To understand various types of house property as per Income Tax Act and to know the method of calculation of Income from House Property.

1. Dr. Minal Manish Bhandari.
Asst. Professor,
Pratibha College of Commerce and Computer Studies, Chinchwad.
minalmbhandari@gmail.com

2.  It includes home, an office, a shop, a building
or some land attached to the building like a
parking lot.
 The IncomeTax Act does not differentiate
between a commercial and residential
property.
 All types of properties are taxed under the
head ‘income from house property’ in the
income tax return.
 An owner for the purpose of income tax is its
legal owner, not on someone else’s behalf.

3.  1) Let out: A property is considered to be let
out when the owner passes on the right of its
occupancy or usage to another person
against a consideration (rent).
 2) Self Occupied:A house property will be
termed 'self-occupied' when the owner or
his/her family members use it for residential
purpose.

4.  3. Deemed to be let out: All vacant properties are
treated as 'Deemed to be let out'.
 Prior to FY 2019-20, if more than one self-occupied
house property is owned by the taxpayer, only one is
considered and treated as a self-occupied property and
the remaining are assumed to be let out.
 For the FY 2019-20 and onwards now, the taxpayer can
claim his 2 properties as self-occupied and remaining
house as let out for Income tax purposes.
 4. Property used for own business or profession
The choice of which property to choose as self-occupied is up to the
taxpayer.

5.  Municipal value – It is the valuation by the Municipal
authorities for charging taxes on house property.
 Fair rent – It is the rent, a similar property in the same
or similar locality can fetch.
 Standard rent – It is fixed under the Rent ControlAct
where a higher rent than the standard rent cannot be
expected by the owner.
 Actual rent – It is the actual rent received/receivable
by the owner by renting out the property.
 Expected rent – Higher value between municipal
value and fair rent subjected to a maximum of
Standard rent is expected rent.

6. 1. Self occupied House Property
 Annual Value NIL
 Less: Deduction U/s 24
 Interest on Capital/loan Borrowed XXX
INCOME FROM HOUSE PROPERTY
xxx

7. 2. Let Out & Deemed to be Let Out House Property
 Gross Annual Value
XXX
 Less: Municipal Taxes Paid
XXX
 Net Annual Value
XXX
 Less: Deduction U/s 24
 Standard Deduction(30% of NAV) XXX
 Interest On Capital/loan Borrowed XXX
INCOME/LOSS FROM HOUSE PROPERTY
XXX
Property let out for residence or business makes no difference

8.  Gross AnnualValue of a property is
the value at which the property might
reasonably be expected to be let from year
to year.
 In India, the GAV is the current value, the
actual rent (whether received or receivable)
or the fair rental value, whichever is highest

9. Step 1: Reasonable Expected Rent -
Least of the two a. Municipal Value or Fair Rent
whichever is higher or b. standard rent
Step 2 : Find out Rent Received/Receivable (Before
Rent of vacancy period) :
It is Annual Rent – Unrealized Rent
Step 3 : Take higher between 1 and 2
Step 4 : Find out loss due to vacancy
Step 5 : GAV = 3-4

10.  Municipal Value is Rs. 1,00,000.
 Fair Rent is Rs. 1,50,000.
 Standard Rent is Rs. 1,20,000.
 Annual Rent Is Rs. 2,40,000.
 Vacancy is 2 months.
 Ground rent is Rs. 30,000.
 Insurance is Rs. 25,000.

11. Step 1: Compare Municipal Value and Fair Rent
i.e Rs 1,00,000 and Rs. 1,50,000
( Take Higher Value)
Step 2: Compare higher value with standard rent
i.e Rs 1,50,000 higher from Step 1 and Rs.
1,20,000 (Take lower of the two)
Step 3: Compare Lower of Step 2 i.e Rs. 1,20,000
with Annual rent- Vacancy-Unrealized Rent
i.e Rs.2,40,000 – Rs. 40,000 which comes to
Rs. 2,00,000.
(Take higher of the two)
Here GAV will be Rs. 2,00,000

12. EXAMPLE
 Fair Rent
(Rs.80,000pm ) 9,60,000
 Municipal Value
 (Rs.70,000pm) 8,40,000
 Standard Rent
 (Rs,60,000pm) 7,20,000
 Actual Rent 9,00,000
 (Rs 90,000 * 10 and vacant for 2
month)
SOLUTION
a) Fair Rent 9,60,000
b) Municipal Value 8,40,000
c) Higher of
a and b 9,60,000
d) Standard Rent 7,20,000
e) Expected Rent
(Lower of c and d) 7,20,000
f) Actual Rent 9,00,000
Gross Annual Value –
Section 23(1)(b) 9,00,000
Note: Section 23(1)(b) is applicable as actual rent
received is Rs 9,00,000 per moth whereas
expected rent is Rs 8,40,000 per month.

13.  a. Standard Deduction – Standard Deduction is
30% of the Net AnnualValue calculated above.
This 30% deduction is allowed even when your
actual expenditure on the property is higher or
lower.
 Therefore, this deduction is irrespective of the
actual expenditure you may have incurred on
insurance, repairs, electricity, water supply etc.
 b. On rented out property, the entire interest on
the home loan is allowed as a deduction.

14. a. Standard Deduction :For a self occupied house property, since the
Annual Value is Nil, the standard deduction is also zero on such a
property.
b. Deduction of Interest on Home Loan for the property :
Homeowners can claim a deduction of up to Rs.2 lakhs (Earlier it
was Rs 1.5 lakhs for FY 2013-14) on their home loan interest, if the
owner or his family reside in the house property.
same treatment applies when the house is vacant.
Deduction on interest is limited to Rs.30,000 if you fail to meet any
of the conditions given below for the Rs.2 lakhs rebate.-
i. The home loan must be for purchase and construction of a property;
ii. The loan must be taken on or after 1 April 1999;
iii. The purchase or construction must be completed within 3 years
from the end of the financial year in which the loan was taken