1
1
2
INCOME FROM HOUSE PROPERTY
House property for this purpose means :
Any building which has the characteristic
features of a building.
E.g.: residential building, cinema theatres etc.
3
Conditions for taxing income under the head house property.
There should be a building or a land appurtenant there to .
AND
The property should be owned by the assessee.
AND
Such building should not be used for own business or profession.
4
Section 22(Charging Section)
“ The Annual Value (likely reasonable rental value) of building or land appurtenant thereto is chargeable to tax in the hands of the owner provided the same is not used for own business or profession”.
E.g.: CASE 1: Mr. X lets out a HP to Mr. Y, who intends to carry on his private business. – Income from HP.
Note:- It is not taxed on monthly basis or Even if it is rented for a day of the previous year it is calculated
annually (financial year-1st April- 31st March of the following year)
5
CASE 2: Mr. X uses his property to carry on his own private business. – Income from such property does not come under income from House Property but income from business
6
Exceptions to the rule – that the rental income is taxable under HP.
Income from sub letting – Income from Other Sources since the assessee is not the owner.
Composite rent – When a building has been let out along with the furniture , then such letting out is called composite letting.
As per sec 56(2) , when the rent is inseparable – income from other sources.
7
Basic concept-continues
Owner ship of the building is important
Building normally have roof, but roof is not important to constitute a building. Four walls can constitute a building.
Registration of property is not primary to become the owner of the property. Part payment is made and house occupied will lead to be the owner of the property as per the transfer of property act (53A).
8
Basic concepts
Property transferred for inadequate consideration to minor children or wife, income is computed in the hands of transferee but taxed in the hands of transferor as per section 64.
Example:- Father transferred property worth Rs.20,00,000 to wife for Rs. 5,00,000, then the income from house property (fair rental value) is computed in the hands of wife. But ¾ th is taxable in the hands of father and ¼ th taxable in the hands of wife (as ¼ paid).
9
Basic concepts
If property is in foreign country, in case of resident assessee, the property is to be valued in foreign currency as per normal calculation. This foreign currency is converted into Indian rupee on the last day of the financial year which is taxable income under the head income from House property.
10
Basic concepts
If a person, doing business by selling building (real estate), during vacant period, rent such building, such rent comes under business.
If such building (stock in trade) is rented to employees, rent collected from employees is considered as business income.
If rented to third parties it comes under income from house property.
11
Basic concepts
Composite rent:
When we compute income from house property we consider four walls which can fetch the owner to be considered.
As per section 22 of the income tax act ‘rental value of the building’ is considered. But the extra facilities like lift, swimming pool if included in rent collected along with rent of four walls it should be separated to compute rental income from house property.
12
Section 23( Annual Value)
Sec 23(1)(a):
Annual Value = Rent at which the HP is reasonably expected to be let out.
Note: Income from house property is calculated on 12 months rental value of the property not on receipt basis.
Receiving rent is not important. Self occupied house property comes under this head. Income includes loss.
Therefore we can show loss from house property including self occupied and rented house property or deemed let out property.
13
Very important Basic concepts Loss from self occupied property is possible if assessee has to
pay interest on loan borrowed.
Net annual value is always ZERO for 100% self occupied property (throughout the year the house occupied by the owner)
If owner stays in more than one house the owner can choose any one of the houses (he can choose different houses for different previous year) which will reduce overall tax liability.
Even if for one day self occupied house property is rented, it is deemed to be let out (treated as let out)
14
When net annual can be negative If municipal tax paid by the owner during the previous year (need
not be for the previous year) exceeds gross annual value, the net annual value can be negative.
Note: Municipal taxes paid during the previous year only deductible in case of let out property.
If municipal tax of 2003-04 period paid by the owner during current previous year, it is deductible. It is always on payment basis.
Anything to government, deduction is always on payment basis. Anything to private parties even payable is deductible: interest on loan payable can be shown as deduction u/s 24(b).
15
Basic concepts
If net annual value is negative (If municipal tax paid exceeds gross annual value) or incase of self occupied house property net annual value is nil, standard deduction [u/s 24(a)] of 30% is not applicable.
Unrealized rent of the current previous year is deductible only from actual rent not from expected rent. But vacancy allowance can be deducted, either from actual rental value or expected rent (if chosen).
16
Basic concepts
Unrealized rent of the current previous year is deductible only from actual rental value if certain conditions like: tenant vacated the premises; such tenant is not staying in any one of the houses of the same owner; case had been filed against the tenant etc.
If actual rent (after deducting unrealized rent of the current previous year and vacancy allowance) is less than reasonable rent only because of vacancy we can choose actual rent.
17
Actual rent means
Actual rental value for 12 months
Less: unrealized rent for the current previous year (Not considered is the unrealized rent of preceding to current previous year)
Less: vacancy allowance
Balance is considered as actual rent.
18
Basic concepts
If a house, for part of the year is self occupied and for remaining part of the year is let out it is considered as let-out (deemed to be let out).
Municipal taxes levied by foreign authority in house property abroad is deductible while computing income from house property.
19
Basic concepts-interest on loan Interest on loan borrowed includes 12 months interest of
the current previous year +1/5th of pre-construction period interest.
If loan taken after 1st April 1999 not for extension like repairs, and renewals, such interest is deductible for self occupied property up to Rs.30,000 only.
Interest on loan borrowed is fully deductible for let out or deemed let out (partly self occupied and partly let out) property with out any limit. It means we can show negative income under such property.
20
Un realised rent realised
Belong toAssessment year 2001-02
Earlier(Sec.25A)
Belong toAfter assessment year 2001-02 (Sec.25AA)
Fully taxableExpenditure in relation to
Such collection is not deductible
(Amount collected- 30% of amount collected)
Taxable
21
Arrears of rent(Section 25 B)
Suppose rent of 2006-07 was Rs. 8000. In the year 2007-08 it is agreed that the rent should be paid at the rate of 10000 per month effect from 2006-07 onwards, then such arrears of rent(difference between 10000-8000) to be paid now during the current previous year is known as arrears of rent.
(Arrears of rent received- 30% of such arrears)is taxable
22
Principal repayment on loan
It is not deductible from house property. But we can deduct it as savings u/s 80C when we compute total income under various heads.
Educational cess
When computing tax calculate 3% educational cess on tax computed and add to tax to find total tax.
Tax +3%(tax)= total tax
23
Test yourself-conceptual questions
1.Land allotted by co-operative society to Mr.X and building is constructed by Mr.X. Annual interest and principal are being paid since then. Whether such property is taxed under house property of X or not?
2. Land belong to Mr. Ranbir Singh but building constructed and owned by Mr. Ranga swamy(he is not the owner of the land).Whether income from house property taxed in the hands of Ranbir Singh or Rangaswamy?
3.Municipal taxes for the year 2004-05 period paid during current previous year and current previous year municipal taxes not yet paid. Whether they are deductible for the current previous year?
4. Interest on loan and principal amount are not yet paid by the assessee for the current previous year. Are they deductible or not ?
5.Interest on loan for the previous year 2005-06 paid during the current previous year. Are they deductible?
6. Repairs –Rs. 3000, maintenance Rs. 4000 and insurance Rs.5000 are paid during the year on a rented house for business. Are they deductible?
24
Sec 23( Annual Value)
Sec 23(1)(b) –
If the house property is actually let out and if rent received or receivable is higher than the reasonable rent as per sec 23(1)(a), then such rent received or receivable is taken as the ANNUAL VALUE.
25
Sec 23( Annual Value)
Sec 23(1)(c) –
If the property is actually let out and was vacant during the year and rent received or receivable is lesser due to vacancy then such lower rent shall be the annual value.
26
Section 23( Annual Value)
Sec 23(2) – If a HP is self occupied . OR If a HP couldn't be occupied for reasons of employment /
profession elsewhere.
In such cases the AV= NIL.
Conditions for sec 23(2)- Such HP shouldn't be let out during any part of the year.
AND No other income is derived from such property.
27
Section 23( Annual Value)
Sec 23(4) – If the assessee owns more than one property
then: AV of one HP at the option of the assessee is
NIL. AND All the other HP’s are Deemed Let Out
Property [DLOP] and annual value thereof is decided as per sec 23.
28
Section 24 Deductions.
SEC 24(a)-Standard deductions @30% of NAV – only for let out property and deemed let out property.
SEC 24(b)- interest on capital or loan borrowed for ACR3 (acquisition ,construction, renewal ,repairs and reconstruction) in respect of
1. LOP/DLOP – any amount is allowed 2. SOP – Deductions is as follows:
- Normal deductions up to Rs 30000/-for repairs or renewals or if loan taken before 1st April 1999.
- Special deduction up to Rs 150000/- for further construction
29
IMPORTANT NOTES
Interest deduction up to Rs 150000/-.It is available only for acquisition and construction. Provided:
(a) The loan taken on / after 01-04-1999. & construction
completed within 3 years from the end of the financial year in which loan is borrowed.
(b) For claiming deduction’s, interest certificate & details of principal outstanding, interest amount etc. Along with return of income is to be submitted.
30
Pre- Construction Period Interest
Allowed in five equal installments commencing from the year of completion.
PCP means period commencing from the date of loan or immediately preceding the March 31st of the year of completion which ever is earlier.
Section 25( amounts not deductible)
Interest paid outside India without TDS or Without having an arrangement for TDS in India is disallowed.
31
Section 25A( Unrealized rent recovered)
UR recovered is taxed in the year of receipt irrespective of whether assessee is the owner or not of such property in the year of such receipt . No deduction is allowed against this income.
Section 25B( Arrears of rent received)
It is taxable in the year of receipt irrespective of whether assessee is the owner or not of such property in the year of such receipt.
Deduction = 30%
32
Section 26( Property owned by Co- Owners)
Share of co-owners definite, ascertainable respective share is taxable in the hands of the co owner.
Share of co-owners not definite, ascertainable entire income is taxed as the income of AOP.
33
Important Points
Annual value of partly SO & partly vacant
Period based (i.e. 9 months SOP & 3 months vacant) = ANNUAL VALUE = NIL
Usage based (i.e. 75% used as SOP & 25% as vacant) = ANNUAL VALUE = 25% .
34
Important Points
Annual value of partly SO & partly LO
Period based (i.e. 9 months SOP & 3 months LOP)
Usage based (i.e. 75% used as – SOP & 25% as – LOP)
Treated as DLOP for entire period.
AV of SOP NIL. AV of LOP to be taken at 25%.
35
Exercise 1(basic calculation)
Find out the gross annual value in the following cases for the assessment year 2008-09
( Rs in thousands)
X Y Z
Municipal value 95 60 60
Fair rent 96 54 55
Standard rent under the rent Control Act
94 78 79
Actual rent 93 106 78
The entire rent is realized. Properties are let out throughout the previous year. Find out the gross annual value for the assessment year 2008-09.
36
Format:Computation of gross annual value:
( Rs in thousands)
X (Property-1) Y(Property-1) Z(Property-1)
Municipal value
Fair rent
Whichever is higher (RER)
Standard rent
Whichever is lower (Expected rent)
Annual rent = 12 months rental value-unrealized rent of the current year-vacancy allowance
Whichever is higher
GROSS ANNUAL VALUE
37
Solution 1
Computation of gross annual value: ( Rs in thousands)
X Y Z
Municipal value 95 60 60
Fair rent 96 54 55
Whichever is higher (RER) 96 60 60
Standard rent 94 78 79
Whichever is lower (expected rent)
94 60 60
Annual rent 93 106 78
Whichever is higher 94 106 78
GROSS ANNUAL VALUE 94 106 78
38
Exercise 2: (let out and part of the year rented and sold later)
X owns a house property (municipal valuation: Rs. 145000, fair rent : Rs 130000, standard rent : Rs. 124000). It is let out throughout the previous year (rent being Rs. 8000 per month up to November 15, 2007 and Rs. 14000 per month thereafter).
The property is transferred by X to Y on January 31, 2008. Find out the gross annual value in the hands of Y for the assessment year 2008-09.
39
Municipal value from 1-02-2008 to 31-03-2008
( 145000 x 2/12)
24167
Fair rent from 1-2-2008 to 31-3-2008
(130000 x 2/12)
21667
Whichever is higher 24167
Standard rent
(124000/12 x 2)
20667
Whichever is lower(Expected rent) 20667
Annual rent (14000 x 2) 28000
Whichever is higher 28000
GROSS ANNUAL VALUE 28000
Solution 2
Computation of gross annual value for ( Y ):
Rs ( in thousands )
40
Exercise 3 (including unrealized rent)Find out the gross annual value after taking into consideration the following information for the assessment year 2008-09.
(Rs.in thousand)
A B C M N
Municipal value 50 50 50 100 100
Fair rent 68 68 68 117 117
Standard rent under rent control act
62 62 75 115 115
Annual rent 66 66 72 120 110
Unrealized rent of the previous year 2007-08
2 6 5 50 40
CONT………
41
1. In the case of A, the defaulting tenant has not vacated the property, nor steps been taken to compel the tenant to vacant the property.
2. In the case of B, the defaulting tenant has occupied another property of B.
3. C has not taken any steps to institute legal proceedings for the recovery of unpaid rent , though C agrees that legal proceedings will not be useless.
4. M has rented out another property owned by him to defaulting tenant with effect from March 1, 2008.
5. N satisfies all the conditions of rule 4.
CONT……..
42
Note:
Application of sec 23 ( 1 ). When unrealized rent of the current previous year shall be deducted if following conditions fulfilled.
Condition 1 The tenancy is bona fide.
Condition 2 The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.
Condition 3 The defaulting tenant is not in occupation of any other property of the assessee.
Condition 4 The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.
43
A B C M N
Municipal value 50 50 50 100 100
Fair rent 68 68 68 117 117
Whichever is higher 68 68 68 117 117
Standard rent 62 62 75 115 115
Whichever is lower(Expected rent)
62 62 68 115 115
Annual rent 66 66 72 120 110
Unrealized rent 2 6 5 50 40
Actual rent (annual rent –unrealized rent - vacancy allowance)
66 66 72 120 70
Whichever is higher 66 66 72 120 115
GROSS ANNUAL VALUE 66 66 72 120 115
Solution 3
Computation of gross annual value: ( Rs in thousands )
44
Exercise 4 (loss due to vacancy)Find out the gross annual value in the case of M if his property remains vacant throughout the previous year 2007-08 and, consequently, the figure of annual rent is not available. Also calculate gross annual value in the cases of N and O if their properties remain vacant for one month only, for the assessment year 2008-09.(Rs in lakhs)
M N O
Municipal value (per annum) 80 140 140
Fair rent (per annum ) 78 150 150
Standard rent 85 120 120
Annual rent 75 100 144
Property remains vacant (in no of months)
(12) (1) (1)
Loss due to vacancy __ 8 12
45
M N O
Municipal value 80 140 140
Fair rent 78 150 150
Whichever is higher 80 150 150
Standard rent 85 120 120
Whichever is lower(Expected rent) 80 120 120
Annual rent 75 100 144
Property remains vacant (in no of months) (12) (1) (1)
Loss due to vacancy ---- 8 12
Actual rent Nil 92 132
GROSS ANNUAL VALUE NIL 112 132
Solution 5
Computation of gross annual value:(Rs in thousands)
46
Working: How to decide reasonable rent?
•(If actual rent minus unrealized rent of the current previous year) is more than expected rent then wesay he is reasonably letting out the property.
•And if we reduce further vacancy allowance, even if it goes down below expectedrent, we consider the actual rent.
47
NOTES:-
Case of A: Rent actually collected is zero. The entire loss is because of vacancy. Therefore gross annual value is zero.
Case of B: Property is let out at lower than the reasonable expected rent. Lower rent collection is partly because of vacancy and partly because of letting out of property at lower than reasonable expected rent. Therefore only loss due to vacancy i.e. Rs 8000 is deducted from the reasonable expected rent. Rs (120000 – 80000 ).
Case of C: Actual rent collection is lower only because of vacancy. Therefore, actual rent is taken as gross annual value.
48
Exercise 5 (Vacant through out the year)
X Y
Municipal value (per annum) 61000 61000
Fair rent( per annum) 72000 72000
Standard rent under the rent control act 60000 60000
Find out the gross annual value for the assessment year 2008-09 assuming that the property of X remains vacant throughout the previous year 2007-08. However, the property of Y remains vacant from April 1, 2007 to January 31, 2008 and it is let out from February 1, 2008 onwards (rent being Rs. 10000 per month).
49
Solution Computation of gross annual value:
X Y
Municipal value 61000 61000
Fair rent 72000 72000
Whichever is higher 72000 72000
Standard rent 60000 60000
Whichever is lower 60000 60000
Period when the property remains unoccupied ( months )
12 10
Actual rent Nil 20000
GROSS ANNUAL VALUE NIL 20000
If actual rent is lower than the reasonable expected rent only due to vacancy then, such rent is taken as gross annual value.
50
Exercise: 6 (vacancy and unrealized rent preceding to current year Rs.000
A
Municipal value 140
Fair rent 145
Standard rent 142
Find out the gross annual value for the assessment year 2008-09 for case A if the property is let out (rent being Rs. 48000 per annum) only for 10 months, vacant for 2 months and rent of 4 months could not be realized for the year 2007-08 Rs. 20,000.
51
Solution
Computation of gross annual value:
A
Municipal value 140
Fair rent 145
Whichever is higher 145
Standard rent 142
Whichever is lower 142
Annual rent if property is let out throughout the previous year 48
Unrealized rent of current previous year 2007-08(only) 16
Period when the property is vacant ( months ) ( 2 )
Loss due to vacancy( 48000/12 x 2 ) 8
Actual rent received/ receivable 24
GROSS ANNUAL VALUE 134
( Rs in thousands )
52
Exercise 7
(Rs).
Municipal value 120000
Fair rent 130000
Standard rent under the rent control act 110000
Actual rent if property is let out throughout the previous year 126000
Unrealized rent of the previous year 2007-08 10500
Period when the property remains vacant (in no of month) (1)
Loss due to vacancy 10500
Municipal taxes-
Tax of the year 2007-08 18000
- Paid by X during 2007-08 17000
- Paid by X after March 31,2008 1000
X
CONT…..
53
Find out the income of property of X chargeable to tax for the assessment year 2008-09, after considering the following information-
(a)During the previous year 2007-08, X gets 6months’ advance rent from the tenant pertaining to the period April 1, 2008 to September 30, 2008; and
(b) apart from paying municipal tax, no other expenditure is incurred by X in respect of the house property for generating income from property.
CONT…..
54
Note:
Any advanced rent received cannot be considered as per sec 22 as it is the annual value(on accrual) of the property which is taxed.
55
Computation of income from house property:
X
Municipal value 120000
Fair rent 130000
Whichever is higher 130000
Standard rent under the rent control act 110000
Whichever is lower 110000
Annual rent if property is let out throughout the previous year 126000
Unrealized rent of the previous year 2007-08 10500
Period when the property remains vacant( in no of month) (1)
Loss due to vacancy(126000/12x1) 10500
Actual rent (annual rent – unrealized rent – loss due to vacancy) 105000
GROSS ANNUAL VALUE (actual rent lower than expected rent only because of vacancy. So consider actual rent)
105000
Less: Municipal tax paid by X during the previous year 2007-08 17000
NET ANNUAL VALUE 88000
Less: Standard deduction under section 24(a) [30% of net annual value] 26400
INCOME FROM HOUSE PROPERTY 61600
56
Exercise 8(interest on loan)
X takes a loan on January 3, 2004 of Rs. 160000 at 18 per cent per annum for construction of a commercial house property. Construction of the property is completed on July 17, 2007. Loan is repaid on November 30, 2007. Calculate the amount of interest which is deductible for the assessment years 2008-09 and 2009-10.
Pre construction interest is the period starting from the date of loan Taken and 31st March preceding the year of completion.
57
SOLUTION:
Loan taken = January 3rd 2004Amount= Rs. 160000Interest rate = 18%Date of completion of construction = 17th July 2007Date of repayment of loan = 30th November 2007
Pre construction period = Jan 3, 2004 – March 31st 2007i.e., 89 days.Pre construction interest=(89/366) x 160000 x (18/100) = Rs. 7003.281st April 2004 – 31st March 2005 = (160000 x 18/100) = Rs. 288001st April 2005 – 31st March 2006 = (160000 x 18/100) = Rs. 288001st April 2006 – 31st March 2007 = (160000 x 18/100) = Rs. 28800__ Rs. 93403.28Note: pre construction period interest is spread over 5 years from the year of
completion for the purpose of deduction under sec 24 (b)
If house is completed in the middle of any previous year go back to the last dateOf the preceding previous year in which house completed
to determine pre-construction period interest
58
(93403.28/5) = Rs. 18680.66
Post construction period: ( for previous year 2007-08)
1st April 2007 – 30th November 2007
Calculation of post construction period interest:
(NOTE: Calculate interest for 8 months and deduct 1 days interest from that amount because interest on the date of repayment is not considered)
160000 x (18/100) x (8/12) = Rs. 19200
Less: 160000 x (18/100) x ( 1/366) = Rs. 78.69
= Rs. 19121.31
TOTAL INTEREST FOR THE ASSESSMENT YEAR(2008-2009):
Pre construction interest + post construction interest = 18680.66+19121.31
= Rs. 37801.97
TOTAL INTEREST FOR THE ASSESSMENT YEAR(2009-2010):
Pre construction interest only = Rs. 18680.66
( the last date to pay interest is November 30, 2007)
59
Exercise 9 (Interest on loan borrowed for marriage)
X owns a house property. It is used by him throughout the previous year 2007-08 for his (and his family members) residence. Municipal value of the property is Rs. 1,70,000, whereas fair rent is Rs. 1,76,000 and standard rent is Rs. 150000. The following expenses are incurred by X : repairs : Rs.30000, municipal tax : Rs.16000, insurance : Rs 20000; interest on capital borrowed to construct the property : Rs136000; interest on capital borrowed by mortgaging the property for daughter’s marriage : Rs.20000. Income of X from business is Rs.7,10,000. If capital borrowed:
(a)For construction of the property on April 1, 1999 and construction is completed on December 2, 1999; OR
(b)On April 1,1999 for repairs of the property and repair is completed on December 2,1999.
Find out the Net income of X for the assessment year 2008-09.
60
Computation of net income of X: (a)
NOTE: Annual value is NIL if the house property is 100% self occupied.
Rs
NET ANNUAL VALUE NIL
Less: Deductions under section 24
Standard deduction 24(a) – 30% of Net annual value NIL
Interest on borrowed capital 24(b) – [ Maximum deduction of Rs. 150000 or Rs. 136000 whichever is lower]
(136000)
Income from House Property as per Sec.22 (136000)
Business income 710000
NET INCOME 574000
61
Computation of net income of X : (b)
Preceding steps should not be calculated Rs
NET ANNUAL VALUE NIL
Less: Deductions under section 24
Standard deduction 24(a) – 30% of Net annual value NIL
Interest on borrowed capital 24(b) – [ Maximum deduction of Rs. 30000 or Rs. 136000 whichever is lower]
(30000)
Property income (30000)
Business income 710000
NET INCOME 680000
62
Exercise 10(self occupied one and let out another)
X owns a residential house property. It has two equal residential units- (unit1 and unit 2). While unit 1 is self occupied by X for his residential purpose, unit 2 is let out ( rent being Rs. 11000 per month, rent of 2 months could not be recovered). Municipal value of the property is Rs. 130000, standard rent is Rs. 125000 and the fair rent is Rs. 140000. Municipal tax is imposed at 12% which is paid by X on April 1, 2008. Other expenses for the previous year 2007-08 being repairs : Rs. 250, insurance: Rs. 600, interest on capital borrowed on 1st April 2005 for constructing the property: Rs. 63000. Construction of the house is completed on 31-3-06. find the income of X for the assessment year 2008-09 on the assumption that income of X from other sources is Rs.180000.
Even though house was completed on 31-3-06 we have stop on 31-3-05.Up to 31-3-05 was pre-construction period.
63
Computation of income from house property
Unit 1 (self occupied) = NAV = nil
Less: interest on borrowed capital = Rs. 31500
Income from unit 1 = Rs. (-)31500
Unit 2 ( let out ) :
Municipal value
Fair rent
Whichever is higher
Standard rent
Whichever is lower
Annual rent(a)
Unrealized rent(b)
Actual rent(a-b)
Gross annual value(which ever is higher)
Municipal taxes paid (not paid during the current PY.)
Net annual value
65000
70000
70000
62500
62500
132000
22000
110000
110000
-
110000
64
LESS: deductions under section 24
Standard deduction of 30% of NAV
Interest on borrowed capital
Income from house property
33000
31500
45500
Net income of X:
Income from house property ( 45500 – 31500 ) = Rs. 14000
Income from other sources = Rs. 180000
Gross income = Rs. 194000
65
Exercise 11
X owns a property at New Delhi (municipal value Rs 1,64,000, fair rent Rs 2,16,000, standard rent Rs 1,80,000). The property is let out up to April 15 2007. (rent being Rs 14000 p.m.) and self occupied for the remaining part of the previous year 2007-08. Expenses incurred by X are:Municipal tax Rs 6000 (actually paid), repairs Rs 2100, insurance Rs 1100, interest on capital borrowed (date of borrowing being June 10th 1991) for acquiring the property :Rs 123000. Assuming the income of X from other sources is Rs 186000, find out the net income of X for the assessment year 2008-09
66
Particulars Amount
Municipal value
Fair rent
Whichever is higher
Standard rent
Whichever is lower
Annual rent
Gross annual value
Less: municipal taxes paid
Net annual value
Less: deduction under section 24
Standard deduction of 30% of NAV
Interest on capital
Income from house property
164000
216000
216000216000
180000
180000180000
168000
180000180000
6000
174000
52200
123000
-1200
SOLUTION:
67
COMPUTATION OF NET INCOME :
Income from house property = (-)1200
Income from other sources = 186000
Gross income = 184800184800
68
Exercise 12(arrears of rent)For the assessment year 2008-09, X claims a deduction of Rs. 86000 on account of unrealized rent and is awarded a decree by a Delhi court on march 15th 2008 and on April 6, 2008, X recovers Rs. 80000 from the defaulting tenant ( legal expenditure Rs.25000). What will be tax implication of the amount so received?
69
SOLUTION:
Rs. 80000 recovered from the defaulting tenant is chargeable to tax as income under the head “ Income From House Property” in the year of recovery i.e., the previous year 2007-08 or assessment 2008-09. expenditure of Rs. 25000 is not deductible.
70
Exercise 13(unrealised rent of 2000-01 period)
X owns a house property which is given on rent. For the previous year 2000-01,he claims a deduction of Rs.78000 on account of unrealized rent, out of which the Assessing officer allows only Rs.62000 as deduction. What are the tax consequences if X recovers on April 6,2007 as full & final payment (A)Rs.78000 (expenditure on recovery Rs.40000) or (B)Rs.5000 (expenditure on recovery Rs.5000)
71
Solution:
Amt recovered during 2007-08
Amount of bad debt(78000-amount of recovery)
Deduction allowed in 2000-01
Balance
(a) 78000
(b) 5000
NIL
73000
62000
62000
Income of 72000
Loss of 11000
In situation (a) the full amt of recovery is taxable.
In situation (b) X cannot claim any deduction
72
Exercise 14(unrealised rent of different period, interest on loan borrowed)From the information given below find out the income under the head Income from HP for the assessment years 2008-09 and 2009-10.
Particulars Amount
Municipal value (a)
Fair rent (b)
Standard rent (c)
Annual rent (d)
Unrealized rent for the previous year 2007-08
Unrealized rent for the year 2008-09
Unrealized rent for the year 2007-08 realized during previous year 2008-09
Interest on borrowed capital
190000
195000
170000
175000
20000
Nil
18000
36000
The above stated property is let out throughout the previous year 2007-08 and 2008-09. Municipal tax paid is at the rate of 20%.
73
Particulars 2008-09 2009-10
Actual rent received
Gross Annual Value
Step 1- expected rent (a ) or (b) which ever is higher but subject to max (c)
Step 2 – if (d) is higher than step 1 , (d) will be taken
Gross annual value
Less: municipal tax paid (20 % of A)
Net annual value
Less : deduction under section 24
Standard deduction 30 %
Interest on loan
Income from house property
155
170
NA
170
38
132
39.6
36
56.4
175
170
175
175
38
137
41.10
36
59.90
74
Particulars Amount
Annual value
Less: effective unrealized rent
Actual rent
Step 1 –expected rent
Step 2 – if (d) is higher than step 1, it would be taken
Step 3 – NA
Gross annual value (recomputed)
Less: gross annual value (original)
Unrealized rent not taxed earlier
Less: deduction under section 24
Income
Income under the head “ income from house property”
Assessment year 2008 –09
Assessment year 2009-10
175
2
173
170
173
NA
173
170
3
___
3__
56.40
62.90
Recomputation of gross annual value of the previous year 2007-08
75
Exercise 15(arrears of rent, municipal taxes paid different period)
X owns a property. It is given on rent (rent being Rs 11000 p.m.) to a bank. Municipal value of the property is Rs 130000, fair rent is Rs 140000 and standard rent is Rs 134000. Municipal tax paid by X is as follows: Rs 26000 on March 3rd,2008 and Rs 30000 on May 10th 2008. on may 1st 2008 rent is increased from Rs 11000 p.m. to Rs 16000 p.m. with retrospective effect from April 1st,2007. Arrears of rent of 2007-08 are paid on May 1st 2008. Find out the income chargeable to tax for the assessment years 2008-09 and 2009-2010.
76
Solution
Particulars 2008-09 2009-10
Municipal value
Fair rent
Whichever is higher
Standard rent
Whichever is lower
Rent collected
Gross Annual Value
Less: municipal tax
Net annual value
Less: deductions under sec 24
Standard deduction i.e. 30% of NAV
Income from Property
130000
140000
140000
134000
134000
NA
134000
26000
108000
32400
75600
130000
140000
140000
134000
134000
192000
192000
30000
162000
48600
113400
77
Arrears of rent of 2007-08 paid on May 1st 2008.
Gross annual value if Rs 16000 rent = Rs 192000
Less: Gross annual considered = Rs 134000
Arrears of rent = Rs 58000
Less: standard deduction 30% = Rs 17400
Amount taxable = Rs 40600
Income from house property :
Assessment year 2008-09 = Rs 75600
Assessment year 2009-10 = Rs 154000
78
Exercise 16(including other income)Mrs. X ( age 22 years ) has occupied two houses for her residential purposes, particulars of which are as follows:
House I
Rs
House II
Rs
Municipal value 30000 90000
Fair rent 28000 95000
Standard rent under rent control act
20000 80000
Municipal taxes paid 3000 9000
Interest on borrowed capital 400 1200
Repairs Nil 100
Business income of Mrs. X is 386000. Besides Mrs. X is employed by a Pvt ltd company on monthly salary of Rs 12500. Every year she contributes Rs 50000 towards public provident fund. Determine the taxable income and tax liability of Mrs. X for the assessment year 2008-09.
79
WORKING NOTES:
(a)Since Mrs. X has occupied two houses for her residential purpose, one house( according to the choice of Mrs. X ) will be treated as self- occupied property. (NET ANNUAL VALUE = NIL)
(b)The other house will be treated as “deemed to be let out” property.
(c) The assessee can choose any one of the houses any year.
80
Let us choose House II as self occupied property, House I will be treated as “deemed to be let out” property.
House I House II
Municipal valuation 30000 -
Fair rent 28000 -
Whichever is higher 30000 -
Standard rent 20000 -
Whichever is lower 20000 -
GROSS ANNUAL VALUE 20000 -
Less: Municipal taxes paid 3000 -
NET ANNUAL VALUE 17000 NIL
Less: Deductions under Sec 24
(a) Standard deduction ( 30% of net annual value) 5100 -
(b) Interest on borrowed capital 400 1200
INCOME FROM HOUSE PROPERTY 11500 (1200)
CONT….
81
Net income from house property:
HOUSE I = Rs. 11500
HOUSE II = Rs. (1200)
NET INCOME = Rs. 10300
Computation of Taxable income :
Income from House property = Rs. 10300
Income from Salary = Rs. 150000
Income from business = Rs. 386000
= Rs. 546300
Less: Deductions under sec 80C
Public provident fund =Rs. 50000
TAXABLE INCOME =Rs. 496300
CONT……
82
Computation of Tax liability:
For Mrs. X,
Up to 145000 : NIL
145000 – 150000 : 10% ( 5000 x 10%) = 500
150000 – 250000 : 20% ( 100000 x 20%) = 20000
250000 & above : 30% (246300 x 30%) = 73890
= 94390
Add: 3% educational cess = 2830
TAXABLE LIABILITY = 97220
83
X borrows from a relative Rs 10,000 @ 12 % for construction of house I (date of borrowing June 1 2004, date of repayment of loan May 31 2007)Construction of all the houses is completed in August 2006 determine the taxable income and tax liability of X for the assessment year 08 -09 on the assumption that X contributes Rs 10,000 towards statutory provident fund Rs 2,000 towards National Relief bonds
Exercise 17(borrowed from relative and three houses) X 36 years a salaried employee drawing Rs 22000 per monthly salary has occupied
three houses for his residential purposes
Particulars House I House II House III
Standard rent under Poona Rent Control Act
33000 55000 40000
Municipal valuation 40,000 60,000 40,000
Fair rent 43,000 58,000 48,000
Municipal taxes paid 3,000 6,000 4,000
Repairs NIL NIL NIL
Ground rent due but outstanding
Insurance premium due but outstanding
200
300
----------------
400
300
500
84
Solution
Particulars House 1 House 2 House 3
Municipal value
Fair rent
Standard rent
Actual Rent
Gross annual valueMunicipal tax paid
Net annual value
Less: Section 24 (a)
30 % standard deduction
Interest on loan borrowed
Income from house property
Total income from HP
House 1 + House 2 + House 3 = 45,560
40,000
43,000
33,000
NA
33,000
3000
-------------
30,000
-------------
9000
----
------------------------
21,000
------------------------
NA
(640)**
----------------------
-640
----------------------
40,000
48,000
40,000
NA
40,000
4000
------------
36000
------------
10,800
----
-----------------------
25200
----------------------
85
Working note
** June 1 04 to March 31 06---22 months pre construction period
10,000 * 22/12*12/100 = 2200 (spread over first 5 years)
2200/5 = 440
86
Exercise 18(many houses)Mr.X is 31 years, owns four houses outside the jurisdiction of the rent contract act
Particulars House I self House II self House III business House IV let out
Municipal valuation 40,000 6,000 16,000 60,000
Fair rent 50,000 8,000 22,000 55,000
Rent if let ------- ------ ------- 72,000
Unrealized rent 3,000
Municipal tax paid by X 4,000 500 1,000 6,000
Date of completion of construction June 16 1991 June 5 1974 June 14 1997 March 31 1998
Repairs nil 2,000 500 Nil
Collection charges ----- ----- ---- 300
Land revenue 200 --- 100 500
Int on capital borrowed covered 1000 200 400 600
Int on capital borrowed for payment of municipal taxes
300 -- 200 600
Int on capital borrowed for construction 3700 --- --- ---House IV remains vacant for the month of Jan 2008.business income of X for the previous year 07-08 is Rs 2,80,000(it has been computed as per the provisions of income tax act) determine the taxable income & tax liability of X for the assessment year 08-09 on the assumption that he could not occupy house III for 2 months during the previous year and X pays insurance premium of Rs 65,000 on his insurance policy op Rs 3,70,000.
87
Particulars House 1
SO
House 2
Business
House 3
Deemed
House 4
DeemedMunicipal value
Fair Rent
Standard Rent
Actual Rent
Gross annual valueMunicipal tax
Net annual value
Less : section 24 (A)30 %Int on loan
Income from house property
-
(4700)
---------------------
(4700)
-
---------------------
16,000
22,000
NA
22,000
---------------------
22,000
1000
---------------------
21,000
6300
400
---------------------
14,300
60,000
55,000
NA
60,000
(72000-6000-3000) = 63,000
---------------------
63,000
6000
--------------------
57,000
17,100
600
------------------
39,300
88
Computation of IncomeIncome from HP
Income from Business
Total income
Less: deduction 80 C insurance paid
Taxable income
Tax amt : 29020
48,900
2,80,000
-------------
3,28,900
65,000
-------------
2,63,900
-------------
89
Exercise 19(full-fledged problem) : Mrs. X age 51 years submits the following particulars of her income relevantfor the previous year ending march 31 2008 business income:
Profit Of Biz A Rs 1,33,400Loss Of Biz B Rs 18,000Loss Of Biz C Rs 8,540
A residential house property: municipal valuation : Rs 48,000, fair rent : Rs 52,000 , standard rent : Rs 65,000 municipal taxes paid Rs 6,000, repairs : Rs 200, interest on capital borrowed for purpose of construction of house property (amt borrowed : Rs 20,000,ratye of interest 18 % date of borrowing June 30 1996, date of repayment of loan June 20 2007, date of completion of construction June 30 2001) and annual charges mot created by Mrs. X Rs 500 besides on May 24 2005, Mrs. X borrows Rs 1,95,000 @ 12% PA for the purpose of reconstruction of house property. The house is self occupied from April 1 2007 to March 15 2008 from march 16 2008 it is let out on monthly rent of Rs 4,000.during the previous year, Mrs. X is employed by a company on monthly salary of Rs 19,000.Determine the taxable income and tax liability of Mrs. X for the assessment year 08-09 , she contributes Rs 2,000 towards Indira Vikas Patra.
90
PARTICULARS AMOUNT
Municipal valueFair rent
HigherStandard Rent
LowerActual rent
HigherLess municipal taxes
Net annual valueLess : deduction 30 % Pre constructionPost construction period till June 2 2007 20,000 * 18 % * 2/12 months 20,000 * 18 % * 20/365
Loan 2 :Reconstruction period interest 195000*12%
Income from House Property
48,00052,000----------52,00065,000----------52,00048,000---------52,000 Gross annual Value 6000----------46,000
13,800 NA
600 197-----------31,40323,400-----------8003
91
Computation of total income
Particulars Amount
Income from salary (9000 * 12)Income from business Profit of biz A 1,33,400 Loss of biz B (18,000) Loss of biz C ( 8540)Income from house property
Total income
2,28,000
1,06860 8003-----------3,42,863------------
92
Exercise 20 : X 50 yrs owns a big house (erection completed on March 1 2003). The house has 3 independent residential units . Unit 1 ( 50 % of the floor area) is let out for residential purposes on monthly rent of Rs 8,000( this unit is however used by X from Jan 15 2008 to March 15 2008for his residential purposes) . A sum of Rs 1,000 could not be collected from the tenant. Unit 2 ( 25 % of the floor area) is used by X for the purposes of his residential while Unit 3 the remaining 25 % is used by him for the purposes of his business . Other particulars of house are : municipal valuation: Rs 1,92,000;municipal taxes paid Rs 16,000; repairs Rs 4,000;ground rent : Rs 6,000; land revenue paid : Rs 1,800; insurance paid : Rs 6,000, and Interest on capital borrowed for payment of municipal tax : Rs 4,000, Income of X from Biz is Rs 1,61,200 ( without debiting house rent and other incidental expenditure including admissible depreciation of Rs 600 on the ¼ portion of house used for Biz . Determine the taxable income and tax liability of X for the assessment year 08-09. X contributes Rs 8,000 towards home loan account of the National Housing Bank .
93
Interest on loan repayment for entire house is 36,000 as per act if it is for repairs or renewals it is limited to 30,000. nut in this case 50% portion interest of house which is 18,000 which means full 18,000 is allowed
** interest on loan borrowed for self occupied property is limited to 30,000 or 15,000. but for repairs and renewals is 30,000
94
Particulars Unit 1 Unit 2 Unit 3
Municipal value 1,92,000 ( 50%)
Unrealized rentLoss due to vacancyGross annual valueLess: municipal tax 16,000 * 50 % & 25 %
Net annual valueLess : deduction Standard 30 %
INCOME FROM BUSINESS Less : municipal valueRepairs 4000 *1/4 Ground rent 6000 * 1\4 Land revenue 1800 * 1\4 Interest on loan 6000 * ¼Depreciation
Total income
96,000
1,000----------95,000
8000-----------88,000
26,400-----------61,600
-------------
(4,000)----------
16,0004000 100015004506001500-----------1,51,150------------
95
Total income Amount
Unit 1 Unit 2Unit 3
Total income Deduction 80 C
Taxable income
Tax amount: Rs 15,400
61,600 ---
1,51,150------------2,12,750 8000------------2,04,750------------
96
Exercise 21
For the assessment year 2008-09,X (age: 46 years) submits the following information:
Income from business Rs 144220Income on debentures Rs 205000Contribution to public provident fund Rs 70000Investment in bonds of infrastructure company Rs 40000(notified)
contd……..
97
House I House II
Fair rent 12900 39700
Municipal value 13000 40000
Annual rent 48000 54000
Municipal taxes paid 1700 4000
Standard rent 12500 60000
Repairs 200 18000
Land revenue 2000 16000
Insurance 500 1500
Unrealized rent of 2006-07 3000 2000
Unrealized rent of 2007-08 1000 35000
Interest on capital borrowed for purchase of house property 1000 14000
Repayment of loan taken from a friend for purchasing house I 3640 ----
Vacant period (number of months) 1 3
Loss on account of vacancy 4000 13500
Actual rent received or receivable 43000 5500
Nature of occupation Let out to residence of MD of A Ltd
Let out for profession
Date of completion of construction March 31st 2003 May 15th 1974
Determine the taxable income and tax liability of X for the assessment year 2008-09. Also calculate the amount of unrealized rent which can be claimed as deduction in the 2009-10
98
Computation of income from house property
Municipal value (a)
Fair rent (b)
Standard rent (c)
Annual rent* (d)
(a) Or (b) whichever is higher
subject to maximum of (c)
If (d) is more than the previous
step then (d) should be
considered
GROSS ANNUAL VALUE:
Less: municipal taxes paid
13000
12900
12500
43000
43000
______
43000
1700
40000
39700
60000
19000
26500
______
26500
4000
99
NET ANNUAL VALUE:
less: deduction under section 24
Standard deduction of 30% of Net Annual value
Interest on capital borrowed
INCOME FROM HOUSE PROPERTY:
41300
12390
1000___
2791027910
22500
6750
14000
17501750
100
CALCULATION OF ANNUAL RENT
Annual rent
Less: unrealized rent
Less: loss due to vacancy
Actual rent received
_______________________
For house 2 the income from house property is Rs.26500Rs.26500 (i.e., 40000 – 13500)
House1
48000
1000
47000
4000
4300043000
House2
54000
35000
19000
( not considered)
101
Computation of taxable incomeIncome from business
Interest on debentures
Income from house property
GROSS INCOME:
Less: deduction under section 80C
Contribution to provident fund-70000
Investment in national bond -40000
110000
*Note: the maximum amount deductable under this sec is Rs. 100000
NET INCOME:
144200
205000
29660
378880
100000
278880278880
102
Computation Of Tax LiabilityNET INCOME
Less: exemption limit
Taxable amount
40000*10%
100000*20%
28880*30%
Add: 3% educational cess
Tax payable
Rounding off
278880
110000
168880168880
4000
20000
8664
32664
979
33643
3364033640
103
Exercise 22(composite rent, unrealised rent, recovery of unrealised rent)
X (age : 28 years) is owner of a house property in Mumbai which is let out for Rs.72000 (which includes Rs.8400 for maintenance of lift and garden), municipal valuation : Rs.60000 ; fair rent : Rs.62000 : Standard rent : Rs.61600 : rent of ½ month could not be collected ( 1/24 of Rs. 72000) : Rs.3000 . The local taxes, payable by the owner, amounts to Rs.6000 but the tenant has undertaken to pay it. The tenant has also undertaken to bear cost of repairs. However, X bears the following expenditure during the previous year 2007-08 :
Annual charges : Rs.1500 ; insurance : Rs.2900 ; ground rent : Rs.4000 ; lift maintenance : Rs. 7600 ; salary of gardener : Rs.1100 ; interest on borrowed capital : Rs.1350
Assuming that business income is Rs. 346000 determine the income ( and tax thereon) for the assessment year 2008-09. The construction of the house was completed on March 31, 2001. During the previous year 2001-02, X had claimed and allowed a deduction of unrealised rent of Rs. 10000. On March 10,2008, X recovers Rs. 9000 from the defaulting tenant (legal expenditure on recovery of rent : Rs.9500). X contributes Rs.60000 towards National Saving certificate VIII Issue on April 1,2008.
104
Solution 22:computation of income from house property
Municipal value( a)
Fair rent (b)
Standard rent (c)
Actual rent (d)
If (d) is more than the previous
step then (d) should be
considered
Gross annual value
Less: municipal tax paid
Net annual value
Less: deduction under sec 24
Standard deduction of 30% of net annual value
Interest on capital
60000
62000
61600
60950
61600
--
61600
18480
1350
105
Income from house property
Add: rent received chargeable under section 25 A
Income under the head ‘income from house property
41770
9000
5077050770
106
Computation of taxable incomeBusiness income
Income from house property
Income from other sources:
Amount collected from tenants for providing amenities (8400*11.5/12)-8050
Less: expenses(7600+1100) - 8700
Gross taxable income
Less: deduction under section 80C
Net income:
346000
50770
396770
-650
396120
-___
396120396120
107
Computation of tax liability
Total income
Less: exemption limit
40000*10%
100000*20%
146120*30%
Add: 3% educational cess
Tax payable
Rounding off
396120
110000
286120286120
4000
20000
43836
67836
2035
69871
6987069870
108
Exercise 23( borrowing at different dates) X (age 32 years) owns four houses which are used by him for his residential
purposes:
House I House II House III House IV
Municipal value 40000 170000 25000 90000
Fair rent 50000 160000 26000 97000
Standard rent 60000 174000 20000 96000
Municipal taxes paid by X 8000 26000 4000 22000
Interest on capital borrowed for purchase/construction (inclusive of 1/5th of pre-construction period’s interest, wherever applicable) (capital was borrowed on 1st April 1999 in the case of House III and IV. In the case of House I and II capital was borrowed on April 10th 1998)
25000 35000 84000 156000
Find out the net income and tax liability of X for the assessment year 2008-09 on the assumption that income of X from other sources is Rs 520000 and he deposits Rs 100000 in notified pension fund of National Housing Bank.
109
Discuss whether the following are true or false:
a) In the example given under 23, if the tax payer’s other income is Rs 164000, then income chargeable to tax is Rs 129000.
b) If net annual value is negative, standard deduction is not available.
c) If net annual value is negative, interest on borrowed capital is not deductible.
d) In case of one self occupied residential property, net annual value cannot be negative.
e) In case of one self occupied residential property, income from property cannot be positive.
f) In case of partly self occupied and partly let out property, income maybe positive or negative.
110
Computation of income under different options
house1 house2 House3 house4
If self occupied , NAV=
less: interest on capital
Income from house property
Nil
25000
_____
-2500025000
Nil
30000
_____
-3000030000
Nil
84000
_____
-8400084000
Nil
150000
______
-150000150000
If deemed let-out
Municipal value (a)
Fair rent (b)
Standard rent (c)
40000
50000
60000
170000
160000
174000
25000
26000
20000
90000
97000
96000
111
House1 House2 House3 House4
Expected rent (a) or (b) subject to a maximum of (c)
GAV
Less: municipal taxes paid
NAV
Less: deductions under section 24
Standard deduction
Interest on capital
50000
50000
8000
_______
42000
12600
25000
44004400
170000
170000
26000
_______
144000
43200
35000
6580065800
20000
20000
4000
_______
16000
4800
84000
-7280072800
96000
96000
22000
_______
74000
22200
156000
-104200104200
112
Mr. X has the following options
particulars (IHP) Option 1
(house 1 is self occupied)
Option 2
(house 2 is self occupied)
Option 3
(house 3 is self occupied)
Option 4
(house 4 is self occupied)
House 1
House 2
House 3
House 4
Income from house property
Income from business
GROSS INCOME:
Less: deduction under sec 80 C
-25000
65800
-72800
-104200
-136200
520000
383800
100000
4400
-30000
-72800
-104200
-202600
520000
317400
100000
4400
65800
-84000
104200
-118000
520000
402000
100000
4400
65800
-72800
-150000
152600
520000
367400
100000
113
Mr. X should take option 2 as net income taxable is lower when compared to other options
therefore taxable income is Rs. 217400
Notified fund
Net income taxable under different option available
100000
283800283800
100000
217400217400
100000
302000302000
100000
267400267400
114
Calculation of tax liability
Net income
Less : exemption limit
40000*10%
67400*20%
+-add: 3% educational cess
Tax payable
217400
110000
107400107400
4000
13480
17480
524.4
18004.4
1800018000
115
Exercise 24:(self occupied partly, let out partly)Mrs. X (age : 51 yrs) own s two houses. Relevant details are given below :
Particulars House 1 House 2
Let out
Self-occupied
Municipal value per annum (a)
Fair rent (b)
Standard rent (c)
Rent of let out property (d)
Interest on borrowed capital
Municipal tax paid
April 1,2007 to June 30, 2007(rent being Rs.25000 per month)
July 1,2007 to March 31, 2008
60000
70000
66000
75000
2000
10000
July 1, 2007 to march 31, 2008 (rent being Rs. 10000 per month)
April 1,2007 to June 30,2007
100000
95000
110000
90000
40000
17000
116
Municipal value (a)
Fair rent (b)
Standard rent (c)
Actual rent (d)
(a) Or (b) subject to maximum of (c)
If (d) is greater than the previous step
then (d) should be considered.. GAV=
LESS: Municipal taxes paid
Net annual value
Less: deduction under section 24
Standard deduction of 30% of NAV
Interest on borrowed capital
Income from house property
HOUSE1
60000
70000
66000
75000
66000
75000
10000
65000
19500
2000
HOUSE2
100000
95000
110000
90000
100000
100000
17000
83000
24900
40000
117
Computation of taxable income and tax liability
Income from house property
Income from business
Gross total income
Less: deductions under section 80C
Contribution to public provident fund
Net taxable income
TAX LIABILITY:
Taxable income
Less : exemption limit
5000*10%
100000*20%
941600*30%
61600
1200000
1261600
70000
11916001191600
1191600
145000
1046600
500
20000
282480
302980
118
Add: surcharge of 10% as income exceeds 1000000
Add: 3% educational cess
Tax payable
Rounding off
30298
333278
9998
343276
343280343280
119
Exercise : 25
Net annual value of house property owned by X = nil Income of Y is related to income from business and profession.
Therefore NAV = nil Z has let out his property and income from house property
should be calculated.
120
Calculation of income from house property
particulars X Z
Gross annual value
Less: municipal taxes paid
Net annual value
Less: deductions under section 24
Standard deduction of 30% of NAV
Interest on capital borrowed
Income from house property
Nil
Nil
Nil
Nil
30000
-30000-30000
120000
20000
100000
30000
30000
4000040000