House property income
INCOME FROM HOUSE PROPERTY:
Excerpts of Tax Implications
- Constitution of “House Property”:
- Building and land surrounding, forming a part of the Building.
- This land may be in the form of a compound or a courtyard being a part of the Building.
- This land is distinguished from an open plot of land.
House Property includes flats, shops, office spaces, factory sheds, agricultural land and farm houses. Residential houses, cinema buildings, godowns, workshop buildings, hotel buildings, etc. also come under “House Properties”.
- Self-occupied House Property:
The property used by the “Owner” for himself is not charged under the head “Income from House Property”. This includes property used for own business or profession carried on by him, the profit of which is chargeable to tax.
- Let-out House Property:
“Owner” also means a person who can exercise his rights in his own right but not on behalf of the owner.
A person entitled to receive income from a property in his own right is to be treated as its owner even if no registered document is executed in his name.
Income from the property taxed under the head “Income from House Property” must satisfy the conditions as under:
- The property must consist of Building and land attached to it.
- The Assessee must be the owner of such “House Property”.
- Excluding the use of the property by the owner for carrying out business or profession, the proceeds received by the owner by way of lending in the form of rent or lease is chargeable to tax.
The income received from such “House Property” is chargeable under Sec. 22 of income tax act as under:
- Statutory Deduction @ 30% on the Net Annual Value computed is allowed.
- Interest on loan on property – The amount of annual interest payable on such capital is allowed as deduction.
The Net Annual Value is arrived at after deducting the Municipal Taxes for the property from the Gross Annual Value computed as under:
- a) Subject to a maximum of Rs. 1,40,000.
- b) Actual rent received.
Whichever is higher of the above two conditions.
The proceeds arrived at after considering the above deductions is the “Income from House Property”.
Hence, summarizing the above,
The Tax payable:
= Gross Annual Value (-) Annual Municipal Taxes = Net Annual Value.
= Net Annual Value (-) Statutory deduction @ 30% of Net Annual Value = Income from House Property.