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Unit 8: Income from House Property

Notes

Task Find the Gross Annual Value of a house property whose municipal valuation is
` 80,000, fair rent is ` 90,000 and standard rent is ` 75,000. The house is let out to a third
party for a monthly rent of ` 7,000 for 10 months and remains vacant for the remaining
part of the year.

Deduction of Municipal Taxes

From the annual value as determined above municipal taxes are to be deducted if the following
conditions are fulfilled:

The property is let out during the whole or any part of the previous year.
The Municipal taxes must be borne by the landlord (If the Municipal taxes or any part
thereof are borne by the tenant, it will not be allowed).

The Municipal taxes must be paid during the year (Where the municipal taxes become due
but have not been actually paid, it will not be allowed. Similarly, the year to which the
taxes relate to, is also immaterial).

Example: No vacancy no unrealized rent
X owns a house property. Municipal value of the house is 1,50,000. The Fair Rent is 1,25,000 and
the Standard Rent is 1,45,000. It is let out throughout the previous year for 10,000 p.m. up to
December 31,2012 and 14,500 p.m. thereafter. Find out the gross assessment year 2013–14.
Solution:
Municipal Value (a) 1, 50,000
Fair Rent (b) 1, 25,000
Standard Rent (c) 1, 45,000

Actual Rent (10,000 x 9 + 14,500 x 3) (d) 1, 33,500
Step 1: Expected Rent (a) or (b) whichever is higher, subject to (c) 1, 45,000
Step 2: Gross Annual Value = Higher of Expected or Actual Rent i.e. 1, 45,000

Example: No vacancy but there is unrealized rent
Mr. A owns two houses. The expected rent of the house one is ` 65,000. This house was let out for
7,500 p.m. But the rent for the months of Feb. and March 2013 could not be realized. The expected
rent of another house is 1,50,000. This house was let out for ` 12,000 p.m. But the rent for the last
three months could not be realized. In the both cases, Mr. A fulfils the conditions of Rule 4. You
are required to compute the Gross Annual Value of both the houses.

Solution:
House I House II
Expected Rent 65,000 1, 50,000
Annual Rent 90,000 1, 44,000

Unrealized Rent 15,000 36,000

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