee.
 In case of self occupied house remain vacant and
hence rented and during that period the owner is
staying in paid accommodation at a place due to
his occupation/ Business/ Employment and there
is no other building in his possession or ownership
then the rent received will not be taxable. He
must be the owner of one house property only
 Important points
 Municipal tax- It is the liability of the
tenant and therefore if it is paid by the
owner then he can avail deduction. How
ever we can go for tax planning with this
regards. The Municipal taxes are
deductable on the basis of Payment
therefore should be dealt with cautiously.
The arrear of Municipal tax paid is also
deductable.
 Local tax including service tax is the
liability of the owner therefore is allowed
to be deducted while calculating the
Set off & carry Forward of
House Property Losses
 Loss From one house Property Can be
adjusted from the profit from another
house property.
 The loss can also be carry forward to the
next year.(can be adjusted under the
house property) irrespective of the delay
in filling.
 The loss on house property can be Set off
with the other sources of Income.
Tax planning in House
Property
 Person having more than one self occupied house.
Higher ERV property should be considered to be
self occupied.
 Interest on loan is allowed only when TDS has
been Deducted
 Municipal tax should be paid before 31st march to
get the deduction
 In case of deemed owner is a member of housing
co operative society , The interest on the
outstanding installments can be claimed as
deduction
 Transfer of HP-
 To Parents, Son’s Wife, Son’s Minor Child without proper
consideration.
 To Son/ Spouse with consideration.
 Karta can transfer the property to his wife in case of HUF