Page 198 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 11: Taxation Planning

6. Income received by way of pension received by an individual or family for a member Notes
who was employed with central government/state government is also exempted from a
tax list.
7. Armed force professional who won the gallantry award for their services towards the
country are exempted from the list of income tax. Employees of central or state government
who have won Param vir Chakra, Maha vir chakra and any other notified gallantry
awards are exempted from the tax list.

Income from House Property

This head taxes rental income received by any person from way of renting of any immoveable
property.
Income form House Property which is exempt i.e. Though there is income from house property,
such income will not be taxable under the Indian Income Tax Law. The following are such
situations:
1. Income from a farmhouse used for agricultural purposes.

2. Income from property earned by trade union or association of trade union.
3. Property income earned by a local authority.
4. Income from house property earned by a political party.
5. Income from property held for charitable purposes.

6. Property used for own business or profession. If such property yields any income, such
income will be treated as business income and not house property income.
7. One property which is used by an individual assessee or an HUF assessee for purpose of
self occupation only and not for renting out to any person will be treated as exempt
property and income from that property will not be treated as taxable income.

For the purposes of understanding the provisions of this unit, let us divide the house properties
into different categories:-
1. Self Occupied Properties (SOP).

2. Let Out Properties.
If an individual or HUF assessee has only one property, that property will be treated as self
occupied. Accordingly, there will not be any taxable income in respect of such property. However,
if the assessee owns more than one property all of which are not rented out but are self occupied,
then the assessee, at his option, may choose any one property as self occupied by him and the
remaining properties though not actually let out, will be deemed to be let out i.e. they will be
assumed to have been let out and a notional rental value will be treated as taxable income in the
hands of the owner of such property. Such properties are known as properties deemed to have
been let out. In respect of properties deemed to have been let out, a notional rental value will be
treated as taxable income even if no rent has actually been received by the assessee. In order to
determine the notional rental value, the highest of the following will be treated as taxable
income:
1. Municipal Rental Value.
2. Fair Rental Value of a similar property in a similar locality.

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