SPECIMEN SHOWING THE COMPUTATION OF TAXABLE INCOME FROM LET OUT HOUSE PROPERTY

Ie first determine the GAV after that deduct municipal tax and unrealized rent for getting annual value of house property. Thereafter make deductions s per u/s 24 for getting the income from house property.



*Municipal tax—Tax paid by the owner to the govt.

*Unrealized rent—Irrecoverable rent due to the default of the tenant

*Std. deduction— 30% of annual value

*Interest on loan- if there is any money borrowed for repair of house then the interest on loan gets deduction from the annual value


Annual value of self occupied property is taken as nil. If it is not let out then the aforesaid expenses not allowed as deduction. But if there is any borrowed fund used for house construction or repair then an amount of Rs.30000/- allowed as deduction per annum. The interest allowable as deduction will be up to Rs150000/- per annum in case of house property acquired or constructed with borrowed capital on or after 1.4.1999 but before 1.4.2003.


House property or any portion thereof occupied by the owner for purpose of his business or profession is excluded and any expenses of current repairs, municipal taxes, depreciation on property etc. is allowable as business expenditure.

FACTOR TO BE CONSIDERED WHILE DETERMINING THE ANNUAL VALUE OF HOUSE PROPERTY

1. Actual Rent(AR) - It is an amount of rent received by the owner from the tenant in relation to house property
2. Annual Rental Value(ARV) – it is the gross annual value
3. Fair Rent (FRV) – it refers to the rent charged on similar types of property located the same locality
4. Municipal Rent (MRV) – it is the annual rental value of the house property fixed by the municipality
5. Standard Rent (SRV) - it refers to the rent fixed or determinable under the Rent Control Act
6. Real Rental Value (RRV) - real rental value is the amount after deducting expenses relating to common facilities from the actual rent by the owner.
7. Expected Rental Value (ERV) – it is the notional rent or reasonable rent


Determination of Gross Annual Value (GAV)

A) GAV of let out House property

Expected rental value (ERV) or Actual rental value (ARV) received for the full year whichever is higher will be the GAV. If the property subject to rent control act,

FRV or MRV whichever is higher and compare the result with SRV, take the lesser one as GAV

If the let out property vacant for a full year the GAV is nil otherwise if it vacant for 2 or more months only ,then deduct the loss due to vacancy out of the total GAV.

B) GAV of Deemed to Be Let Out

ie if a person using more than one his own house for his own occupation, then treat one as self occupied but other houses will be considered as deemed to be let out. So here also calculating GAV like the GAV of let out property

b) Gross annual value of self occupied house property

Here GAV is nil


Briefly in case of let out property, income will be Fair Annual Value or Actual Rent Received whichever is more. However, if property is let-out only for part of the year or not let out, income will be Fair Annual Value or Actual Rent Received whichever is less.

INCOME FROM HOUSE PROPERTY

Income from house property not only mean by the rental income from house property but the inherent capacity of the property to earn income, technically known as annual value of the house property.


According to Sec.22, Income from house property means,

“The Assessee is chargeable to tax on the annual value of the property, consisting of any building or lands appurtenant thereto, of which he is the owner, and which is not used by him for his own business or profession”


While calculating income from hose property, the following points should be taken into consideration, ie


1.The property should consist of any building or land appurtenant.
2.Legal ownership of the property must be vested with the Assessee.
3.the concept of annual value of house property
4.The property should not be used by the owner for his own business or profession.
5.letting out of building along with furniture(income from furniture treated as income from other source not from hose property)


ANNUAL VALUE

Annual value is the inherent capacity of the property to earn income; otherwise it has been defined as the amount for which the property might reasonably be expected to let from year to year and is the base for calculating income from house property.


EXEMPTED HOUSE PROPERTY INCOME


Fully exempted:-
1 .Income from farm house connected with agriculture
2. Annual value of one palace of ex-Indian ruler
3. Inocme from property used for Assessee’s own business
4. Income from house meant for self residence
5. Income from property owned by local authority, trade union, charitable trust, hospital etc.


Partially exempted:-

Income of a co-operative society from letting out of godown of commodities meant for sale