income from house property new 2008 09 assessment year

Income from House property

By

Prof. Augustin Amaladas

M.Com., AICWA.,PGDFM., B.Ed.

Education for allSt. Joseph’s College of Commerce,

163, Brigade Road, BangaloreIndia

Learn Management Accounting

Learn Income taxwww.augustin.co.nr

Costing, Auditing

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International Finance

FinancialManagement

Merger and Acquisition, demerger

For B.com., BBM., M.Com. CA., ICWA, CS, CFA students

3

Courtesy : Income tax by Dr.Vinod K.SinghaniaWe are thankful to You.

If there is any doubts refer to the above text book.Or contact

[email protected]

SJCC’s slidesTo all colleges

Simple tounderstand

For B.ComBBM

M.ComCA

AICWACS

RelaxSit and enjoy

4

Special thanks to III B.Com A 2008-09 batch

• Master Arjun Ramesh III B.Com A

• Master Nishad P.C III B.Com A

• Miss Preethi G III B.Com A

• Master Nitin Jain III B.Com A

5

Dedicated to all professors who teach

Income tax and students who study Income tax

Education and Knowledge

For all

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INCOME FROM HOUSE PROPERTY

House property for this purpose means :

Any building which has the characteristic

features of a building.

E.g.: residential building, cinema theatres etc.

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INCOME FROM HOUSE PROPERTY

Taxed on “Notional Basis”

Give to others especially knowledge without expectation

8

Conditions for taxing income under the head house property.

There should be a building or a land appurtenant there to .

ANDThe property should be owned by the

assessee.

ANDSuch building should not be used for own

business or profession.If you want to develop India what do you do?

9

Section 22(Charging Section)

“ The Annual Value(likely reasonable rental value) of building or land appurtenant thereto is chargeable to tax in the hands of the owner provided the same is not used for own business or profession”.

E.g.: CASE 1: Mr. X lets out a HP to Mr. Y, who intends to carry on his private business. – Income from HP.

Note:- It is not taxed on monthly basis or Even if it is rented for a day of the previous year it

is calculated annually(financial year-1st April-31st March of the following year)

Educate others especially first generation

10

CASE 2: Mr. X uses his property to carry on his own private business. – Income from such property does not come under income from House Property but income from business( Refer to www.augustin.co.nr for income from Business.

Knowledge meant for giving not holding to oneself

http://www.augustin.co.nr/

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Exceptions to the rule – that the rental income is taxable under HP.

Income from sub letting – Income from OTHER SOURCES since the assessee is not the owner.

Composite rent – When a building has been let out along with the furniture , then such letting out is called composite letting.

As per sec 56(2) , when the rent is inseparable – income from other sources.

Threat is an opportunity

12

As per CIT vs. SHAMBHU INVESTMENTS PVT. LTD., (2003) (s.c) such inseparable composite rent is taxable under the head HP.

At present Supreme Court decision has to be followed.

People need not go to far off places to seek godRather seek god in neighbour.

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Section 23( Annual Value)

Sec 23(1)(a) –

Annual Value = Rent at which the HP is reasonably expected to be let out.

Note: Income from house property is calculated on 12 months rental value of the property not on receipt basis.

Receiving rent is not important.self occupied house property comes under this head. Income includes loss. Therefore we can show loss from house property including self occupied and rented house property or deemed let out property.

Go to government schools offer a pencil or note book to a girl or boy which encourage such girl/ boy to study well rather than giving

donation to school authorities.

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Very important Basic concepts

• 1.Loss from self occupied property is possible if assessee has to pay interest on loan borrowed.

• 2.Net annual value is always ZERO for 100% self occupied property.(throughout the year the house occupied by the owner)

• 2a). If owner stays in more than one house the owner can choose any one of the houses(he can choose different houses for different previous year) which will reduce overall tax liability.

• 3.Even one day self occupied house property is rented it is deemed to be let out(treated as let out)

You fought against lakhs of cells before you enter into your mother’s womb therefore…………..

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Basic concept-continues

• 4.Owner ship of the building is important• 5. Building normally have roof, but roof is

not important to constitute a building.Four walls can constitute a building.

• 6.Registration of property is not primary to be the owner of the property. Part payment is made and house occupied will lead to be the owner of the property as per the transfer of property act(53A).

Don’s give up. Fight till the end.

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Basic concepts

• 7.property transferred for inadequate consideration to minor children or wife, income is computed in the hands of transferee but taxed in the hands of transferor as per section 64.

• Example:- Father transferred property worth Rs.20,00,000 to wife for Rs. 5,00,000, then the income from house property(fair rental value) is computed in the hands of wife but taxed ¾ th is taxable in the hands of father and ¼ th taxable in the hands of wife(as ¼ paid).

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• 8.If property is in foreign country, in case of resident assessees, the property to be valued in foreign currency as per normal calculation and convert the foreign currency into Indian rupee on the last day of the financial year which is taxable income under the head income from House property.

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Basic concepts

• 9.If a person doing business by selling building (real estate) and during vacant period, rent such building, such rent comes under business. If such building(stock in trade) is rented to employees, rent collected from employees considered as business income.

• If rented to third parties it comes under income from house property.

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Basic concepts

• 10.Composite rent:

When we compute income from house property we consider four walls which can fetch the owner to be considered.As per section 22 of the income tax act ‘rental value of the building’ is considered but the extra facilities like lift, swimming pool if rent collected along with rent of four walls it should be separated to compute rental income from house property.

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When net annual can be negative

• 11.If municipal tax paid by the owner during the previous year (need not be for the previous year) exceeds gross annual value, the net annual value can be negative.

• 12.Note: Municipal taxes paid during the previous year only deductible in case of let out property.

• 13.If municipal tax of 2003-04 period paid during current previous year paid by the owner it is deductible.it is always on payment basis.

• 14.Anything to government it is always on payment basis. Anything to private parties even payable is deductible: interest on loan payable can be shown as deduction u/s 24(b).

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Basic concepts

• 15.If net annual value is negative(If municipal tax paid exceeds gross annual value) or incase of self occupied house property net annual value is nil, standard deduction deduction [u/s 24(a)] of 30% is not applicable.

• 16.Unrealised rent of the current previous year is deductible only from actual rent not from expected rent.But vacancy allowance can be deducted from either from actual rental value or expected rent(if chosen).

Alternative work is rest

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• 17.Unrealised rent of the current previous year is deductible only from actual rental value if certain conditions like tenant vacated the premises, such tenant is not staying in any one of the houses of the same owner, case had been filed against the tenant.

• 18.If actual rent (after deducting unrealised rent of the current previous year and vacancy allowance) is less than reasonable rent nly because of vacancy we can chose actual rent.

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Actual rent means

• 19.Actual rental value for 12 months

• Less: unrealised rent for the current previous year(Not considered the unrealised rent of preceding to current previous year)

• Less: vacancy allowance

Balance is considered as actual rent.

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Basic concepts

• 20.If a house is part of the year self occupied and remaining part of the year is self occupied it is considered as letout(deemed let out).

• 21.Municipal taxes levied by foreign authority in house property in abroad is deductible while computing house property.

• 22.Interest on loan borrowed includes 12 months interest of the current previous year +1/5th of pre-construction period interest.

• 23.If loan taken after 1st April 1999 not for extension like repairs, and renuals, such interest is deductible for self occupied property Rs.30,000 only.

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Basic concepts-interest on loan

• 24.Interest on loan borrowed is fully deductible for let out or deemed let out(partly self occupied and partly let out) property with out any limit.It means we can show negative income under such property unlimited.

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Un realised rent realised

Belong toAssessment year 2001-02

Earlier(Sec.25A)

Belong toAfter assessment year 2001-02 (Sec.25AA)

Fully taxableExpenditure in relation to

Such collection is not deductible

(Amount collected- 30% of amount collected)

Taxable

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Arrears of rent(Section 25 B)

• 25.Suppose rent of 2006-07 was Rs. 8000. In the year 2007-08 it is agreed that the rent should be paid at the rate of 10000 per month effect from 2006-07 onwards, then such arrears of rent(difference between 10000-8000) to be paid now during the current previous year is known as arrears of rent.

• (Arrears of rent received- 30% of such arrears)is taxable

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26.Can we deduct interest on loan even if the net annual value is negative?

• Yes you can.

Share your knowledge with others

29

Educational cess

• When compute tax calculate 3% educational cess on tax computed and add to tax to find total tax.

• Tax +3%(tax)= total tax

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27.Principal repayment on loan

• It is not deductible from house property. But we can deduct it as savings u/s 80C when we compute total income under various heads.

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Test yourself-conceptual questions

• 1.Land allotted by co-operative society to Mr.X and building is constructed by Mr.X. Annual interest and principal are being paid since then.Whether such property is taxed under house property of X or not?

• 2. Land belong to Mr. Ranbir Singh but building constructed and owned by Mr. Ranga swamy(he is not the owner of the land).Whether income from house property taxed in the hands of Ranbir Singh or Rangaswamy?

• 3.Municipal taxes for the year 2004-05 period paid during current previous year and current previous year municipal taxes not yet paid.Whether they are deductible for the current previous year?

• 4. Interest on loan and principal amount are not yet paid by the assessee for the current previous year. Are they deductible or not ?

• 5.Interest on loan for the previous year 2005-06 paid during the current previous year. Are they deductible?

• 6. Repairs –Rs. 3000, maintenance Rs. 4000 and insurance Rs.5000 are paid during the year on a rented house for business.Are they deductible?

• Answer the question and for any clarification contact: [email protected]

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Sec 23( Annual Value)

Sec 23(1)(b) –

If the house property is actually let out and if rent received or receivable is higher than the reasonable rent as per sec 23(1)(a), then such rent received or receivable is taken as the ANNUAL VALUE.

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Sec 23(1)(c) –

If the property is actually let out and was vacant during the year and rent received or receivable is lesser due to vacancy then such lower rent shall be the annual value.

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Sec 23(2) –

If a HP is self occupied .

OR

If a HP couldn't be occupied for reasons of employment / profession elsewhere.

In such cases the AV= NIL.

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Sec 23(3) –

Conditions for sec 23(2)-

Such HP shouldn't be let out during any part of the year.

AND

No other income is derived from such property.

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Sec 23(4) – If the assessee owns more than one

Sec 23(2) property then: AV of one HP at the option of the

assessee is NIL. AND All the other HP’s are Deemed Let

Out Property [DLOP] and annual value thereof is decided as per sec 23.

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Section 24 Deductions.

SEC 24(a)-Standard deductions @30% of NAV – only for let out property and deemed let out property.

SEC 24(b)- interest on capital or loan borrowed for ACR3 (acquisition ,construction, renewal ,repairs and reconstruction) in respect of

1. LOP/DLOP – any amount is allowed 2. SOP – Deductions is as follows:

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SOP(100%Self occupied property) Deductions

- Normal deductions up to Rs 30000/-for repairs or renuals or if loan taken before 1st April 1999.

- Special deduction up to Rs 150000/- for further construction

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IMPORTANT NOTES

• Interest deduction up to Rs 150000/-.It is available only for acquisition and construction. Provided:

(a) The loan taken on / after 01-04-1999. & construction completed within 3 years from the end of the financial year in which loan is borrowed.

(b) For claiming deduction’s interest certificate & details of principal outstanding, interest amount etc. Along with return of income.

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Pre- Construction Period Interest

Allowed in five equal installments commencing from the year of completion.

PCP means period commencing from the date of loan or immediately preceding the March 31st of the year of completion which ever is earlier.

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Section 25( amounts not deductible)

Interest paid outside India without TDS or Without having an arrangement for TDS in India is disallowed.

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Section 25A( Unrealized rent recovered)

UR recovered is taxed in the year of receipt irrespective of whether assessee is the owner or not of such property in the year of such receipt . No deduction is allowed against this income.

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Section 25B( Arrears of rent received)

It is taxable in the year of receipt irrespective of whether assessee is the owner or not of such property in the year of such receipt.

Deduction = 30%

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Section 26( Property owned by Co- Owners)

Share of co-owners definite, ascertainable respective share is taxable in the hands of the co owner.

Share of co-owners not definite, ascertainable entire income is taxed as the income of AOP.

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Important Points

Annual value of partly SO & partly vacant

Period based (i.e. 9 months – SOP & 3 months – vacant) = ANNUAL VALUE = NIL

Usage based (i.e. 75% used as – SOP & 25% as – vacant) = ANNUAL VALUE = 25% .

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Important Points

Annual value of partly SO & partly LO

Period based (i.e. 9 months – SOP & 3 months – LOP)

Usage based (i.e. 75% used as – SOP & 25% as – LOP)

Treated as DLOP for entire period.

AV of SOP NIL. AV of LOP to be taken at 25%.

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Exercise 1(basic calculation)

Find out the gross annual value in the following cases for the assessment year 2008-09

( Rs in thousands)

X Y Z

Municipal value 95 60 60

Fair rent 96 54 55

Standard rent under the rent Control Act

94 78 79

Actual rent 93 106 78

The entire rent is realized. Properties are let out throughout the previous year. Find out the gross annual value for the assessment year 2008-09.

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Format:Computation of gross annual value:

( Rs in thousands)

X (Property-1) Y(Property-1) Z(Property-1)

Municipal value

Fair rent

Whichever is higher

Standard rent

Whichever is lower(Expected rent)

Annual rent = 12 months rental value-unrealised rent of the current year-vacancy allowance

Whichever is higher

GROSS ANNUAL VALUE

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Solution 1

Computation of gross annual value: ( Rs in thousands)

X Y Z


Fair rent 96 54 55

Whichever is higher 96 60 60

Standard rent 94 78 79

Whichever is lower(expected rent)

94 60 60

Annual rent 93 106 78


GROSS ANNUAL VALUE 94 106 78

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Exercise 2(let out and part of the year rented and sold later)X owns a house property (municipal valuation: Rs. 145000, fair rent : Rs 130000, standard rent : Rs. 124000). It is let out throughout the previous year (rent being Rs. 8000 per month up to November 15, 2007 and Rs. 14000 per month thereafter). The property is transferred by X to Y on January 31, 2008. Find out the gross annual value in the hands of Y for the assessment year 2008-09.

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Municipal value from 1-02-2008 to 31-03-2008

( 145000/12 x 2)

24167

Fair rent from 1-2-2008 to 31-3-2008

(130000/12 x 2)

21667

Whichever is higher 24167

Standard rent

(124000/12 x 2)

20667

Whichever is lower(Expected rent) 20667

Annual rent (14000 x 2) 28000


GROSS ANNUAL VALUE 28000

Solution 2

Computation of gross annual value for ( Y ):

Rs ( in thousands )

52

Exercise 3(including unrealised rent)Find out the gross annual value after taking into consideration the following information for the assessment year 2008-09.

(Rs.in thousand)

A B C M N

Municipal value 50 50 50 100 100

Fair rent 68 68 68 117 117

Standard rent under rent control act

62 62 75 115 115

Annual rent 66 66 72 120 110

Unrealized rent of the previous year 2007-08

2 6 5 50 40

CONT………

53

1. In the case of X, the defaulting tenant has not vacated the property, nor steps been taken to compel the tenant to vacant the property.

2. In the case of Y, the defaulting tenant has occupied another property of Y.

3. Z has not taken any steps to institute legal proceedings for the recovery of unpaid rent , though Z agrees that legal proceedings will not be useless.

4. A has rented out another property owned by him to defaulting tenant with effect from March 1, 2008.

5. B satisfies all the conditions of rule 4.

CONT……..

54

Note:

Application of sec 23 ( 1 ). When unrealized rent of the current previous year shall be deducted if following conditions fulfilled.

Condition 1 The tenancy is bona fide.

Condition 2 The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property.

Condition 3 The defaulting tenant is not in occupation of any other property of the assessee.

Condition 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.

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A B C M N

Municipal value 50 50 50 100 100

Fair rent 68 68 68 117 117

Whichever is higher 68 68 68 117 117

Standard rent 62 62 75 115 115

Whichever is lower(Expected rent)

62 62 68 115 115

Annual rent 66 66 72 120 110

Unrealized rent 2 6 5 50 40

Actual rent ( annual rent – unrealized rent- vacancy allowance )

66 66 72 120 70

Whichever is higher 66 66 72 120 115

GROSS ANNUAL VALUE

66 66 72 120 115

Solution 3

Computation of gross annual value: ( Rs in thousands )

56

Exercise 4(loss due to vacancy)Find out the gross annual value in the case of M if his property remains vacant throughout the previous year 2007-08 and, consequently, the figure of annual rent is not available. Also calculate gross annual value in the cases of N and O if their properties remain vacant for one month only for the assessment year 2008-09.(Rs in lakhs)

M N O

Municipal value( per annum) 80 140 140

Fair rent( per annum ) 78 150 150



Property remains vacant (in no of months)

(12) (1) (1)

Loss due to vacancy __ 8 12

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M N O


Fair rent 78 150 150



Whichever is lower(Expected rent) 80 120 120


Property remains vacant (in no of months) (12) (1) (1)

Loss due to vacancy ---- 8 12

Actual rent Nil 92 132

GROSS ANNUAL VALUE NIL 112 132

Solution 5

Computation of gross annual value:(Rs in thousands)

58

How to decide reasonable rent?

(If actual rent minus un realised rent of the current previous year)

is more than expected rent then wesay he is reasonably letting out

The property.And if we reduce further vacancy allowance, even if it goes down below expected

rent, we consider the actual rent.

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Intermission

Be truthful to your parents.Work hard.

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NOTES:-

Case of A: Rent actually collected is zero. The entire loss is because of vacancy. Therefore gross annual value is zero.

Case of C: Property is let out at lower than the reasonable expected rent. Lower rent collection is partly because of vacancy and partly because of letting out of property at lower than reasonable expected rent. Therefore only loss due to vacancy i.e. Rs 8000 is deducted from the reasonable expected rent. Rs( 120000 – 80000 ).

Case of D: Actual rent collection is lower only because of vacancy. Therefore, actual rent is taken as gross annual value.

61

Exercise 5Vacant through out the year)

X Y

Municipal value (per annum) 61000 61000

Fair rent( per annum) 72000 72000

Standard rent under the rent control act

60000 60000

Find out the gross annual value for the assessment year 2008-09 assuming that the property of X remains vacant throughout the previous year 2007-08. However, the property of Y remains vacant from April 1, 2007 to January 31, 2008 and it is let out from February 1, 2008 onwards (rent being Rs. 10000 per month).

62

Solution Computation of gross annual value:

X Y

Municipal value 61000 61000

Fair rent 72000 72000

Whichever is higher 72000 72000

Standard rent 60000 60000

Whichever is lower 60000 60000

Period when the property remains unoccupied ( months )

12 10

Actual rent Nil 20000

GROSS ANNUAL VALUE NIL 20000If actual rent is lower than the reasonable expected rent only due to vacancy then, such rent is taken as gross annual value.

63

Exercise: 6(vacancy and unrealised rent preceding to current year Rs.000

A

Municipal value 140

Fair rent 145

Standard rent 142

Find out the gross annual value for the assessment year 2008-09 for case A if the property is let out (rent being Rs. 48000 per annum) only for 10 months, vacant for 2 months and rent of 4 months could not be realized for the year 2006-07 Rs. 20,000.

64

Solution

Computation of gross annual value:

A

Municipal value 140

Fair rent 145


Standard rent 142

Whichever is lower 142

Annual rent if property is let out throughout the previous year 48

Unrealized rent of current previous year 2007-08(only) 16

Period when the property is vacant ( months ) ( 2 )

Loss due to vacancy( 48000/12 x 2 ) 8

Actual rent received/ receivable 24

GROSS ANNUAL VALUE 134

( Rs in thousands )

65

Exercise 7

(Rs).

Municipal value 120000

Fair rent 130000

Standard rent under the rent control act 110000

Actual rent if property is let out throughout the previous year 126000

Unrealized rent of the previous year 2007-08 10500

Period when the property remains vacant (in no of month) (1)

Loss due to vacancy 10500

Municipal taxes-

Tax of the year 2007-08 18000

- Paid by X during 2007-08 17000

- Paid by X after March 31,2008 1000

X

CONT…..

66

Find out the income of property of X chargeable to tax for the assessment year 2008-09, after considering the following information-

(a)During the previous year 2007-08, X gets 6months’ advance rent from the tenant pertaining to the period April 1, 2008 to September 30, 2008; and

(b) apart from paying municipal tax, no other expenditure is incurred by X in respect of the house property for generating income from property.

CONT…..

67

Note:

Any advanced rent received cannot be considered as per sec 22 as it is the annual value(on accrual) of the property which is taxed.

68

Computation of income from house property:

X

Municipal value 120000

Fair rent 130000


Standard rent under the rent control act 110000

Whichever is lower 110000

Annual rent if property is let out throughout the previous year 126000

Unrealized rent of the previous year 2007-08 10500

Period when the property remains vacant( in no of month) (1)

Loss due to vacancy(126000/12x1) 10500

Actual rent (annual rent – unrealized rent – loss due to vacancy) 105000

GROSS ANNUAL VALUE (actual rent lower than expected rent only because of vacancy. So consider actual rent)

105000

Less: Municipal tax paid by X during the previous year 2007-08 17000

NET ANNUAL VALUE 88000

Less: Standard deduction under section 24(a) [30% of net annual value] 26400

INCOME FROM HOUSE PROPERTY 61600

69

Exercise 8(interest on loan)

X takes a loan on January 3, 2004 of Rs. 160000 at 18 per cent per annum for construction of a commercial house property. Construction of the property is completed on July 17, 2007. Loan is repaid on November 30, 2007. Calculate the amount of interest which is deductible for the assessment years 2008-09 and 2009-10.

Pre construction interest is the period starting from the date of loan Taken and 31st March preceding the year of completion.

70

SOLUTION:

Loan taken = January 3rd 2004Amount= Rs. 160000Interest rate = 18%Date of completion of construction = 17th July 2007Date of repayment of loan = 30th November 2007

Pre construction period = Jan 3, 2004 – March 31st 2007i.e., 89 days.Pre construction interest=(89/366) x 160000 x (18/100) = Rs. 7003.281st April 2004 – 31st March 2005 = (160000 x 18/100) = Rs. 288001st April 2005 – 31st March 2006 = (160000 x 18/100) = Rs. 288001st April 2006 – 31st March 2007 = (160000 x 18/100) = Rs. 28800__ Rs. 93403.28Note: pre construction period interest is spread over 5 years from the year of

completion for the purpose of deduction under sec 24 (b)

If house is completed in the middle of any previous year go back to the last dateOf the preceding previous year in which house completed

to determine pre-construction period interest

71

(93403.28/5) = Rs. 18680.66

Post construction period: ( for previous year 2007-08)

1st April 2007 – 30th November 2007

Calculation of post construction period interest:

(NOTE: Calculate interest for 8 months and deduct 1 days interest from that amount because interest on the date of repayment is not considered)

160000 x (18/100) x (8/12) = Rs. 19200

Less: 160000 x (18/100) x ( 1/366) = Rs. 78.69

= Rs. 19121.31

TOTAL INTEREST FOR THE ASSESSMENT YEAR(2008-2009):

Pre construction interest + post construction interest = 18680.66+19121.31

= Rs. 37801.97

TOTAL INTEREST FOR THE ASSESSMENT YEAR(2009-2010):

Pre construction interest only = Rs. 18680.66

( the last date to pay interest is November 30, 2007)

72

Exercise 9 (Interest on loan borrowed for marriage)

X owns a house property. It is used by him throughout the previous year 2007-08 for his (and his family members) residence. Municipal value of the property is Rs. 1,70,000, whereas fair rent is Rs. 1,76,000 and standard rent is Rs. 150000. The following expenses are incurred by X : repairs : Rs.30000, municipal tax : Rs.16000, insurance : Rs 20000; interest on capital borrowed to construct the property : Rs136000; interest on capital borrowed by mortgaging the property for daughter’s marriage : Rs.20000. Income of X from business is Rs.7,10,000. If capital borrowed:

(a)For construction of the property on April 1, 1999 and construction is completed on December 2, 1999; OR

(b)On April 1,1999 for repairs of the property and repair is completed on December 2,1999.

Find out the Net income of X for the assessment year 2008-09.

73

Computation of net income of X: (a)

NOTE: Annual value is NIL if the house property is 100% self occupied.

Rs

NET ANNUAL VALUE NIL

Less: Deductions under section 24

Standard deduction 24(a) – 30% of Net annual value NIL

Interest on borrowed capital 24(b) – [ Maximum deduction of Rs. 150000 or Rs. 136000 whichever is lower]

(136000)

Income from House Property as per Sec.22 (136000)

Business income 710000

NET INCOME 574000

74

Computation of net income of X : (b)

Preceding steps should not be calculated Rs

NET ANNUAL VALUE NIL

Less: Deductions under section 24

Standard deduction 24(a) – 30% of Net annual value NIL

Interest on borrowed capital 24(b) – [ Maximum deduction of Rs. 30000 or Rs. 136000 whichever is lower]

(30000)

Property income (30000)

Business income 710000

NET INCOME 680000

75

Exercise 10(self occupied one and let out another)

X owns a residential house property. It has two equal residential units- (unit1 and unit 2). While unit 1 is self occupied by X for his residential purpose, unit 2 is let out ( rent being Rs. 11000 per month, rent of 2 months could not be recovered). Municipal value of the property is Rs. 130000, standard rent is Rs. 125000 and the fair rent is Rs. 140000. Municipal tax is imposed at 12% which is paid by X on April 1, 2008. Other expenses for the previous year 2007-08 being repairs : Rs. 250, insurance: Rs. 600, interest on capital borrowed on 1st April 2005 for constructing the property: Rs. 63000. Construction of the house is completed on 31-3-06. find the income of X for the assessment year 2008-09 on the assumption that income of X from other sources is Rs.180000.

Even though house was completed on 31-3-06 we have stop on 31-3-05.Upto 31-3-05 was pre-construction period.

76

Computation of income from house property

Unit 1 (self occupied) = NAV = nil

Less: interest on borrowed capital = Rs. 31500

Income from unit 1 = Rs. (-)31500

Unit 2 ( let out ) :

Municipal value

Fair rent

Whichever is higher

Standard rent

Whichever is lower

Annual rent(a)

Unrealized rent(b)

Actual rent(a-b)

Gross annual value(which ever is higher)

Municipal taxes paid (not paid during the current PY.)

Net annual value

65000

70000

70000

62500

62500

132000

22000

110000

110000

-

110000

If you do not understandGo back to concepts

To understand

77

LESS: deductions under section 24

Standard deduction of 30% of NAV

Interest on borrowed capital

Income from house property

33000

31500

45500

Net income of X:

Income from house property ( 45500 – 31500 ) = Rs. 14000

Income from other sources = Rs. 180000

Gross income = Rs. 194000

78

Exercise 11

X owns a property at New Delhi (municipal value Rs 1,64,000, fair rent Rs 2,16,000, standard rent Rs 1,80,000). The property is let out up to April 15 2007. (rent being Rs 14000 p.m.) and self occupied for the remaining part of the previous year 2007-08. Expenses incurred by X are:Municipal tax Rs 6000 (actually paid), repairs Rs 2100, insurance Rs 1100, interest on capital borrowed (date of borrowing being June 10th 1991) for acquiring the property :Rs 123000. Assuming the income of X from other sources is Rs 186000, find out the net income of X for the assessment year 2008-09

79

Particulars Amount

Municipal value

Fair rent

Whichever is higher

Standard rent

Whichever is lower

Annual rent

Gross annual value

Less: municipal taxes paid

Net annual value

Less: deduction under section 24


Interest on capital


164000

216000

216000216000

180000

180000180000

168000

180000180000

6000

174000

52200

123000

-1200

SOLUTION:

80

COMPUTATION OF NET INCOME :

Income from house property = (-)1200

Income from other sources = 186000

Gross income = 184800184800

81

Exercise 12(arrears of rent)For the assessment year 2008-09, X claims a deduction of Rs. 86000 on account of unrealized rent and is awarded a decree by a Delhi court on march 15th 2008 and on April 6, 2008, X recovers Rs. 80000 from the defaulting tenant ( legal expenditure Rs.25000). What will be tax implication of the amount so received?

82

SOLUTION:

Rs. 80000 recovered from the defaulting tenant is chargeable to tax as income under the head “ Income From House Property” in the year of recovery i.e., the previous year 2007-08 or assessment 2008-09. expenditure of Rs. 25000 is not deductible.

83

Exercise 13(unrealised rent of 2000-01 period)

X owns a house property which is given on rent. For the previous year 2000-01,he claims a deduction of Rs.78000 on account of unrealized rent, out of which the Assessing officer allows only Rs.62000 as deduction. What are the tax consequences if X recovers on April 6,2007 as full & final payment (A)Rs.78000 (expenditure on recovery Rs.40000) or (B)Rs.5000 (expenditure on recovery Rs.5000)

84

Solution:

Amt recovered during 2007-08

Amount of bad debt(78000-amount of recovery)

Deduction allowed in 2000-01

Balance

(a) 78000

(b) 5000

NIL

73000

62000

62000

Income of 72000

Loss of 11000

In situation (a) the full amt of recovery is taxable.

In situation (b) X cannot claim any deduction

85

Exercise 14(unrealised rent of different period, interest on loan borrowed)From the information given below find out the income under the head Income from House Property for the assessment years 2008-09 and 2009-10.

Particulars

Amount

Municipal value (a)

Fair rent (b)

Standard rent (c)

Annual rent (d)

Unrealized rent for the previous year 2007-08

Unrealized rent for the year 2008-09

Unrealized rent for the year 2007-08 realized during previous year 2008-09


190000

195000

170000

175000

20000

Nil

18000

36000

86

The above stated property is let out throughout the previous year 2007-08 and 2008-09. Municipal tax paid is at the rate of 20%.

87

Particulars 2008-09 2009-10

Actual rent received

Gross Annual Value

Step 1- expected rent (a ) or (b) which ever is higher but subject to max (c)

Step 2 – if (d) is higher than step 1 , (d) will be taken

Gross annual value

Less: municipal tax paid (20 % of A)

Net annual value

Less : deduction under section 24

Standard deduction 30 %

Interest on loan


155

170

NA

170

38

132

39.6

36

56.4

175

170

175

175

38

137

41.10

36

59.90

88

Particulars Amount

Annual value

Less: effective unrealized rent

Actual rent

Step 1 –expected rent

Step 2 – if (d) is higher than step 1, it would be taken

Step 3 – NA

Gross annual value (recomputed)

Less: gross annual value (original)

Unrealized rent not taxed earlier


Income

Income under the head “ income from house property”

Assessment year 2008 –09

Assessment year 2009-10

175

2__

173

170

173

NA

173

170

3

___

3__

56.40

62.90

Recomputation of gross annual value of the previous year 2007-08

89

Exercise 15(arrears of rent,municipal taxes paid different period)

X owns a property. It is given on rent (rent being Rs 11000 p.m.) to a bank. Municipal value of the property is Rs 130000, fair rent is Rs 140000 and standard rent is Rs 134000. Municipal tax paid by X is as follows: Rs 26000 on March 3rd,2008 and Rs 30000 on May 10th 2008. on may 1st 2008 rent is increased from Rs 11000 p.m. to Rs 16000 p.m. with retrospective effect from April 1st,2007. Arrears of rent of 2007-08 are paid on May 1st 2008. Find out the income chargeable to tax for the assessment years 2008-09 and 2009-2010.

90

Solution

Particulars 2008-09 2009-10

Municipal value

Fair rent

Whichever is higher

Standard rent

Whichever is lower

Rent collected

Gross Annual Value

Less: municipal tax

Net annual value

Less: deductions under sec 24

Standard deduction i.e. 30% of NAV

Income from Property

130000

140000

140000

134000

134000

NA

134000

26000

108000

32400

75600

130000

140000

140000

134000

134000

192000

192000

30000

162000

48600

113400

91

Arrears of rent of 2007-08 paid on May 1st 2008.

Gross annual value if Rs 16000 rent = Rs 192000

Less: Gross annual considered = Rs 134000

Arrears of rent = Rs 58000

Less: standard deduction 30% = Rs 17400

Amount taxable = Rs 40600

Income from house property :

Assessment year 2008-09 = Rs 75600

Assessment year 2009-10 = Rs 154000

92

Exercise 16(including other income)Mrs. X ( age 22 years ) has occupied two houses for her residential purposes, particulars of which are as follows:

House I

Rs

House II

Rs


Fair rent 28000 95000

Standard rent under rent control act

20000 80000

Municipal taxes paid 3000 9000

Interest on borrowed capital 400 1200

Repairs Nil 100

Business income of Mrs. X is 386000. Besides Mrs. X is employed by a Pvt ltd company on monthly salary of Rs 12500. Every year she contributes Rs 50000 towards public provident fund. Determine the taxable income and tax liability of Mrs. X for the assessment year 2008-09.

93

WORKING NOTES:

(a)Since Mrs. X has occupied two houses for her residential purpose, one house( according to the choice of Mrs. X ) will be treated as self- occupied property. (NET ANNUAL VALUE = NIL)

(b)The other house will be treated as “deemed to be let out” property.

(c) The assessee can choose any one of the houses any year.

94

Let us choose House II as self occupied property, House I will be treated as “deemed to be let out” property.

House I House II

Municipal valuation 30000 -

Fair rent 28000 -

Whichever is higher 30000 -

Standard rent 20000 -

Whichever is lower 20000 -

GROSS ANNUAL VALUE 20000 -

Less: Municipal taxes paid 3000 -

NET ANNUAL VALUE 17000 NIL

Less: Deductions under Sec 24

(a) Standard deduction ( 30% of net annual value) 5100 -

(b) Interest on borrowed capital 400 1200

INCOME FROM HOUSE PROPERTY 11500 (1200)

CONT….

95

Net income from house property:

HOUSE I = Rs. 11500

HOUSE II = Rs. (1200)

NET INCOME = Rs. 10300

Computation of Taxable income :

Income from House property = Rs. 10300

Income from Salary = Rs. 150000

Income from business = Rs. 386000

= Rs. 546300

Less: Deductions under sec 80C

Public provident fund =Rs. 50000

TAXABLE INCOME =Rs. 496300

CONT……

96

Computation of Tax liability:

For Mrs. X,

Upto 145000 : NIL

145000 – 150000 : 10% ( 5000 x 10%) = 500

150000 – 250000 : 20% ( 100000 x 20%) = 20000

250000 & above : 30% (246300 x 30%) = 73890

= 94390

Add: 3% educational cess = 2830

TAXABLE LIABILITY = 97220

97

X borrows from a relative Rs 10,000 @ 12 % for construction of house I (date of borrowing June 1 2004, date of repayment of loan May 31 2007)Construction of all the houses is completed in August 2006 determine the taxable income and tax liability of X for the assessment year 08 -09 on the assumption that X contributes Rs 10,000 towards statutory provident fund Rs 2,000 towards National Relief bonds

Exercise 17(borrowed from relative and three houses)

X 36 years a salaried employee drawing Rs 22000 per monthly salary has occupied three houses for his residential purposes

Particulars House I House II House III

Standard rent under Poona Rent Control Act

33000 55000 40000

Municipal valuation 40,000 60,000 40,000

Fair rent 43,000 58,000 48,000

Municipal taxes paid 3,000 6,000 4,000

Repairs NIL NIL NIL

Ground rent due but outstanding

Insurance premium due but outstanding

200

300

----------------

400

300

500

98

Solution

Particulars House 1 House 2 House 3

Municipal value

Fair rent

Standard rent

Actual Rent

Gross annual value-Municipal tax paid

Net annual value

Less: Section 24 (a)

30 % standard deduction

Interest on loan borrowed


Total income from HP

House 1 + House 2 + House 3 = 45,560

40,000

43,000

33,000

NA

33,000

3000

-------------

30,000

-------------

9000

----

------------------------

21,000

------------------------

NA

(640)**

----------------------

-640

----------------------

40,000

48,000

40,000

NA

40,000

4000

------------

36000

------------

10,800

----

-----------------------

25200

----------------------

99

Working note

• ** June 1 04 to March 31 06---22 months pre construction period

10,000 * 22/12*12/100 = 2200 (spread over first 5 years)

2200/5 = 440

If you want to take rest from studies………cook. If you want to take Rest from cooking clean your room,

if you want to take rest from Cleaning your room …….study.Alternative work is rest.

100

Exercise 18(many houses)Mr.X is 31 years, owns four houses outside the

jurisdiction of the rent contract act Particulars House I self House II self House III business House IV let

out

Municipal valuation 40,000 6,000 16,000 60,000

Fair rent 50,000 8,000 22,000 55,000

Rent if let ------- ------ ------- 72,000

Unrealized rent 3,000

Municipal tax paid by X 4,000 500 1,000 6,000

Date of completion of construction June 16 1991 June 5 1974 June 14 1997 March 31 1998

Repairs nil 2,000 500 Nil

Collection charges ----- ----- ---- 300

Land revenue 200 --- 100 500

Int on capital borrowed covered 1000 200 400 600

Int on capital borrowed for payment of municipal taxes

300 -- 200 600

Int on capital borrowed for construction 3700 --- --- ---House IV remains vacant for the month of Jan 2008.business income of X for the previous year 07-08 is Rs 2,80,000(it has been computed as per the provisions of income tax act) determine the taxable income & tax liability of X for the assessment year 08-09 on the assumption that he could not occupy house III for 2 months during the previous year and X pays insurance premium of Rs 65,000 on his insurance policy op Rs 3,70,000.

101

Particulars House 1

SO

House 2

Business

House 3

Deemed

House 4

DeemedMunicipal value

Fair Rent

Standard Rent

Actual Rent

Gross annual value

-Municipal tax

Net annual value

Less : section 24 (A)

-30 %

-Int on loan


-

(4700)

---------------------

(4700)

-

---------------------

16,000

22,000

NA

22,000

---------------------

22,000

1000

---------------------

21,000

6300

400

---------------------

14,300

60,000

55,000

NA

60,000

(72000-6000-3000) = 63,000

---------------------

63,000

6000

--------------------

57,000

17,100

600

------------------

39,300

102

Computation of IncomeIncome from HP

Income from Business

Total income

Less: deduction 80 C• insurance paid

Taxable income

Tax amt : 29020

48,900

2,80,000

-------------

3,28,900

65,000

-------------

2,63,900

-------------

103

Exercise 19(full-fledged problem) : Mrs. X age 51 years submits the following particulars of her income relevantfor the previous year ending march 31 2008 business income:

Profit Of Biz A Rs 1,33,400Loss Of Biz B Rs 18,000Loss Of Biz C Rs 8,540

A residential house property: municipal valuation : Rs 48,000, fair rent : Rs 52,000 , standard rent : Rs 65,000 municipal taxes paid Rs 6,000, repairs : Rs 200, interest on capital borrowed for purpose of construction of house property (amt borrowed : Rs 20,000,ratye of interest 18 % date of borrowing June 30 1996, date of repayment of loan June 20 2007, date of completion of construction June 30 2001) and annual charges mot created by Mrs. X Rs 500 besides on May 24 2005, Mrs. X borrows Rs 1,95,000 @ 12% PA for the purpose of reconstruction of house property. The house is self occupied from April 1 2007 to March 15 2008 from march 16 2008 it is let out on monthly rent of Rs 4,000.during the previous year, Mrs. X is employed by a company on monthly salary of Rs 19,000.Determine the taxable income and tax liability of Mrs. X for the assessment year 08-09 , she contributes Rs 2,000 towards Indira Vikas Patra.

104

PARTICULARS AMT

Municipal valueFair rent

HigherStandard Rent

LowerActual rent

HigherLess municipal taxes

Net annual valueLess : deduction• 30 % •Pre construction•Post construction period till June 2 2007 20,000 * 18 % * 2/12 months 20,000 * 18 % * 20/365

Loan 2 :Reconstruction period interest 195000*12%

Income from House Property

48,00052,000----------52,00065,000----------52,00048,000---------52,000 Gross annual Value 6000----------46,000

13,800 NA

600 197-----------31,40323,400-----------8003

105

Computation of total income

Particulars Amount

Income from salary (9000 * 12)Income from business • Profit of biz A 1,33,400• Loss of biz B (18,000)• Loss of biz C ( 8540)Income from house property

Total income

2,28,000

1,06860 8003-----------3,42,863------------

Helping your mother and sweeping the floor gives you a good excise

106

Exercise 20 : X 50 yrs owns a big house (erection completed on March 1 2003). The house has 3 independent residential units . Unit 1 ( 50 % of the floor area) is let out for residential purposes on monthly rent of Rs 8,000( this unit is however used by X from Jan 15 2008 to March 15 2008for his residential purposes) . A sum of Rs 1,000 could not be collected from the tenant. Unit 2 ( 25 % of the floor area) is used by X for the purposes of his residential while Unit 3 the remaining 25 % is used by him for the purposes of his business . Other particulars of house are : municipal valuation: Rs 1,92,000;municipal taxes paid Rs 16,000; repairs Rs 4,000;ground rent : Rs 6,000; land revenue paid : Rs 1,800; insurance paid : Rs 6,000, and Interest on capital borrowed for payment of municipal tax : Rs 4,000, Income of X from Biz is Rs 1,61,200 ( without debiting house rent and other incidental expenditure including admissible depreciation of Rs 600 on the ¼ portion of house used for Biz . Determine the taxable income and tax liability of X for the assessment year 08-09. X contributes Rs 8,000 towards home loan account of the National Housing

Bank .

107

Interest on loan repayment for entire house is 36,000 as per act if it is for repairs or renewals

it is limited to 30,000. nut in this case 50% portion interest of house which is 18,000 which

means full 18,000 is allowed

** interest on loan borrowed for self occupied property is limited to 30,000 or 15,000. but for

repairs and renewals is 30,000

108

Particulars Unit 1 Unit 2 Unit 3

Municipal value 1,92,000 ( 50%)

Unrealized rentLoss due to vacancyGross annual valueLess: municipal tax 16,000 * 50 % & 25 %

Net annual valueLess : deduction •Standard 30 %

INCOME FROM BUSINESS Less : municipal valueRepairs 4000 *1/4 Ground rent 6000 * 1\4 Land revenue 1800 * 1\4 Interest on loan 6000 * ¼Depreciation

Total income

96,000

1,000----------95,000

8000-----------88,000

26,400-----------61,600

-------------

(4,000)----------

16,0004000 100015004506001500-----------1,51,150------------

109

Total income Amount

Unit 1 Unit 2Unit 3

Total income Deduction 80 C

Taxable income

Tax amount: Rs 15,400

61,600 ---

1,51,150------------2,12,750 8000------------2,04,750------------

110

Exercise 21

For the assessment year 2008-09,X (age: 46 years) submits the following information:

Income from business Rs 144220Income on debentures Rs 205000Contribution to public provident fund Rs 70000Investment in bonds of infrastructure company Rs 40000(notified)

contd……..

111

House I House II

Fair rent 12900 39700


Annual rent 48000 54000

Municipal taxes paid 1700 4000

Standard rent 12500 60000

Repairs 200 18000

Land revenue 2000 16000

Insurance 500 1500

Unrealized rent of 2006-07 3000 2000

Unrealized rent of 2007-08 1000 35000

Interest on capital borrowed for purchase of house property 1000 14000

Repayment of loan taken from a friend for purchasing house I 3640 ----

Vacant period (number of months) 1 3

Loss on account of vacancy 4000 13500

Actual rent received or receivable 43000 5500

Nature of occupation Let put for residence of managing director of A Ltd

Let out for profession

Date of completion of construction March 31st 2003

May 15th 1974

112

Determine the taxable income and tax liability of X for the assessment year 2008-09. also calculate the amount of unrealized rent which can be claimed as deduction in the assessment year 2009-10

113

Computation of income from house property

Municipal value (a)

Fair rent (b)

Standard rent (c)

Annual rent* (d)

(a) Or (b) whichever is higher

subject to maximum of (c)

If (d) is more than the previous

step then (d) should be

considered

GROSS ANNUAL VALUE:


13000

12900

12500

43000

43000

______

43000

1700

40000

39700

60000

19000

26500

______

26500

4000

114

NET ANNUAL VALUE:

less: deduction under section 24

Standard deduction of 30% of Net Annual value

Interest on capital borrowed

INCOME FROM HOUSE PROPERTY:

41300

12390

1000___

2791027910

22500

6750

14000

17501750

115

CALCULATION OF ANNUAL RENT

Annual rent

Less: unrealized rent

Less: loss due to vacancy

Actual rent received

_______________________

For house 2 the income from house property is Rs.26500Rs.26500 (i.e., 40000 – 13500)

House1

48000

1000

47000

4000

4300043000

House2

54000

35000

19000

( not considered)

116

Computation of taxable incomeIncome from business

Interest on debentures


GROSS INCOME:

Less: deduction under section 80C

Contribution to provident fund-70000

Investment in national bond -40000

110000

*Note: the maximum amount deductable under this sec is Rs. 100000

NET INCOME:

144200

205000

29660

378880

100000

278880278880

117

Computation Of Tax LiabilityNET INCOME

Less: exemption limit

Taxable amount

40000*10%

100000*20%

28880*30%

Add: 3% educational cess

Tax payable

Rounding off

278880

110000

168880168880

4000

20000

8664

32664

979

33643

3364033640

118

Exercise 22(composite rent,unrealised rent,recovery of unrealised rent)

X (age : 28 years) is owner of a house property in Mumbai which is let out for Rs.72000 (which includes Rs.8400 for maintenance of lift and garden), municipal valuation : Rs.60000 ; fair rent : Rs.62000 : Standard rent : Rs.61600 : rent of ½ month could not be collected ( 1/24 of Rs. 72000) : Rs.3000 . The local taxes, payable by the owner, amounts to Rs.6000 but the tenant has undertaken to pay it. The tenant has also undertaken to bear cost of repairs. However, X bears the following expenditure during the previous year 2007-08 :

Annual charges : Rs.1500 ; insurance : Rs.2900 ; ground rent : Rs.4000 ; lift maintenance : Rs. 7600 ; salary of gardener : Rs.1100 ; interest on borrowed capital : Rs.1350

Assuming that business income is Rs. 346000 determine the income ( and tax thereon) for the assessment year 2008-09. The construction of the house was completed on March 31, 2001. During the previous year 2001-02, X had claimed and allowed a deduction of unrealised rent of Rs. 10000. On March 10,2008, X recovers Rs. 9000 from the defaulting tenant (legal expenditure on recovery of rent : Rs.9500). X contributes Rs.60000 towards National Saving certificate VIII Issue on April 1,2008.

119

Solution 22:computation of income from house property

Municipal value( a)

Fair rent (b)

Standard rent (c)

Actual rent (d)

If (d) is more than the previous

step then (d) should be

considered

Gross annual value

Less: municipal tax paid

Net annual value

Less: deduction under sec 24

Standard deduction of 30% of net annual value

Interest on capital

60000

62000

61600

60950

61600

--

61600

18480

1350

120


Add: rent received chargeable under section 25 A

Income under the head ‘income from house property

41770

9000

5077050770

121

Computation of taxable incomeBusiness income


Income from other sources:

Amount collected from tenants for providing amenities (8400*11.5/12)-8050

Less: expenses(7600+1100) - 8700

Gross taxable income

Less: deduction under section 80C

Net income:

346000

50770

396770

-650

396120

-___

396120396120

122

Computation of tax liability

Total income

Less: exemption limit

40000*10%

100000*20%

146120*30%


Tax payable

Rounding off

396120

110000

286120286120

4000

20000

43836

67836

2035

69871

6987069870

123

Exercise 23( borrowing at different dates) X (age 32 years) owns four houses which are used by him for his residential

purposes:

House I House II House III House IV

Municipal value 40000 170000 25000 90000

Fair rent 50000 160000 26000 97000

Standard rent 60000 174000 20000 96000

Municipal taxes paid by X 8000 26000 4000 22000

Interest on capital borrowed for purchase/construction (inclusive of 1/5th of pre-construction period’s interest, wherever applicable) (capital was borrowed on 1st April 1999 in the case of House III and IV. In the case of House I and II capital was borrowed on April 10th 1998)

25000 35000 84000 156000

Find out the net income and tax liability of X for the assessment year 2008-09 on the assumption that income of X from other sources is Rs 520000 and he deposits Rs 100000 in notified pension fund of National Housing Bank.

124

Discuss whether the following are true or false:

a) In the example given under 23, if the tax payer’s other income is Rs 164000, then income chargeable to tax is Rs 129000.

b) If net annual value is negative, standard deduction is not available.

c) If net annual value is negative, interest on borrowed capital is not deductible.

d) In case of one self occupied residential property, net annual value cannot be negative.

e) In case of one self occupied residential property, income from property cannot be positive.

f) In case of partly self occupied and partly let out property, income maybe positive or negative.

125

Computation of income under different options

house1 house2 House3 house4

If self occupied , NAV=

less: interest on capital


Nil

25000

_____

-2500025000

Nil

30000

_____

-3000030000

Nil

84000

_____

-8400084000

Nil

150000

______

-150000150000

If deemed let-out

Municipal value (a)

Fair rent (b)

Standard rent (c)

40000

50000

60000

170000

160000

174000

25000

26000

20000

90000

97000

96000

126

House1 House2 House3 House4

Expected rent (a) or (b) subject to a maximum of (c)

GAV


NAV

Less: deductions under section 24

Standard deduction

Interest on capital

50000

50000

8000

_______

42000

12600

25000

44004400

170000

170000

26000

_______

144000

43200

35000

6580065800

20000

20000

4000

_______

16000

4800

84000

-7280072800

96000

96000

22000

_______

74000

22200

156000

-104200104200

127

Mr. X has the following options

particulars (IHP) Option 1

(house 1 is self occupied)

Option 2


Option 3


Option 4


House 1

House 2

House 3

House 4


Income from business

GROSS INCOME:

Less: deduction under sec 80 C

-25000

65800

-72800

-104200

-136200

520000

383800

100000

4400

-30000

-72800

-104200

-202600

520000

317400

100000

4400

65800

-84000

104200

-118000

520000

402000

100000

4400

65800

-72800

-150000

152600

520000

367400

100000

128

Mr. X should take option 2 as net income taxable is lower when compared to other options

therefore taxable income is Rs. 217400

Notified fund

Net income taxable under different option available

100000

283800283800

100000

217400217400

100000

302000302000

100000

267400267400

129

Calculation of tax liability

Net income

Less : exemption limit

40000*10%

67400*20%

+-add: 3% educational cess

Tax payable

217400

110000

107400107400

4000

13480

17480

524.4

18004.4

1800018000

130

Exercise 24:(self occupied partly, let out partly)Mrs. X (age : 51 yrs) own s two houses. Relevant details are given below :

Particulars House 1 House 2

Let out

Self-occupied

Municipal value per annum (a)

Fair rent (b)

Standard rent (c)

Rent of let out property (d)


Municipal tax paid

April 1,2007 to June 30, 2007(rent being Rs.25000 per month)

July 1,2007 to March 31, 2008

60000

70000

66000

75000

2000

10000

July 1, 2007 to march 31, 2008 (rent being Rs. 10000 per month)

April 1,2007 to June 30,2007

100000

95000

110000

90000

40000

17000

131

Municipal value (a)

Fair rent (b)

Standard rent (c)

Actual rent (d)

(a) Or (b) subject to maximum of (c)

If (d) is greater than the previous step

then (d) should be considered.. GAV=

LESS: Municipal taxes paid

Net annual value





HOUSE1

60000

70000

66000

75000

66000

75000

10000

65000

19500

2000

HOUSE2

100000

95000

110000

90000

100000

100000

17000

83000

24900

40000

132

Computation of taxable income and tax liability


Income from business

Gross total income

Less: deductions under section 80C

Contribution to public provident fund

Net taxable income

TAX LIABILITY:

Taxable income

Less : exemption limit

5000*10%

100000*20%

941600*30%

61600

1200000

1261600

70000

11916001191600

1191600

145000

1046600

500

20000

282480

302980

133

Add: surcharge of 10% as income exceeds 1000000


Tax payable

Rounding off

30298

333278

9998

343276

343280343280

134

Exercise : 25

• Net annual value of house property owned by X = nil• Income of Y is related to income from business and

profession. Therefore NAV = nil• Z has let out his property and income from house

property should be calculated.

135

Calculation of income from house property

particulars X Z

Gross annual value


Net annual value

Less: deductions under section 24


Interest on capital borrowed


Nil

Nil

Nil

Nil

30000

-30000-30000

120000

20000

100000

30000

30000

4000040000

136

Thank you very muchStudy daily

You can achieve anything under the sunIf you are sincere to you.

Jai Hind

Help your mother in cookingDon’t give excuses saying

you are studying

income from house property new 2008 09 assessment year

Business

institute

national housing

section 80c

current previous

reasonable

important

property remains

municipal