Taxation Exam > Taxation Notes > Fast Track Quick Revision Income Tax > Income from House Property (Section 22 to 27)
Income from House Property (Section 22 to 27)
| Section 22. Charge | ||
| LAW : The Annual Value of building or land attached thereto of which assessee is the owner not occupying the building for his own business or profession. | ||
| Annual Value | It represents the earning capacity of building. Section 23. | |
| Building. (Construction should be completed) | Residential | Four walls with roof. |
| Commercial | Four walls with optional roof. | |
| Land attached with building | Land attached with building | Charged under the head House Property. |
| Indepandent Land | Charged under the head Other Sources | |
| Owner | Registered Owner | Register maintained with Stamp Valuation Authority. |
| Deemed Owner | 6 cases of deemed owner specified in Section 27. | |
| Owner not occupying the building for his own business or profession. | Let out to employees | Charged under the head Business. |
| Let out to others | Charged under the head House Property. | |
| Section 27. Deemed Owner (6 points) | |||||
| i | An individual (Transferrer) who transfers House Property to spouse without consideration, then individual who transfers the property is treated as deemed owner. Exception : Property is transferred with an agreement to live apart then registered owner (transferee) is treated as owner | Transferrer | Transferee | ||
| Husband - DO | Wife | ||||
| Wife - DO | Husband | ||||
| Husband | Wife - RO | ||||
| ii | An individual (Transferrer) who transfers House Property to a minor child, without consideration such individual who transfers the property is treated as deemed owner. Exception : Where the minor child is a married daughter then deemed owner concept is not applicable. Income from HP chargeable in the hands of minor married daughter itself. | Transferrer | Transferee | ||
| Father - Do | Minor Child | ||||
| Mother - Do | Minor Child | ||||
| Father/Mother | Minor married daughter - RO | ||||
| iii | Holder of an impartible estate. | ||||
| iv | A member of a Co-operative society, Company or other association of person who is allotted a building under a house building scheme of such society. | Registered Owner | Deemed Owner | ||
| Co-operative Society | Member | ||||
| v | A pers on w ho is allow ed to take or retain possession of any building or part thereof in part performance of a contract where every formality of sale is completed except registration of property with Stamp Valuation Authority. | Seller (received the full price) | Buyer (has key of property) | ||
| Registered Owner | Deemed Owner | ||||
| vi | A person who acquires any right in any building by way of lease for a term of atleast 12 years. | Lease Terms | Lessor | Lessee | |
| 12 years | RO | DO | |||
| 11 years | RO | Tenant | |||
| Section 23. Annual Value | ||||
| LAW : Annual Value is value after deduction of municipal tax. Municipal Tax. It’s deduction is allowed in the financial year in which payment is made by the owner. PAID basis + Owner. Tenant pays dedn not allowed. | GAV | xxx | ||
| Less MT | xxx | |||
| NAV | xxx | |||
| (1) | (2) & (3) | (4) | ||
| Let out property | SOP - Residence for whole year | DLOP (owns more than 1 SOP - R : one property whose GAV is highest treated as SOP - R remaining property as DLOP) | ||
| a | b | c | ||
| ER | AR | Loss on account of vacancy | ||
| ER = MV or FR whichever is higher or SR whichever is lower. | AR = Rent received or receivable. = Let out period + Vacant Period – unrealised rent of current financial year. (ignore SOP - R) | Property is lying vacant inspite of the best effort of the owner to let the property. | ||
| GAV = ER or AR whichever is higher less loss on account of vacancy. | GAV = ER = Nil | GAV = ER | ||
| Section 24a. Standard Deduction |
| Standard Deduction allowed is 30% of NAV. It is automatic deduction i.e. even if question do not provide it this deduction must be allowed. No Standard deduction if NAV is nil or negative. |
| Section 24b. Interest on borrowed capital | |||||
| 1. | The loan should be borrowed for PCR5. Purchase, Construction, Re - construction, Repairs. Renovation, Renewal, Repayment of existing housing loan. Note : Dedn. not allowed if loan is borrowed for payment of MT, interest on interest or penal interest. | 2. | The interest is allowed as deduction on accrual basis. Even if interest is not paid deduction is allowed. | 3. | Interest is allowed as deduction from that PY in which construction of building is completed or building is purchased. |
| Pre construction period interest | Post construction period interest | ||||
| Total Interest before the FY in which building comes into existence --------------------------------- = 5 | allowed from FY in which building comes into existence. | Allowed from FY in which building comes into existence. This interest keeps on decreasing with the re payment of loan | |||
| Let out / DLOP / Vacant | SOP - Residence | |
| Any amount of interest is allowed as deduction of both Pre and Post (No Limit) | Interest both pre + post limited to | |
| Rs. 2,00,000 if all the following 3 conditions are satisfied. | otherwise Rs. 30,000. | |
| The loan is borrowed on or after 1-4-1999 | The loan is borrowed before 1-4-1999 | |
| The loan is borrowed for purchase or construction of residential house property. | The loan is borrowed for repairs, renewal. | |
| The building comes into existence within 5 years from the FY in which loan is borrowed. [FYloan + 5 years] | The building comes into existence after 5 years. | |
| Section 25. Restriction on deduction of interest |
| Where interest is payable outside India but is paid without deducting tax at source then such interest is not allowed as deduction. |
| Section 25A. Recovery of unrealised Rent | Section 25A. Receipt of arrears of rent | |
| Timing of taxation | In the year of receipt | In the year of receipt |
| Head | House Property even if building is transferred | House Property even if building is transferred |
| Standard Dedn. | Available @ 30% of recovery of unrealised rent. | Available @ 30% of arrears of rent. |
| Section 26. Co-owner | |
| 1. | Co - owner not assessed as AOP. |
| 2. | Each owner treated as individual. |
| 3. | Each owner entitled to benefit of SOP-R whose GAV is nil. |
| 4. | Each co owner entitled to deduction of interest to a max of Rs. 30,000 / 2,00,000. |
| Computation of Income from House Property (23 – 24 + 25A) | ||
| MV | GAV | HP |
| FR | MT | +25 A |
| SR | NAV | Recovery of Unrealised Rent – 30% |
| ER | -SD | Receipt of Arrears of Rent – 30% |
| AR | – Interest | HP |
| Loss on account of vacancy | HP | |
| GAV | ||
| What you should never forget in HP while solving practical questions | |
| 1. | Fair Rent should be given in the question. If it is not given then actual rent is treated as fair rent. |
| 2. | Expected rent is always computed for 12 months. It can be less than 12 months only if the property comes into existence in same PY of computation. |
| 3. | Interest is limited only in case of SOP-R. In remaining cases actual amount of interest is allowed as deduction. |
| 4. | MT is allowed as deduction on paid basis. Interest on accrual basis. SD on uniform basis. |
The document Income from House Property (Section 22 to 27) is a part of the Taxation Course Fast Track Quick Revision Income Tax.
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FAQs on Income from House Property (Section 22 to 27)
| 1. What is income from house property? |  |
Ans. Income from house property refers to the rental income earned by an individual from a property that he owns. It includes income from residential houses, commercial buildings, flats, shops, etc. This income is taxable under the Income Tax Act and is calculated based on certain provisions mentioned in Sections 22 to 27.
| 2. How is income from house property calculated? | |
Ans. Income from house property is calculated by subtracting the municipal taxes paid and the standard deduction of 30% from the annual value of the property. The annual value is determined based on the higher rent received or the fair rental value of the property. In case the property is self-occupied, the annual value is considered as nil.
| 3. Can I claim deduction for the interest paid on a home loan under income from house property? | |
Ans. Yes, you can claim a deduction for the interest paid on a home loan under income from house property. The interest paid on a home loan is allowed as a deduction under Section 24(b) of the Income Tax Act. However, there is a maximum limit of Rs. 2 lakhs for self-occupied properties, and there is no maximum limit for let-out or deemed let-out properties.
| 4. Can I claim a deduction for the principal repayment of a home loan under income from house property? | |
Ans. No, you cannot claim a deduction for the principal repayment of a home loan under income from house property. The principal repayment of a home loan is not considered as an expense while calculating the income from house property. However, you can claim deductions for the principal repayment under other sections of the Income Tax Act, such as Section 80C.
| 5. Are there any exemptions available for income from house property? | |
Ans. Yes, there are certain exemptions available for income from house property. For example, if the property is used for business or professional purposes, the income from that property may be taxed under the head "Profits and Gains of Business or Profession" instead of income from house property. Additionally, if the property is used for charitable or religious purposes, the income may be exempt from taxation. However, specific conditions and provisions apply to avail these exemptions.
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