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Income Tax

Income from house property

The annual value of property, consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him, the profits of which are chargeable to income tax, shall be chargeable to income tax under the head "Income from House Property".

      The annual value of any property you own is taxable under the head ‘income from house property’. While there are a few deductions available from this income, income from a property is not taxable under the head ‘income from house property’ when.

  1. The property is used for one’s own business or profession.
  2. The property is self-occupied.
  3. It is income from a farmhouse.
  4. It is the property income of a local authority.
  5. It is the property income of a university or an educational institution.
  6. It is the property income of a trade union.
  7. It is property held for charitable or religious purposes.
  8. It is the property income of a political party.
  9. It is the property income of an approved scientific research association.

Annual value of the house property:

The annual value of house property has been defined as ‘the amount for which the property may reasonably be expected to be let out for a year’.

However, if your property is let out for the whole or a part of the financial year, the gross annual value will be the amount received during the year as a result of the letting out of the house property. This shall also exclude the rent that the taxpayer is unable to realize in the financial year.

The following four factors have to be taken into consideration while determining the annual value:

  1. Rent payable by the tenant.
  2. Municipal valuation of the property.
  3. Fair rental value (market value of a similar property in the same area) of the property.
  4. Standard rent payable under the Rent Control Act.

Gross Annual Value:

In the case of self-occupied property, the annual value is taken to be ‘nil’.

In the case of property that is rented out, the gross annual value is the municipal value, the ‘de facto rent’ (whether received or receivable) or the fair rental value, whichever is highest. If, however, the Rent Control Act applies to the property, the gross value cannot exceed the ‘de facto rent’ or the standard rent under the Rent Control Act, whichever is higher.

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