House Property Income: Tax

home-logoTax is on the annual value of the house property after allowing certain deductions. House Property consists of any building, flat, shop etc., and the land attached to the building.

Computation of income from Self Occupied property

Income is computed after giving certain deductions from the annual value of the property.

A) Computation of annual value of self occupied property

The annual value of Self occupied property is taken as NIL if the property is fully utilized for own residential stay during the year or if the property is not actually occupied as owner and is also not let out. If a property is let out for only a part of the year, proportionate annual value will be calculated.

B) Entitled deductions for self occupied property

The only entitled deduction is interest, if any payable, on loan taken for the purchase or construction of the house property. The maximum deduction on this account is Rs.30,000/-; However, for properties acquired or constructed between the 1st April 1999 and the 1st April 2003 out of borrowed funds, maximum limit is Rs. 1,50,000/-

Computation of income from let out property

Income is computed after giving certain deductions from the net annual value of the let out property.

A) Computation of net value of let out property

For let out properties the gross annual value will be the greater of the following three amounts:

  • Municipal value of the property;
  • Actual rent received during the year;
  • Fair rent i.e. rent of similar properties in the same or similar locality.

Out of the gross annual value, municipal taxes actually paid during the year has to be deducted to arrive at the net annual value.

B) Entitled deductions for let out property

The deductions available for computing House Property Income are:

  • 30% of the net annual value for repair and maintenance and rent collection expenses for the property
  • Interest on money borrowed to build, buy or repair the property;

Ownership of property

Besides owning property in own name, a person is deemed as owner in following three cases:

  • As transferor of the property to spouse or minor child for inadequate or no consideration;
  • As holder of an impartible estate or a property in part performance of a contract under the Transfer of Property Act;
  • As share holder of a co-operative society or a company, which entitles to hold any property

Source: Income Tax Department of India

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