INDIAN INCOME TAX 3 -- INCOME FROM HOUSE PROPERTY

Income from house property

Income under this head is taxable if the assessee is the owner of a property consisting of building or land appurtenant thereto and is not used by him for his business or professional purpose.

An individual or an Hindu Undivided Family (HUF) is eligible to claim any one property as Self-occupied if it is used for own or family's residential purpose.

In that case, the Net Annual Value (as explained below) will be nil.

Such a benefit can only be claimed for one house property.

However, the individual (or HUF) will still be entitled to claim Interest on borrowed capital as deduction under section 24, subject to some conditions.

In the case of a self occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of

o  Rs. 150,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) and

o  Rs. 30,000 (if the loan is taken before 1 April 1999).

For let-out property, all interest is deductible, with no upper limits.

The balance is added to taxable income.

The computation of income from let-out property is as under:-

Gross annual value (GAV)1	xxxx
Less:Municipal Taxes paid	(xxx)
Net Annual value (NAV)	xxxx
Less:Deductions under section 242	(xxx)
Income from House property	xxxx

¹ The GAV is higher of Annual Letting Value (ALV) and Actual rent received/receivable during the year. The ALV is higher of fair rent and municipal value, but restricted to standard rent fixed by Rent Control Act.

² Only two deductions are allowed under this head by virtue of section 24, viz.,

o   30% of Net annual value as Standard deduction

o   Interest on capital borrowed for the purpose of acquisition, construction, repairs, renewals or reconstruction of property (subject to certain provisions).

Disclaimer

In this note, we have attempted to summarise some of the significant aspects to be kept in mind by readers to ensure compliance of Income tax laws and regulations. Readers should ensure to verify specific provisions as applicable to each case before taking any business decisions. It would be pertinent to note that some changes are being made to the Income tax laws and rules and regulations on a continuous basis by way of notifications, clarifications etc issued by the department based on their practical experience in implementing the legislation.

It may be noted that nothing contained in this note should be regarded as our opinion.  Professional advice should be sought for applicability of legal provisions based on specific facts. Though reasonable efforts have been taken to avoid errors or omissions in this note we are not responsible for any liability arising to readers directly or indirectly due to any mis-statements or error contained in this note. It must be noted that the views expressed in the note are based on our understanding of the law and regulations as published by the Government authorities and we may or may not agree or subscribe to such views/ interpretations.