Method of Computation of Income from House Property
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This document discusses the computation of income from house property under the Indian Income Tax Act. It defines income from house property as rental income or profits from selling a house, building, or other property. It explains that there are three types of house properties: self-occupied, let out, and deemed let out. Key terms related to house property income like municipal value, fair rental value, standard rent, and annual value are also defined. The document concludes by showing an example computation of taxable income from house property for an assessment year.
Method of Computation of Income from House Property
- 1. Method of Computation of Income from House Property Under the guidance of Sundar B. N. Asst. Prof. & Course Co-ordinator GFGCW, PG Studies in Commerce Holenarasipura Sushmitha P 2nd M. Com
- 3. Introduction:- The income arising out of a house property either in the form of a rental income or on its transfer is reffered to us ‘ income from house property’. In essence , any property such as house, building, office warehouse is treated as ‘house property‘ under the income tax act.
- 4. Meaning:- The income tax act had divided the income received by an individual in various heads for simplification of tax computational. One of these heads is “ Income from house property “ . The income earned by the ownership of a property his said to be income from house property. If a tax payer owns a house property and rents it, the rent received from that property is taxable.
- 5. Types of house property:- 1.Self occupied property 2.Letout property 3.Deemed to be let out property
- 6. Terminologies associated with income from house property:- 1.Muncial value:- Is the value of the house property that is calculated by the muncipal authorities for imposing muncipal taxes. 2.Fair rental value: - Is the Fair rent that can be charged for a similar property with the same Features in the same locality.
- 7. 3.Standard rent:- Is the rent determined under rent control act. The property owner cannot charge a rent higher than the standard rent fixed under rent control act. 4.Annual value:- This is the actual rent received or to be received by the property owner on renting out the house.
- 8. 5.Deduction:- Are the rebates that are given to the taxpayer as benefits for making investments. These are deducted to ascertain the actual taxable income. The taxpayer can claim these deduction under section 24 of the income tax act 1961.
- 9. 6.Standard deduction:- You can claim 30% of the net annual value as a deduction of repairs, rent and so on ( irrespective of actual expense incurred is, this deduction will not be permitted in case the gross annual value is nill. 7.Interest on home loan:- Deduction can be claimed for interest on home loan under sec 24 of the income tax act. The limit under this sec is ₹ 200000.
- 11. Computation of income from house property PARTICULAR AMOUNT Gross annual value less:- muncipal taxes Net annual value Less:-deduction under sec 24 Standard deduction at 30% Interest paid on borrowed loan Income from house property XXX (XXX) XXX (XXX) (XXX) (XXX) XXX
- 12. Problem:- During the assessment year 2019-20 XYZ lamping submits the following in formulation. 1. Fair rent value ₹ 60000 2. Muncipal value ₹ 46000 3. Annual value ₹ 50000 4. House has vaccant for two month during the year 2018-19 5. Muncipal tax paid ₹ 4000 6. Repairs ₹ 20000 7. Insurence premium paid ₹ 12000 Determine the taxable income from house property of the XYZ company
- 13. Particulars ₹ ₹ Fair rent Muncipal value Standard rent Actual rent 50000/12=4167*10 Gross annual value less;:- muncipal tax Net annual value Less:- deduction under sec 24 a) Standard deduction on 30% On NAV(56000*30/100) b) Interest on loan Taxable income from house property 60000 45000 60000 - 60000 41670 60000 4000 56000 16800 - 39200 39200 Computation of income from house property for the year of 2019-20
- 14. Conclusion :- In a nutshell, it is always a better option to get complete knowledge of the taxes and proper assessment of incomes with this article you can get apro active approach to plan strategically where and how to invest in properties to gain maximum returns and charged minimum taxes.
- 15. Reference:- https://cleartax.in > income tax. https://tax2win.in/guide/house property.