Page 233 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes

Notes

Income from house property is determined as under:
Particulars Amount
Gross Annual Value xxxxxxx
Less: Municipal Taxes xxxxxxx
Net Annual Value xxxxxxx
Less: Deductions under Section 24
- Statutory Deduction (30% of NAV) xxxxxxx
- Interest on Borrowed Capital xxxxxxx

Income from House Property xxxxxxx

Self Assessment

State whether the following statements are true or false:
10. Income from let out house property is computed after giving certain deductions from the
net annual value of the let out property.

11. For let out properties, the gross annual value will be the lowest of the (a) Municipal value
of the property, (b) Actual rent received during the year and (c) Fair rent i.e. rent of similar
properties in the same or similar locality.
12. Out of the gross annual value, municipal taxes actually paid during the year have to be
deducted to arrive at the net annual value.
13. The Municipal taxes must be borne by the landlord.
14. The Municipal taxes must be paid during the year.

8.4 Computation of Annual Value or Net Annual Value

The basis of calculating Income from House property is the ‘annual value’. This is the inherent
capacity of the property to earn in come and it has been defined as the amount for which the
property may reasonably be expected to be let out from year to year. It is not necessary that the
property should actually be let out. It is also not necessary that the reasonable return from
property should be equal to the actual rent realized when the property is, in fact, let out. Where
the actual rent received is more than the reasonable return, it has been specifically provided that
the actual rent will be the annual value. Where, however, the actual rent is less than the reasonable
rent (e.g., in case where the tenancy is affected by fraud, emergency, close relationship or such
other consideration), the latter will be the annual value. The municipal value of the property,
the cost of construction, the standard rent, if any, under the Rent Control Act, the rent of similar
properties in the same locality, are all pointers to the determination of annual value.

Gross Annual Value [Section 23(1)]

The following four factors have to be taken into consideration while determining the Gross
Annual Value of the property:
1. Rent payable by the tenant (actual rent)

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