Page 227 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes At the end of this unit, you will learn the conditions to be satisfied for income to be chargeable
under this head, how to determine the annual value of different types of house properties,
admissible deductions and inadmissible deductions from annual value, tax treatment of
unrealized rent, who are deemed owners, what is meant by co-ownership and what is its tax
treatment etc.
Income from house property is one of the important heads of income under the Income Tax Act.
The tax payers have been, in particular, keen to know about the exemptions and deductions
available to them on repayment of interest and principal of the loan obtained to purchase the
house property, if that house property is let out or self-occupied. The amount of interest on
borrowed capital of the current year is available under the head house property further repayment
of principal is available under section 80C to individuals and Hindu Undivided Families.

8.1 Income from House Property: An Introduction

Section 22 of the Act provides:
“The annual value of property consisting of any buildings or lands appurtenant thereto of which
the assessee is the owner, other than such portions of such property as he may occupy for the
purposes of any business or profession carried on by him, the profits of which are chargeable to
income-tax, shall be chargeable to income tax under the head Income from House Property”.

The following points emerge from the above charging section:
1. Tax is charged on income from the buildings or lands appurtenant thereto: The buildings
include residential buildings, buildings let out for business or profession or auditoriums
for entertainment programmes. The location of the building is immaterial. It may be
situated in India or abroad.
2. Tax is charged on income from lands appurtenant to buildings: Where the land is not
appurtenant to a building the income from land can be charged as business income or
“income from other sources”, as the case may be. The lands appurtenant to buildings
include approach roads to and from public streets, courtyards, motor garage, compound,
playground and kitchen garden. In case of non-residential buildings, carparking spaces,
drying grounds or playgrounds shall be the lands appurtenant to buildings.

3. Tax is charged from the owner of the buildings and land appurtenant thereto: Where the
recipient of the income from house property is not the owner of the building, the income
is not chargeable under this head but under the head ‘Income from Business or Other
Sources’. For example, the income to a lessee from sub-letting a house or income to a
mortgagee from house property mortgaged to him is not chargeable under the head
‘Income from House Property’.
The owner of the buildings may be the legal owner or beneficial owner. In ownership, the
ownership of building is considered and not the ownership of income. In certain cases the
income may not be received by the owner of the building, still he shall be liable to tax because
he is the owner of the building.

Notes The annual value of a property, consisting of any buildings or lands appurtenant
thereto, of which the assessee is the owner, is chargeable to tax under the head ‘Income
from house property’. However, if a house property, or any portion thereof, is occupied
by the assessee, for the purpose of any business or profession, carried on by him,
Contd...

222 LOVELY PROFESSIONAL UNIVERSITY