Income From House Property | Income Tax | Study Notes | Bachelor of Commerce | 3rd Semester CBCS (Honours) | Dibrugarh University

Income From House Property | Income Tax | Study Notes | Bachelor of Commerce | 3rd Semester CBCS (Honours) | Dibrugarh University


What is the basis of charge [Section. 22]?

-> Income from house property shall be taxable under this head if following conditions are satisfied:

∙  The house property should consist of any building or land appurtenant thereto;

∙  The taxpayer should be the owner of the property. Owner includes deemed owner.

∙  The house property should not be used for the purpose of business or profession carried on by the taxpayer.

When property income is not charged to tax?

-> In the following cases, rental income is not charged to tax:

a) Income from farm house [sec. 2(1A) (c) read with sec. 10(1)];

b) Annual value of any one palace of an ex-ruler [sec. 10(19A)];

c) Property income of a local authority [sec. 10(20)];

d) Property income of an approved scientific research association [sec. 10(21)];

e) Property income of an educational institution and hospital [sec. 10(23C)];

f) Property income of a trade union [sec. 10(24)];

g) House property held for charitable purposes [sec. 11];

h) Property income of a political party [sec. 13A];

i) Property used for own business or profession [sec. 22]; and

j) One self-occupied property [sec. 23(2)].

What is the basis of computing income from a let out house property?


After arriving at Ratable Value and Annual Value, if the property is let-out (given for rent / lease), the following deductions for which the owner is eligible :

1.  Repair Charges (restricted to 30% of Annual Value of the Property).

2.  Interest on borrowed capital for the purpose of acquisition, construction, re-construction, repairs, renovation etc.

How to compute taxable income from self-occupied property?

-> A self-occupied house property is used for one’s own residential purposes. This may be occupied by the taxpayer’s family – parents and/or spouse and children. A vacant house property is considered as self-occupied for the purpose of Income Tax.

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. The choice of which property to choose as self-occupied is up to the taxpayer.

For the FY 2019-20 and onwards, the benefit of considering the houses as self-occupied has been extended to 2 houses. Now, a homeowner can claim his 2 properties as self-occupied and remaining house as let out for Income tax purposes.

 A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence. Income chargeable to tax under the head “Income from house property” in case of a self-occupied property is computed in following manner:

Gross annual valueNil
Less:- Municipal taxes paid during the yearNil
Net Annual Value (NAV)Nil
Less:- Deduction under section 24 
➣Deduction under section 24(a) @ 30% of NAV➣Deduction under section 24(b​) on account of interest on borrowed capitalNil(XXXX)
Income from house propertyXXXX

What are special provisions when unrealized rent is realized subsequently [Sec. 25A]?

-> Special provision for arrears of rent and unrealized rent received subsequently [New Section 25A]

 (i) At present, section 25AA contains the special provisions on taxation of unrealized rent allowed as deduction when realized subsequently and section 25B contains the tax treatment of arrears of rent received.

(ii) These two provisions are now merged in new section 25A, in order to ensure uniformity in tax treatment of arrears of rent and unrealized rent. Thus, new section 25A substitutes erstwhile sections 25A, 25AA and 25B.

(iii) As per new section 25A (1), the amount of rent received in arrears from a tenant or the amount of unrealized rent realized subsequently from a tenant by an assessee shall be deemed to be income from house property in the financial year in which such rent is received or realized, and shall be included in the total income of the
assessee under the head “Income from house property”, whether the assessee is the owner of the property or not in that financial year.

New section 25A (2) provides a deduction of 30% of arrears of rent or unrealized rent realized subsequently by the assessee.

What is Mode of Taxation of Arrears of Rent?

-> Arrears of rent received or unrealized rent received subsequently in respect of let out property, if not charged to tax in earlier previous year, is taxable in the year of receipt after deducting 30% of such amount for repair, etc., irrespective of the assessee is the owner of the property or not in the year of receipt of such arrears or unrealized rent.

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