Computation of Income From House Property (Income from HP)

Income from Let-out Property

Gross Annual Value Xxxx

LESS: Municipal Taxes paid (by the assessee only) (xxxx)
Net Annual Value Xxxx
LESS: Deduction u/s 24
Standard deduction 30% of NAV
XXXX
Interest on borrowed capital (unlimited) (xxxx)
xxxxx
Income from HP Xxxx/
(xxxx)

Gross annual value sec 23(1)

Step 1: find out reasonable expected rent (RER):

Municipal valuation of the property or fair rent of the property

whichever is higher, subject to the maximum of the standard rent i.e. at
any point of time RER cannot be more than standard rent. But if standard
rent is the highest ignore the standard rent and the higher of the MV OR
FR shall be the RER.

Municipal Valuation: for collecting municipal taxes, local authorities make

a prescribed survey of all buildings in their jurisdiction, such valuation
may be taken as a strong evidence representing the earning capacity of a
building.

Fair Rent: a rent fetched by a similar property in the same or similar

locality.

Standard Rent: is the maximum rent which a person can legally recover
from his tenant under a Rent Control Act.

Step2: find out rent actually received or receivable after excluding

unrealized rent before deducting loss due to vacancy.

Step3: find out which one is higher amount computed in step1 or step 2

Step 4 : ascertain the loss due to vacancy

Step 5 : step3 minus step 4 is the Gross Annual Value.

Condition for claiming unrealized rent from rent actually received

 a. The tenancy is bona fide
b. The defaulting tenant has vacated or steps have been taken to
compel him to vacate the property.

c. The defaulting tenant is not in occupation of any other property of

the assessee.
d. The assessee has taken reasonable steps to institute legal
proceedings for the recovery of the unpaid rent or satisfies the
Assessing Officer that legal proceedings would be useless.

Interest on borrowed capital 24(b): the following points are kept in

mind.
i. Interest on borrowed capital is allowable as deduction if
capital is borrowed for the purpose of purchase, construction,
repair, renewal or reconstruction of the property.
ii. The deduction is allowable on ‘accrual’ basis.
iii. No deduction is allowable for brokerage or commission for
arranging the loan.
iv. Interest on a fresh loan, taken to repay the original loan( even
it is interest free) raised for the aforesaid purposes is
allowable for deduction.

IF THE PROPERTY IS SELF OCCUPIED THROUGHOUT THE YEAR, THEN THE

PROPERTY IS KNOWN AS SELF OCCUPIED PROPERTY. BUT IF THE ASSESSEE
OCCUPIES MORE THAN ONE PROPERTY, THEN AT THE OPTION OF THE
ASSESSEE ANY ONE PROPERTY IS CONSIDERED AS SELF OCCUPIED, AND
THE BALANCE IS KNOWN AS DEEMED TO BE LET OUT (THE TREATMENT
SHALL BE AS IF IT IS LET OUT).

Computation of income from self occupied property

Gross Annual Value Nil

LESS: municipal taxes paid by the assessee(owner) Nil

Net Annual Value Nil

LESS: deduction u/s24

Standard deduction
Nil

Interest on borrowed capital for

construction/purchase/renovation

Maximun Rs.
1,50,000/Rs.30,000

Income from HP (Self occupied) (Rs.1,50,0

00)/

(Rs.30,00
0)

Condition for claiming Rs.1,50,000

1. The capital is borrowed on or after 1st April 1999, for acquiring or

purchase or construction of a property.
2. The acquisition or construction should be completed within 3 years,
from the end of financial year in which the capital was borrowed.
3. The person extending loan certifies that such interest is payable in
respect of the amount advanced for acquisition / construction of the
house or as re-finance of the principal amount outstanding under an
earlier loan taken.
Condition for claiming Rs.30,000
1. The capital is borrowed before 1st April 1999 for construction,
purchase or repairs or renewals of the property.
2. If the capital is borrowed after 1st April 1999 but for
reconstruction or repairs or renewal or the property.
3. Though the capital is borrowed after 1st April 1999 but the
construction is not completed within 3 years, from the end of the
financial year in which the capital was borrowed.

Other relevant points:

1. If a house property consists of two or more independent residential

units, one of which is self occupied for own residential purpose and the
others are let out, then self occupied portion will be valued separately
and let out will be valued separately.
2. Even though the property is let-out for part of the year and self
occupied for the part of the year, then the valuation shall be made as if
it is let out throughout the year, no concession is allowed for self
occupied.
3.