Howtocalculatetaxonhousepropertyincome

Ifyouownmorethanoneproperty,thenonlyonehouseofyourchoicewillbeconsideredasselfoccupiedandotherswillbeconsideredasletoutorDeemedtobeletout
InvestmentYogi|HyderabadMarch12,2014LastUpdatedat09:47IST
IncomefromhousepropertyisoneamongthetaxableheadsofincomeaspertheIncomeTaxact.Itconstitutestheincomeearnedfromapropertybyhis/herowner.
Propertyherebyreferstoanybuilding(house,officebuilding,godown,factory,hall,shop,auditorium,etc.)and/oranylandattachedtothebuilding(e.g.Compound,garage,garden,carparking
space,playground,gymkhana,etc.).
Thisistheonlyheadofincome,whichtaxesnotionalincome(exceptundersomecircumstancesundercapitalgains,incomefromothersources).Thetaxabilitymaynotnecessarilybeofactual
rentorincomereceivedbutthepotentialincome,whichthepropertyiscapableofyielding.

ImageviaShutterstock

Whileselfoccupiedandrentalpropertyarewithinthepurviewunderthishead,incomefromvacanthouseisdealtwithundertheheadincomefromothersources.

Taxablevalue

Theannualvalueofpropertyconsistingofanybuildingorlandappurtenant(belonging)thereto,exceptsuchpropertywhichisusedbyassesseeforthepurposeofbusinessandprofession,shallbethetaxablevalue.

HowtodetermineAnnualValue?
GrossAnnualValue(GAV)ofpropertywillberequiredtodeterminetheannualvalue,whichishigherof:
(a)Thesumforwhichthepropertymightreasonablybeexpectedtoletfromyeartoyear.IncasesofpropertieswhereStandardRenthasbeenfixed,suchsumcannotexceedthisvalue.However,wherepropertywasvacantduring
thewholeorpartofthepreviousyearandrentactuallyreceivedorreceivableislessthanexpectedrent,thenrentactuallyreceivedorreceivableistakenasGAV.

(b)Wherepropertyisactuallyletoutandtherentreceivedorreceivableismorethantheamountdeterminedin(a)above,theannualvaluewouldbetheactualrentreceived.

Exclusions
FollowingamountswillbeexcludedwhiledeterminingGAV:

Theamountofmunicipaltaxrealizedfromatenant.
Notionalinterestontheamountreceivedtowardsrent/securitydepositfromthetenant
Repairscarriedoutbythetenant.

WhenAnnualValueisNIL?
Theannualvalueofapropertyshallbeconsiderednilinfollowingcases:
(a)Selfoccupiedproperty,i.e.propertywhichisinoccupationoftheownerforthepurposeofhisownresidenceandhedoesnotderiveanyotherbenefitoutofit.

(b)Similarly,iftheownerofonlyoneresidentialhouseisunabletooccupyitonaccountofhisemployment,businessorprofessioncarriedoninanyotherplaceandheisresidinginapropertynotownedbyhim.

Letsillustratethiswithanexample.Mr.PiyushArora,whoboughtahouseinMumbaihadtoshifttoarentalaccommodationinBangloreduetohisjob.Inthisscenario,theannualvaluewillbenilandstillMr.Piyushwillgeta
taxdeductionuptoRs.1,50,000forinterestpaidonborrowedcapital.

NetAnnualValueisarrivedatafterdeductingthemunicipaltaxesandtheunrealizedrent(subjecttocertainconditions).However,receiptofanyunrealizedrentshallbechargeabletotaxintheyearofreceipt.

Deductionsu/s24
SerialNo Particulars
1

3
4

AmountorPercentage
Deduction
30%ofNetAnnualValue

Standarddeduction
Propertyacquired/constructedafter
1stApril,1999withborrowed
capital(deductionisallowedonly
wheresuchacquisitionor
Rs.1,50,000
constructioniscompletedwithin3
yearsfromtheendofthefinancial
yearinwhichcapitalwasborrowed)
Inallothercasesexceptinpoint2. Rs.30,000
Fulldeductionofintereston
Incaseofletoutproperty
borrowedcapital.

*Interestfortheperiodpriortotheacquisitionorconstructionofthepremiseswouldbedeductibleinfiveequalinstalmentsstartingfromtheyearinwhichpropertyisacquired/constructed(possession).

TaxPlanningforIncomefromHouseproperty
Youcanminimizeyourtaxoutgointhefollowingcases:

(1)OwingmorethanonepropertyIfyouownmorethanoneproperty,thenonlyonehouseofyourchoicewillbeconsideredasselfoccupiedandotherswillbeconsideredasletoutorDeemedtobeletout(ifnotletout).
Therefore,youshouldcarefullyevaluateandchooseapropertywithlesstaxliability.

Illustration:

IfShivahastwohousesthanhecanchooseonewhichwillminimizehistaxliability.

Particulars(IfDeemedLetout) House1
House2
AnnualValue
3,60,000
7,00,000
Less:(MunicipalTaxes)
(40,000)
(54,000)
NetAnnualValue(NAV)
3,20,000
6,46,000
Deductionsu/s24

(a)
(96,000)
(1,93,800)
30%ofNAV
(b)
(1,75,000)
(2,50,000)
Interestonborrowedcapital
IncomefromHouseProperty
49000
2,02,200

IfShivaconsidersHouse1asSelfoccupiedandHouse2asdeemedtobeletoutthenhisincomefromhousepropertywillbeRs.52,200anditwillbenegativeRs.(1,01,00)viceversa.Therefore,heshouldconsiderHouse1as
deemedletoutandHouse2asselfoccupied.

(2)JointHomeLoanIfyouareaJointownerandalsoapplyforajointhomeloanthenboththecoborrowerscantakeamaximumdeductionof150000each.

(3)FirsthouseisinasinglenameandplanningasecondhomeIfyourfirsthomeisinsinglenamethenyoucanbuyasecondhomeinyourspousesnametohelpyouavoidtaxondeemedtobeletoutproperty.

(4)JointOwnershipIncomefromhousepropertycanbedividedbetweenboththecoownerswhichcanreduceoveralltaxliability.

Yourhomeandameticulousplanningcanlightenupyourtaxburdentoagreatextent.

Source:investmentyogi.com