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Income from House Property - Under Section 22 to 27

Income from House Property
Contents -
  1. Chargeability : Section 22.
  2. Income from House Property Exempt from Tax.
  3. Annual value Determination and Factors Considered in Determining of Annual Value.
  4. Deductions Allowed under Income from House Property : Section 24.
  5. Conditions for income to be taxed.
  6. Deduction not allowed : Section 25.
  7. Treatment and Rules of Unrealized Rent : Section 23(1).
  8. Unrealized Rent Received Subsequently to be Charged to Income Tax : Section 25A, 25AA, 25B.
  9. Self-Occupied House Property.
  10. House Property Which cannot be Let-Out Property.
  11. Vacant House Property.
  12. Property of co-owners : Section 26.
  13. Deemed / Misc Owner of House Property, Annual Charge etc. Defined : Section 27.
  14. Problems with Solution on Income From House Property .
Q: What is meant by annual value of the House Property? What are the deductions are allowed from annual value in computing taxable income from House Property?
Q: Explain the term "Annual Value" and explain with examples how the annual
value of rented house if computed.
Q: How is "Annual value determined u/s 23 of the Income Tax Act? Explain the deductions allowable in computing "Income from house Property".

Introduction -

This is second head of the income of the assessee is the source from 'House
property'. Section 22 of the Income Tax Act, 1961 attracts the tax on the income from House property. It is the tax on the Annual Value of property consisting of any building, Lands appurtenant there to of which the assessee is the owner.
If any portion of such property were occupied by the assessee as owner, for the purpose of any business or profession carried on by him, the income from such portion of house property would not be chargeable under the head "Income from house property".

Income from House Property is chargeable to tax when the following conditions are satisfied:
There should be a House Property. The property should consist of building and lands appurtenant thereto.
Assessee should be the owner of the House property. (can be legal/deemed owner) Assessee should not use the House Property for his own business or profession.
Building should be a permanent structure. It cannot be a temporary structure like exhibitions, tents etc.
Property situated in foreign country shall be taxed similar to the property situated in India. However the taxability will depend on the residential status of the assessee.

  • Chargeability : Income from House Property : Section 22 :

Section 22 
Income from house property is the second amongst the five head of income. Section 22 to 27 of the Income Tax Act 1961 related to these head of income. According to Section 22 the annual value of property consisting of any building or land appurtenant thereto of which the assessee is the owner shall be chargeable to Income Tax under the head of income from house property. But if any portion of such property is occupied by the owner for the purpose of any business or profession carried on by him the profits of which be chargeable to Income Tax the annual value of such portion is not chargeable to Income Tax under this head.
The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, shall be chargeable to income tax under the head "Income from house property".
The annual value of property consisting of any building or lands appurtenant thereto of which the assessee is the owner shall be chargeable to income tax under this head. It is important to note that if the house property is situated outside India it is taxable in India if the owner-assessee is resident India.
Where the composite rent received by the assessee from his tenant as well as services and amenities like furniture and fixtures, water and electricity etc. then only the original value of such property is taxable under this head, i.e. "Income from House Property".
To clear this point, please note the following incomes which are excluded from the Income from the House Property.
Thus, an income to be chargeable under the head of income from house property must satisfy the following conditions :

1. Income from Buildings or Lands at Appurtenant thereto -
Income Tax is payable by an assessee on the income of any building or land appurtenant thereto. Income from an open land not attached to any building is not chargeable to Income Tax under the head. Income from open land will be taxed under this head only when it is attached to a building. Open land attached to a building may be in the shape of courtyard or a compound or playground or a lawn or a parking place etc. Land attached to building means in case of residential building the way to the house gallery, kitchen, garden, playground, garage and a place for keeping animals etc. income from building whether situated in India or outside India is taxable under the head 'Income from House Property'.

2. Assessee should be the owner of the Property -
An assessee is chargeable to income tax on income from buildings or lands attached thereto if he is the owner of such buildings or lands attached thereto.

3. Deemed Ownership -
According to Section 27 of the Act, the following persons are treated as deemed owner of the house property:

i) Transfer without Adequate Consideration -
An individual who transfers, without adequate consideration, any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred.

ii) Holder of an Impartible Estate -
The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.

iii) House Allotted or Leased under any House Building Scheme - 
A member of a co-operative society. company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof.

iv) Person in Possession of any Building -
A person, who is allowed to take or to retain possession of any building or part thereof in part performance of a contract, shall be deemed to be the owner of that building or part thereof.

v) Acquiring Rights in a Building -
A person who acquires any rights (excluding any right by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, shall be deemed to be the owner of that building or part thereof.

vi) Acquiring Property under a Power of Attorney Transaction -
If a person has acquired a property under a 'Power of Attorney Transaction', they shall be deemed as owner of the property that they may not be registered owner of the property. Similarly if the purchaser has taken possession of the property or has a right to enter upon and exercise as of possession on effectively he shall be deemed as owner of the property.

4. Annual Value :
It is not the rent received which is chargeable to tax under the head "Income from house property" but it is the annual value of the house property which is subject to tax under this head. Annual value is that notional rent for which the property can reasonably be let out from year to year. Thus, the annual value of house property does not mean the rent received but it means the expected rent which can reasonably be taken from the house property. Annual value of the ownership of property is charged to tax, irrespective of the fact whether or not any income was either actually received or had accrued to the assesse.

5. Property in Occupation of Owner's Business or Profession : 
If an assessee uses his own house property or any portion of it for purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, the income from such house property or from any portion of such house property will not be chargeable to income tax. Thus, two things are important in order to exempt the income from house property on this ground:
i) The business or profession must be owned by the owner of house property.
ii) The profits of such business or profession must be chargeable to income tax under Income Tax Act, 1961. If in any year, there is loss in the said business or profession, even then, the income from house property will not be chargeable to income tax. But if any house property has been let out for the purposes of business or profession, the income from such house property shall be taxable under the head"Income from house property.

 

  • Income from House Property Exempt from Tax :
Exemption of income from house property can be divided into following two categories :
1) Fully Exempt Incomes
2) Partly Exempt Incomes

Fully Exempt Incomes :
In the following cases income from property is not charge to tax.

1) Farm House : Income from any building owned or occupied by an agriculturist or receiver of rent  /revenue of such land provided that the building is in the immediate vicinity of agricultural land and is used as a dwelling house or as a store house or other out-building.

2) Property Held for Charitable Purposes : As per Section 11, where the property is held for charitable or religious purposes the income from such property is exempt from tax.

3) House Property used for own Business / Profession : It falls under the head Income from Business and Profession and although no income will be derived but deductions /allowances of such property shall be allowed under that head.

4) Self-Occupied House : Annual value of one self- occupied house shall be taken as nil.

5) House Property of Registered Trade Union [exempt u/s 10 (24)J/Local Authority (exempt u/s 10(20)] : The income from property held by a registered trade union/local authority is not taxable.

6) Palace of Ex-Ruler : The annual value of any one palace in the occupation of an ex-ruler shall be exempted from tax.

7) Property income of an approved scientific research association is exempt u/s 10(21).

8) Property income of any hospital or other institution existing solely for philanthropic purposes and not for purposes of profit, is exempt u/s 10 (23 C).

9) Property income of any university or other educational institution existing solely for educational purpose and not for the purpose of profit is exempt us 10(23 C).

10) Property income of a statutory corporation or an institution or association financed by the government for promoting the interests of members of Scheduled Castes or Scheduled Tribes is exempt u/s 10(26 B).

11) Property income of a political party is exempt under section 13-A.

Partly Exempt Incomes :

The following property incomes are included in the assessee's total income but are not liable to tax:

1) Income derived by a co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, is wholly deductible u/s 80-P (2) (e).

2) Property income of a co-operative society is fully deductible u/s 80-P (2)(1). provided the gross total income of the society does not exceed Rs. 20,000 and the society is not a housing society or an urban consumer's society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power.

  • Annual Value :
As per Section 23(1)(a) the annual value of any property shall be the sum for which the property might reasonably be expected to be let from year to year. It may neither be the actual rent derived nor the municipal valuation of the property. It is something like notional rent which could have been derived, had the property been let.

Determination of Annual Value : Section 23 :

The measure of charging income tax under this head is the annual value of the property, i.e., the inherent capacity of a building to yield income. The expression 'annual value' has been defined in Section 23(1) of the Income tax Act as:

1. For the purposes of section 22, the annual value of any property shall be deemed to be :
a) The sum for which the property might reasonably be expected to let from year to year.
b) Where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable.
c) Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable.
Provided that the taxes levied by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in previous year in which such taxes are actually paid by him.

2. Where the property consists of a house or part of a house which :
a) Is in the occupation of the owner for the purposes of his own residence.
b) Cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil.

3. The provisions of sub-section (2) shall not apply if :
a) The house or part of the house is actually let during the whole or any part of the previous year.
b) Any other benefit there from is derived by the owner.

4. Where the property referred to in sub-section (2) consists of more than one house :
a) The provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf.
b) The annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.
To say in short that annual value of property is the sum for which the property could reasonably be expected to let from year to year. Expected rent can be determined by taking in to the consideration of the following factors.

Factors Considered in Determining Annual Value :

In determining the annual value there are four factors which are normally taken into consideration. These are as follows :

1) Actual Rent Received or Receivable (AR) -
Actual rent received/receivable is an important factor in determining the annual value of a property though this is not the only decisive factor. The actual rent could be dependent upon various considerations. There could be circumstances where the owner agrees to bear certain obligations of the tenant, e.g., the water and electricity bills of the tenant may be payable by the owner.
In this case, the de facto rent will be calculated by stepping down the rent received /receivable by the amount spent by the owner on meeting the obligation of the tenant. On the other hand, if any obligation of the owner is met by the tenant, the de facto rent will be computed by stepping up the rent received /receivable by the amount spent by the tenant in discharging the obligation of the landlord.
Any deposit received from the tenant for property is a capital receipt and thus, it cannot be treated as income. Further while determining the actual rent, no notional interest on such deposit should be considered.

2) Municipal Value (MV) -
This is the value as determined by the municipal authorities for levying municipal taxes on house property. Municipal authorities normally charge house tax /municipal. taxes on the basis of annual letting value of such house property, which is determined by it based upon many considerations.
The local authority makes a periodically survey of all buildings in its jurisdiction. Such valuation may considered for earning capacity of a building. Please to be noted that such valuation is not a conclusive evidence because in the big cities the valuation by the local authorities might be high compare to other cities. e.g. Delhi, Kolkata, Mumbai etc.

3) Fair Rent of the Property (FR) -
Fair rent is the rent which a similar property can fetch in the same or similar locality, if it is let for a year. Fair rent of the property can be determined on the basis of a rent fetched by a similar property in the same locality.

4) Standard Rent (SR) -
The standard rent is fixed under the Rent Control Act. If the standard rent has been fixed for any property under the Rent Control Act, the owner cannot be expected to get a rent higher than the standard rent fixed under the Rent Control Act. Therefore, this is also an important factor in determining the annual value.

Municipal valuation and Fair value of the property in which, The Higher of (1) or (2) is Generally Taken as Expected Rent :

1. It is important to note that if the property is covered under the Rent Control Act, then the amount so calculated cannot exceed the "Standard Rent" determinable under the Rent Control Act.

2. Income of rent received from vacant land.

3. Income from the house property in the immediate vicinity of agricultural land and used as a store house, dwelling house etc. by the cultivators.

  • Deductions Allowed under Income from House Property : Section 24 :
Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely :

1) Standard Deduction : 
From the net annual value computed, the assessee shall be allowed a standard deduction of a sum equal to 30% of the net annual value. This deduction is like standard deduction which is allowed from gross salary.

2) Interest on Borrowed Capital :
Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital is allowed as a deduction. The amount of interest payable yearly should be calculated separately and claimed as a deduction every year. It is immaterial whether the interest has been actually paid or not paid during the year. The following points should also be kept in view:

i) Interest on borrowed capital is deductible on "accrual" basis. It can be claimed on yearly basis, even if the interest is not actually paid during the year.

ii) Deduction is available even if either the principal nor the interest is charged on property.

iii) Interest on unpaid interest is not deductible.

iv) No deduction is allowed for any brokerage or commission for arranging the loan.

v) Interest on a fresh loan, taken to repay the original loan raised for the aforesaid purpose, is "allowable" as deduction. This rule is applicable even if the original loan was interest free.

vi) If amount borrowed is not utilized for acquisition, construction, repairs, etc., of house property, deduction cannot be claimed for interest due. In such a case, any deduction already claimed will be withdrawn by re-assessment under Section 147.

vii) Interest on borrowing can be claimed as deduction only by the person who has acquired or constructed the property with borrowed fund. It is not available to the successor to the property (if the successor has not utilized borrowed funds for acquisition, etc.).

viii) Interest on borrowed capital is deductible fully without any maximum ceiling (in the case of a let out property).
There are two types of interest:
i) Post Acquisition Interest : Amount of deduction is actual amount of post acquisition interest.
ii) Pre Acquisition Interest : Amount of deduction is 1/5th of total pre acquisition interest.

  • The Basic Conditions must be Satisfied for Income to be Taxed under the Head Income from House Property :
  1. The property consists of buildings or land adjacent thereto.
  2. The assessee must own the property.
  3. If the property used for the purpose of business or profession carried on by him, the profits will be charged to income tax under the Head "Profit and Gains from Business or Profession". If a firm carries on business in a building owned by the assessee-partner, no income from the said property will be computed in the hands of the partner.
  • Amounts Not Deductible from Income from House Property : Section 25 :
Any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938). On which tax has not been paid or deducted in respect of which there is no person in India who may be treated as an agent under section 163, shall not be deducted in computing the income chargeable under the head "Income from house property".

Special Provision for Cases where Unrealized Rent Allowed as Deduction is Realized Subsequently : Section 25A :  (In the Assessment Year 2001-02 or Earlier) :

Where a deduction has been made under clause (x) of sub-section (1) of section 24 in the assessment for any year in respect of rent from the property let to a tenant which the assessee cannot realize and subsequently during any previous year the assessee has realized any amount in respect of such rent, the amount so realized shall be deemed to be income chargeable under the head "Income from house property and accordingly charged to income-tax (without making any deduction under section 23 or section 24 as the income of that previous year, whether the assessee is the owner of that property in that year or not.
Where any amount of the rent could not be realized by the owner of the property during any of the previous year/s and subsequently, if such rent is realized, then such amount will be treated as income from the house property of that year in which it is received.
It is not necessary that the assessee must be owner of the property even during the year of realization of rent.

Income from House Property under Different Conditions :
  • Treatment of Unrealized Rent (Section 23(1)] :
As per the explanation, the actual rent received or receivable mentioned in Section 23(1)(b) and (c) shall not include the amount of rent which the owner cannot realize, subject to the rules made in this behalf.

Rules for Unrealized Rent :
The amount of rent which the owner cannot realize shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where:
1) The tenancy is bona fide.
2) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.
3) The defaulting tenant is not in occupation of any other property of the assessee.
4) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.

  • Unrealized Rent Received Subsequently to be Charged to Income Tax :
Section 25A : 
Where a deduction has been claimed and allowed to the assessee in respect of unrealized rent in assessment year 2001-02 or prior to that and subsequently the assessee realizes any amount respect of such rent, the amounts so realized shall be deemed to be income chargeable under the head "income from house property" and accordingly charged to tax as the income of that previous year, irrespective of the fact whether the assessee is the owner of the property in that year or not. No deduction under Section 23 or Section 24 whatsoever will be allowed to the assessee from such unrealized rent recovered.

Section 25 AA : 
Where assessee cannot realize the rent from the property let to tenant and subsequently the assessee has realized any amount in respect of such rent, the amount so realized shall be deemed to be the income chargeable under the head income from house property and accordingly charged to the income tax as the income of that previous year in which such rent is realized whether or not the assessee is the owner of that property in that year.

Section 25 B :
1. The tax payer is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant.

2. He has received any amount, by way of arrears of rent from such property, not charged to Income tax for any previous year.

3. The amount so received (after deducting a sum equal to 30% of such amount) shall be deemed be the income chargeable under the head income from house property.

4. It is taxable in the previous year in which it is received.

5. It is taxable even if the assessee is not the owner of that property in the year in which he has received arrears of rent.

Provision of Section 25B are clarificatory in nature and should be given retrospective elfect. (CIT v/s DOWAGER Maharani Residential Accommodation Welfare Association Trust (2008) 217 CTR (Raj) 497)

  • Self-Occupied House Property :

Self-occupied house property means the house property used by its owner for his own residential purpose. In order to determine the annual value of such house property, it has been classified into the following:

1) House Property Fully Utilized throughout the Previous Year for Self Residential Purpose (Sec. 23(2)(a)] : 
Where the property consists of a house or part of a house in the occupation of the owner for his own residence, the annual value of such house or part of the house shall be taken to be Nil. if the following two conditions are satisfied:
i) The property or part thereof is not actually let during whole or any part of the previous year.
ii) The owner has not derived any other benefit from the property during the previous year.

2) House Property not Fully Utilized for Self  Residential Purpose (Sec. 23(2)(b) and 23(3)) :
Such house property can be divided into three groups:

i) House Property which is not Actually Occupied by the Owner : 
Where the property consists of a house or part of a house which is not actually occupied by the owner previous year and the following conditions are satisfied, the annual value of such property (house or part of the house) shall be taken to be 'Nil':
a) The house property is not actually occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place;
b) He resides at that other place in a building not owned by him;
c) Such house property or part thereof is not actually let-out during whole or any part of the previous year; and
d) The owner has derived no other benefit from such house property.

ii) House Property a Part of which is Self-Occupied and Remaining Part is Let-Out :
Where the property consists of a house which has two or more independent residential units, one of which is self-occupied for own residential purposes and other unit or units are let-out, annual value of such house property shall be computed as follows:
a) Annual value of residential unit shall be taken to be 'Nil'.
b) Annual value of rented unit or units shall be computed in the same manner as in 'annual value of let-out house property'.

iii) House Property which is Self-Occupied for part of the previous year and let out for the remaining part of the previous year :
 where the property consists of a house which is let out for a part of the previous year and self occupied for the remaining part of the previous year annual value of search house property shall be computed as if the property is let out throughout the previous year. No concession for self occupied period will be given.

3) More than One Self-Occupled House Properties [Sec. 23 (4)] : 
If an assessee is owner of more than one house and uses them for his own residence, the annual value of only one of these self-occupied houses is taken as 'Nil'. Remaining houses shall be deemed to be let out and their annual value shall be calculated as let out houses. Which of the houses is treated as self-occupied will depend upon the will of the assessee. The houses not chosen by the assessee as self-occupied are deemed to be let-out houses.

  • House Property Which cannot be Let-Out Property :

Where a house property cannot be let-out or no other benefit can be derived from it, on account of any of the following reasons, its annual value shall be 'Nil' :
1) The house property is situated at such a place where it is not worth living,
2) The house is closed down by the owner as it is not worth living on account of its being fallen down or being in a state of fallen down.
The notional rent of such house is Nil; hence the annual value will also be Nil.

  • Vacant House Property :

According to Section 23(2) and (3), where the owner has only one residential house, which cannot actually be occupied by him by reason of the fact that owing to his
employment, business or profession carried on at any other place, he has to reside at that other place, in a building not belonging to him, the annual value of the
house shall be taken to be Nil, provided that the following conditions are fulfilled.
1) Such house is not actually let
2) No other benefit there from is derived by the owner.

But to avail the benefit of this section the owner will have to prove that he resided in some other building not belonging to him on account of the convenience of his employment, business or profession and not on account of his personal convenience.
He will have to prove that it was necessary to reside in some other person's house for the efficient conduct of the business or profession or for efficient performance of his employment duties. If he resided in his father's house keeping his own house closed only for his personal convenience, he will not get benefit of this section.
But in all those cases where officials and dignitaries, under the constitution of India and even otherwise has to reside in official residences instead of their own residences by reason of their office, they can avail benefit of this section provided their own house remained vacant and they did not derive any other benefit from it during the previous year.

  • Property Owned by Co-owners : Section 26 :

If a house property is owned by two or more persons, such persons are known as co-owners. Section 26 covers a case if a property is owned by co-owners.
Section 26 is applicable if the following conditions are satisfied:
1) The property must consist of building or building and land appurtenant thereto,
2) It is owned or deemed to be owned by two or more persons.
3) The respective shares of the co-owners are definite and ascertainable.

If these conditions are satisfied, then the share of each co-owner in the income of the property (as computed under the head "Income from House Property'") shall be included in the total income of each such person. The following points should be noted:
1) In respect of property income, co owners shall not be assessed as an Association of Persons.
2) The concessional tax treatment in respect of self- occupied property is applicable as if each such person is individually entitled to such relief in Section 23(2).
3) Income from property held under trust for charitable or religious purposes is exempted from tax under Section 11.

Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and, their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association ot persons, but the share ol each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income.
Section 26 is mandatory. Co-widows inheriting certain Immovable properties in equal shares would be co-owners.(CrTv/s Indira Balkrishna (1960) 39 1TR 546 (SC).
A firm having only property income cannot claim the status of AOP under section 26
in respect of rental income, so long as the partnership is in operation.
(Balaji Enterprises v/s CIT (1997) 225 ITR 471 (Kar.

  • Deemed / Misc Owner of House Property, Annual Charge etc. Defined : Section 27 :

A deemed owner is an owner by implication, although he may not be the owner in the real sense of the word.
However, for tax purposes, such a person is treated as an owner and is liable to tax in the same manner as a real owner. It is not only the owner who is liable to pay tax on "Income from House Property'.
A deemed owner is also liable to tax on such incomes. Specific provisions have been provided in the Income Tax Act that deal with tax of income from a house.
These basic conditions must be met for income to be taxed under this head :
1) The property should consist of building or land adjacent to it,
2) The assessee must own the property, 
3) The property must not be used for business or profession of the assessee. It must be rented out so as to derive rental income.
Therefore, any income from a property which is not owned by an assessee will not be treated as 'Income from House Property', but as 'Other Income' and other provisions of the Income Tax Act will apply in this connection. In certain cases, an assessee, though not the owner of the property, is deemed to be the owner of the property - he is treated as owner of the property and income from that property will be treated as 'Income from House Property'.

According to Section 27 of the Act, the following persons are treated as deemed owner of the house property :

1) Transfer without Adequate Consideration : 
An individual who transfers, without adequate consideration, any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred.

2) Holder of an Impartible Estate : 
The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.

3) House Allotted or Leased under any House Building Scheme : 
A member of a cooperative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be shall be deemed to be the owner of that building or part thereof.

4) Person in Possession of any Building : 
A person who is allowed to take or to retain possession of any building or part thereof in part performance of a contract, shall be deemed to be the owner of that building or part thereof.

5) Acquiring Rights in a Building : 
A person who acquires any rights (excluding any right by way of a lease from month to month'or for a period not exceeding one year) in or with respect to any building or part thereof, shall be deemed to be the owner of that building or part thereof.

6) Acquiring Property under a Power of Attorney Transaction :
If a person has acquired a property under a "Power of Attorney Transaction', they shall be deemed as owner of the property although they may not be a "registered owner of the property. Thus, if under any agreement of purchase and sale, the purchaser who has not actually made payment but he is ready to make payment on its becoming due, the purchase shall be deemed as owner of the property. Similarly, if the purchaser has taken possession of the property or has a right to enter upon and exercise acts of possession on effectively, he shall be deemed as owner of the property.

For the purposes of section 22 to 26 :

1. Income from property transferred by an individual without adequate consideration, to his spouse or minor child not being married daughter, shall be deemed to be the owner of the house property so transferred.

2 The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate.

3. A member of a co-operative society, company, association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof.

4. Income from property in possession of a person in part performance of a contract of the nature referred to in section 53A of Transfer of Property Act 1882 shall be deemed to be the owner of that building or part thereof.

5. A person who acquires any rights (excluding any rights by way of a lease from month to month or tor a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA shall be deemed to be the Owner of that building or part thereof.

6. Taxes levied by a local authority in respect of any property shall be deemed to include Service taxes levied by the local authority In respect of the property.

In the said section the definition of annual charge (section 27(iv) omitted w.e.f. 1/04/2002.

  • Problems on Income From House Property :

Mr. A is the owner of the house of which the construction was completed on 31.8.2012. The rent recd from 1.12.2012. The particulars tor 2014-15 are given
below:

Municipal valuation

55000/-

Standard rent

6000/- p.m.

Actual rent

6000/- p.m.

Municipal taxes(including RS 5000/- paid by tenant)

15000/-

Water/sewage taxes disputed in court

6000/-

Fire insurance payable

800/-

Interest on loan taken for construction of house. The interest has been paid outside India to a non resident without deduction of tax at source, as the non resident agreed to pay income tax on such interest directly to government

10000/-

Legal charges for recovery of rent

4000/-

Stamp duty and registration charges in respect of lease agreement

2000/-

The unrealized rent for earlier years Rs 10000/- but deduction

claimed only Rs 7000/-, There is recovery of Rs 8000/- from the

tenant.

 


Solution :

Gross annual value, higher of the following two :

 

72000/-

a) Municipal value(RS. 55000(fair rent Rs. 60000/-

Whichever is more but restricted to standard rent

b) Actual rent received or receivable 6000 X 12

 

60000/-

 

 

72000/-

 

Less Municipal taxes

 

10000/-

Net annual value

 

62000/-

Less Statutory deduction @30% of N.A.V,

 

18600/-

 

 

43400/-

Add out of recovery of unrealized rent

 

5000/-

Income from House Property

 

48400/-



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