Page 248 - DCOM301_INCOME_TAX_LAWS_I

Unit 8: Income from House Property

Notes
Questions
1. Study and analyse the case.
2. Write down the case facts.

3. What do you infer from it?
Source: www.bcasonline.org/articles/artin.asp?235

8.8 Summary

Section 22 of the Act provides that 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.

Deemed Owner: As per section 27, the following persons though not the legal owners of
a property are deemed to be the owners for the purposes of sections 22 to 26: (a) Transfer
to a spouse or minor child, (b) Holder of an impartible estate, (c) Member of a co-operative
society, (d) Person in possession of a property and (e) Person having right in a property for
a period not less than 12 years.

The measure of charging income-tax under this head is the annual value of the property,
i.e., the inherent capacity of a building to yield income. The expression ‘annual value’ has
been defined in Section 23(1) of the Income-tax Act as, the annual value of any property
shall be deemed to be: the sum for which the property might reasonably be expected to let
from year to year; or where the property or any part of the property is let and the actual
rent received or receivable by the owner in respect thereof is in excess of the sum referred
to in clause (a), the amount so received or receivable; or where the property or any part of
the property is let and was vacant during the whole or any part of the previous year and
owing to such vacancy the actual rent received or receivable by the owner in respect
thereof is less than the sum referred to in clause (a), the amount so received or receivable.

Gross annual value shall be higher of (a) Expected Rent and (b) Actual rent received or
receivable. The higher of Municipal value and fair rental value shall be Expected rent.
However, expected rent shall not exceed the Standard rent. Net annual value shall be
computed in the following manner: Determine the Gross Annual Value, Deduct municipal
tax actually paid by the owner during the previous year from the Gross Annual Value.

Deduction from Annual Value (Section 24): W.e.f. Assessment Year 2002–03, income
chargeable under the head “Income from house property” shall be computed after making
the following deductions, namely: Standard deduction: a sum equal to 30% of the annual
value; Interest on borrowed capital: where the property has been acquired, constructed,
repaired, renewed or reconstructed with borrowed capital, the amount of any interest
payable on such capital. The interest on borrowed money pertaining to pre-construction
period is available in 5 equal instalments commencing from the previous year in which
house is acquired or constructed. For this purpose the pre-construction period means the
period commencing on the date of borrowing and ending on 31st March immediately
prior to the date of completion of construction/date of acquisition or date of repayment of
loan, whichever is earlier. Interest for current year is deductible upto ` 30,000/` 1,50,000 as
the case may be.

LOVELY PROFESSIONAL UNIVERSITY 243