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The annual taxable value of any holdings/patrimony/property is calculated by reducing the Municipal Taxes. Paid deduction under income tax section 24 from the actual rent receivable/deemed is ‘tax on rental income’.

Contents explaining these criteria are income from House Property and Section 24. Here in this article, you will know how to calculate income from house property.

Income from House Property- Meaning and Basis of charge

Under the head ˜Income from House Property, the basis of the charge is the annual value of the property which:

1. Consists of any buildings or lands appurtenant thereto.
2. Assessee is the owner.
3. Which is not for the assessees business or profession. 

Under gst on rental income or india Income Tax Act, income from the property is taxable. Likewise, the property could be residential, commercial, or industrial on which the gst on rental income india taxes are levied. 

Buildings or Lands accessory to it

Under the head Income From House property or tax on rental income in india Thus, income is calculated based on buildings & lands appurtenant to it. A land that is not appurtenant to any building does not come within this section. Income from such type of land is taxable under the head ‘Income from Other Sources. It includes a compound, playground, kitchen, garden, courtyard, etc. If non-residential buildings, car parking spaces, roads in the area shall be land adjunct to buildings for house property income.

Exceptions: - 

The following are the exceptions which are under income from the house property-

• Buildings and staff quarters let out to employees and others
• Paying-guest Accommodation

NOTE: The assessee ought to be the owner of the house property. Thus, the owner of the house property is liable to pay all the taxes under section 24 of income tax act. The following are the owners of the house property:

• The person whose name is registered in the property.
• Just in the case of a mortgage, it is the mortgagor, not the mortgagee.

Deemed Owners (Sec 27) 

The individual who is not the owner from the beginning, but has one by implication afterward. Also not have not legal registration is ‘Deemed Owner’. Such a person is liable to pay all the taxes as in the same manner an owner does. Similarly with deemed income and deemed profit. Some conditions make an individual a deemed owner and as a result, they are liable to pay gst on rental income under standard deduction u/s 24(a)-

• Gifting Property
• Holder of importable estate 
• Member of Society
• Section 53A
• Long term leaseholder

It is not for purposes of assessee’s business or profession 

If the property or a portion of it is occupied by the owner for his own business or profession and the profits of such business or profession are assessable to tax, thus, the annual value in respect of such property or portion of it is not taxable as revenue from house property and lastly, nothing will be deductible as expenditure on rent house of these premises in computing the profits of business or profession.

Note: If you are an owner of two or more than two houses, In that case, it is required to file ITR. Click here to file it now!

Determination of Gross Annual Value

The following are the steps to determine the gross annual value under income from house property calculation for ay 2018-19:

Deduction under section 24 from Annual value

The following deductions are from the annual value to know the income chargeable. All that comes under the head ‘Income from House Property-

A sum is equal to 30% of the annual value as the standard deduction for expenses. Interest is not included in that.

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Important Points for tds on repairs and maintenance

1. Standard Deduction @ 30% of the annual value shall be deducted whether any expenditure is sustained or not.
2. If the owner of the house occupies more than two houses for his residential purposes. Except for two houses all other self-occupied house/houses are deemed let out property. In such a case standard deduction @ 30% of annual value shall be permissible.
3. Regarding two houses (rent property) which are treated as self-occupied houses. The standard deduction is not permissible.

Interest on loan taken relating to house possessions

Interest on loan taken for the persistence of purchasing, building, reconstructing, or repairing the house property is permissible as a deduction on the accrual basis.

Points to note:

1. firstly, interest on unpaid interest is not deductible.
2. Secondly, any commission or brokerage paid for raising the loan is not deductible.
3. Interest for pre-acquisition or pre-construction period.
4. Lastly, the computation of taxable income from let-out house property.

Example of income from house property calculation

Ms. Kunti Gupta has a house property let-out for residential purposes.

Municipal rental value Rs.8500 p.m.

Actual rent received Rs.9000 p.m.

Rent payable under the Rent Control Act Rs.8500 p.m.

The rent payable for a similar house is Rs.9000 p.m.

She has paid 15% of the Municipal Valuation as local taxes, 2% of valuation as education and health cess. The Construction of the property began in Sept.2013. She had borrowed a loan for the construction of the rented house, on which she has paid Rs, 200000 as interest up to 31.3.2015 and Rs.50,000 as interest during the Previous Year, Fire insurance premium paid Rs.3000 p.a. Therefore, you have to calculate the Income from let out property or house property for the assessment year 2021-22 under deduction u/s 24.

Solution: Computation of income from house property (for the assessment year 2021-22)

Other Important points regarding Income from House Property

1. Income from house property: If a property abroad or tax on rental income india (income tax on rental income) then it will be taxable under the head ‘income from house property’. Its annual value will be calculated as if the property is in India. Thus, you have to understand the income from house property format.
2. The property possessed by co-owners: Income from the co-owned property shall not be assessed on such person as an association of persons. But the share of each such person from the property shall be there in his respective total rental income. If the co-owner occupies any portion of the house for his residence. In that case, the portion is treated as self-occupied and the annual value will be nil. this will be exempted from tax.

Closure

You should carefully inspect the above guidelines and provisions for any income that comes under the head “income from house property”. Also, taxpayers must keep in the record that the documents of purchase, construction, or repair/renovation of the property, rent income, rent agreement, etc. Record all the things properly for house property income tax or gst on rent paid on commercial property.

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