Income From House Property: Section/Rule Subject Matter

RAJESH NANGALIA CLASSES 9903133927
INCOME FROM
HOUSE PROPERTY
Section/Rule Subject Matter
Charging Section – Chargeability of income under
Section 22
the head ‘house property’
House let out throughout the year/partly let out/

Section 23(1)
partly vacant/vacant throughout the year
Section 23(2) One house which is self-occupied
House partly self-occupied/partly let out, may or
Section 23(3)
may not be vacant
Section 23(4) More than one house which are self-occupied
Section 23(5) House property held as stock-in-trade

Proviso to
Municipal taxes
Section 23(1)
Rule 4 & Explanation
Meaning of unrealised rent & its treatment
to Section 23(1)
Section 24(a) Statutory deduction/standard deduction
Section 24(b) Interest on borrowed capital
Section 25 Interest in case of loan taken from outside India

Section 25A Recovery of unrealised rent and arrears of rent
Section 26 Property owned by co-owners
Section 27 Deemed ownership
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INCOME FROM HOUSE PROPERTY
Section 22 {Charging Section}

CHARGEABILITY OF INCOME UNDER THE HEAD ‘HOUSE PROPERTY’
Essential The following three conditions must be satisfied before income of any property can be
Conditions for taxed u/h “income from house property”:
Taxing Income
• The property must consist of buildings and land appurtenant thereto (ie any open
Under ‘House
land which is part and parcel of a building is also treated as house property).
Property’ Head
(To Be Satisfied • The assessee must be the owner of such house property.
Cumulatively)
• The assessee may use the property for any purpose, but it should not be used by
the assessee for the purpose of any business/profession carried on by him. If the
property is used for own business or profession, it shall not be chargeable to tax u/h
“income from house property”.
Buildings & Land • Buildings include factory buildings, offices, shops, godowns & other commercial
Appurtenant premises.
Thereto
• Examples of land appurtenant are compounds, gardens, marriage halls with gardens.
• Income from letting out any land, which is not an essential part of any building
is not taxable u/h ‘income from house property’. Such vacant site lease rent is
taxable u/h ‘income from other sources’.
SPECIAL POINTS:
❑ Sub-Letting Of House Property:
As per Section 56 of the Income Tax Act, where an assessee is not the owner of a building
and he further sub-lets it to any other person, rental income earned by the assessee from
sub-letting of building shall be taxable u/h ‘income from other sources’.
❑ Sale Of House Property:

Income from sale of house property is taxable u/h ‘income from capital gains’. However, if
an assessee has a business of buying/selling house property, such income would be taxable
u/h ‘income from business/profession’.
❑ Income From Business Of Letting-Out House Property:

Where an assessee is engaged in the business of letting out of properties on rent, income from
such letting-out would be taxable as business income. {As per the decision of the Supreme Court
in the case of Rayala Corporation (P) Ltd v. Assistant CIT}
❑ Income From House Property Held As Stock-In-Trade:

Annual value of house property will be charged u/h ‘income from house property’, where it is
held by the assessee as stock-in-trade of a business.
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Computation of Income Under the Head “HOUSE PROPERTY”

Gross Annual Value (GAV) [Computed as per Section 23] XXXX
Less: Municipal Taxes [Proviso to Section 23(1)] (XXXX)
Net Annual Value (NAV) XXXX
Less: Statutory Deduction/Standard Deduction @ 30% of NAV [Section 24(a)] (XXXX)
Less: Interest on Borrowed Capital for Construction, etc [Section 24(b)] (XXXX)
Income Under the Head “House Property” XXXX
Sections 23(1)(a) & 23(1)(b)

HOUSE PROPERTY LET OUT THROUGHOUT THE YEAR
Gross Annual Value (ie reasonable rental value of the property) shall be computed as follows:
• Step 1: Compare Fair Rent with Municipal Valuation/Municipal Rent and select the higher.
• Step 2: Compare the rent so selected at Step 1 with Standard Rent and the lower of the two
will be selected and referred to as ‘Expected Rent’.
• Step 3: Compare Expected Rent calculated at Step 2 with Actual Rent Received/Receivable and
the higher shall be considered to be the Gross Annual Value (GAV).
Meaning • Fair Rent: Rent of similar types of buildings in the same locality
of Certain
Terms • Municipal Valuation: Rental value determined by the municipality for the purpose of
charging municipal tax (ie house tax or property tax)
• Standard Rent: Highest possible rent as per Rent Control Act
Proviso to Section 23(1)

DEDUCTIBILITY OF MUNICIPAL TAX / PROPERTY TAX / HOUSE TAX
Municipal taxes are allowed as deduction from GAV to arrive at NAV if BOTH the following conditions
are satisfied:
• Such municipal taxes have been actually paid (ie deduction is allowed on cash basis and not on accrual
basis); and
• Such municipal taxes have been paid by the owner himself (ie no deduction is available where the
municipal taxes have been paid by the tenant or any other person).
Example: If municipal taxes payable for PY 2022-23 are Rs 25,000 but the assessee has paid only Rs 20,000,
deduction of only Rs 20,000 would be available in PY 2022-23. If municipal taxes payable for PY 2023-24 are
Rs 60,000 but the assessee has paid Rs 70,000 which includes Rs 5,000 for the earlier year and Rs 5,000 for
the subsequent year, deduction of Rs 70,000 would be available during PY 2023-24.
Purpose of Municipal taxes are generally levied by the local authority to raise funds for the
Levying purpose of maintaining any particular town or city. Municipal taxes may also be water
Municipal Taxes tax, house tax, fire tax, sewerage tax, etc.
Net Annual Value (‘NAV’) can be negative if municipal taxes actually paid during the year
exceeds Gross Annual Value (‘GAV’).
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Illustration on Pre-Construction Period Interest
Mr Ganesh owns a commercial building whose construction got completed in June 2020. He took a loan of Rs 15 lakhs
from his friend on 1.8.2019 and had been paying interest calculated at 15% p.a. He is eligible for pre-construction
interest as deduction as per the provisions of the Income Tax Act. Mr Ganesh has let out the commercial building at a
monthly rent of Rs 40,000 during FY 2022-23. He paid municipal tax of Rs 18,000 each for FY 2021 -22 and FY 2022-23
on 1.5.2021 and 5.4.2022 respectively. Compute income u/h ‘House Property’ of Mr Ganesh for AY 2023-24.
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Section 24
DEDUCTIONS FROM ‘NAV’ FOR CALCULATING ‘INCOME FROM HOUSE PROPERTY’
• Section 24(a) – Statutory Deduction/Standard Deduction:
A notional deduction equal to 30% of NAV is allowed in respect of various expenditures incurred to
maintain the house. The actual amount of expenditure is not relevant.
• Section 24(b) – Interest on Borrowed Capital:

❑ Interest payable on loan/advance taken for purchase, construction, repairs, renovation, addition,
alteration, etc of a house property is allowed as deduction from NAV u/s 24(b) (interest has to
calculated on simple interest basis; compound interest)
❑ Such interest is allowed to be deducted on accrual basis (ie the payment of interest is not
relevant for claiming deduction).
❑ Current period interest is fully allowed as deduction. The treatment of prior-period interest is
discussed below.
Special • Prior period starts from the date on which the loan is taken and ends with the expiry
Provisions for of the financial year immediately preceding the financial year in which the house is
Prior Period purchased/constructed. Interest for prior period is known as ‘prior period interest’.
Interest
• Prior period interest is allowed as deduction in 5 equal instalments starting with
the financial year in which the house was purchased or constructed.
Loans Taken Interest on loans taken from outside India is also allowed as deduction if ANY one
from Outside of the following two conditions is satisfied:
India
• The person making payment of interest deducts TDS at the time of making payment of
(Section 25)
interest to the foreign lender;
OR
• The foreign lender (ie person receiving interest) has appointed an agent in India.
Example:
If Mr A has taken a loan of Rs 10,00,000 for construction of property on 01.10.2019 and interest is payable
@ 10% p.a. and the construction was completed on 30.06.2021, in this case interest allowed u/s 24(b) during
PY 2022-23 shall be:
❑ Interest for the current year (01.04.2022 to 31.03.2023) = 10% of Rs 10,00,000 = Rs 1,00,000
❑ Prior period interest = 10% p.a of Rs 10,00,000 for 18 months (01.10.2019 to 31.03.2021) = Rs 1,50,000
(Prior period interest to be allowed in 5 equal annual installments of Rs 30,000 starting from the year
of completion of construction, PY 2021-22 in the present case).
❑ Therefore, total interest allowed as deduction u/s 24(b) = 1,00,000 + 30,000 = Rs 1,30,000
SPECIAL POINTS:
• No deduction is allowed for any brokerage or commission for arranging loan.
• Interest on fresh loan taken to repay the original loan is allowed as deduction. There can also be
more than one loan.
• Interest on unpaid interest is not deductible.
• List of deductions given u/s 24 is exhaustive; no other deductions shall be allowed from NAV
other than deductions given u/s 24(a) & 24(b).
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SPECIAL CASES
Section 23(1)(c) Section 23(2) Section 23(3) Section 23(4) Section 23(5)
House Lying Self-Occupied One House Self-Occupied Multiple Houses House Property
Vacant for Part or Unoccupied for Part of Year & Let Out Which are Held As
of the Year House for Other Part of Year Self-Occupied Stock-In-Trade
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COMPUTATION OF INCOME U/H HOUSE PROPERTY - SPECIAL CASES:
Case 1: Section 23(1)(c) {HOUSE LYING VACANT FOR PART OF THE YEAR}
Computation • Step 1: Calculate Expected Rent for full 12 months.
of GAV
• Step 2: Calculate Gross Rent Received/Receivable for full 12 months. Also calculate
Effective Rent Received/Receivable for the months during which the house property was
actually let out.
• Step 3: Compare Expected Rent with Gross Rent Received/Receivable.
• If Gross Rent R/R is not less than Expected Rent, Effective Rent R/R shall be taken as
GAV. If Gross Rent R/R is less than Expected Rent, Expected Rent shall be taken as GAV.
• In other words, if the assessee would have given the property on rent for full 12
months and the Rent R/R by him would not be less than Expected Rent, the assessee
will be given the benefit of vacancy and Effective Rent R/R shall be taken as GAV.
Example: Expected Rent of a house is Rs 30,000 p.m.; it was let out @ Rs 50,000 p.m. for
only 6 months whereas it was vacant for the remaining 6 months.
• Expected Rent (12 months) = Rs 30,000*12 = Rs 3,60,000
• Gross Rent R/R (12 months) = Rs 50,000*12 = Rs 6,00,000
• Effective Rent R/R (6 months) = Rs 50,000*6 = Rs 3,00,000
Since Gross Rent R/R is not less than Expected Rent, the assessee would be given the
benefit of vacancy and Effective Rent R/R will be taken as GAV. GAV = Rs 3,00,000.
Municipal Taxes Allowed in the normal manner

Deduction u/s 24(a) Allowed in the normal manner
Deduction u/s 24(b) Allowed in the normal manner
Case 2: Section 23(2) {SELF-OCCUPIED HOUSE OR UNOCCUPIED HOUSE}

GAV Nil
Municipal Taxes Nil (Not Allowed) – NAV will also be ‘Nil’
Deduction u/s 24(a) Nil (Since NAV would be nil, statutory deduction would also come out to nil)
Deduction u/s 24(b) • Deduction for interest on borrowed capital would be limited to Rs 30,000.
• However, if all the following conditions are satisfied, the assessee can claim a
maximum deduction of Rs 2,00,000 in respect of interest on borrowed capital:
a) Loan has been taken on or after April 1, 1999;
b) Loan has been taken for purchase or construction of the property
(repairs, alteration, etc);
c) The house has been purchased or constructed within 5 years from the
end of the year in which the loan was taken; and
d) A certificate has been obtained from the lender certifying the amount of
interest.
Note 1: The expression ‘unoccupied property’ refers to a property which cannot be occupied by the owner
by reason of his employment, business or profession at a different place and he resides at such other place
in a building not belonging to him.
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Note 2: The benefit of exemption in respect of self-occupied house is available only to an individual/HUF.
Note 3: If a house is self-occupied as well as vacant, its income shall be computed as if it is a self-occupied
house. In other words, there is no treatment of vacancy in case of a self-occupied house.
Case 3: Section 23(3) {ONE HOUSE SELF-OCCUPIED FOR PART OF THE YEAR &
LET OUT FOR OTHER PART OF THE YEAR (MAY / MAY NOT BE VACANT)}
GAV • Expected Rent shall be calculated for full 12 months.
• Rent Received/Receivable shall be calculated only for the period the house
property was actually let out.
• GAV shall be higher of Expected Rent and Rent Received/Receivable.
NO BENEFIT OF VACANCY IS AVAILABLE UNDER THIS CASE.
Municipal Taxes Municipal taxes for the whole year are allowed as deduction provided they are paid
by the owner himself during the relevant previous year.
Deduction u/s 24(a) Allowed in the normal manner
Deduction u/s 24(b) Allowed in the normal manner
Case 4: Section 23(4) {MULTIPLE HOUSES WHICH ARE SELF-OCCUPIED}

• MAXIMUM TWO HOUSES can be TREATED AS SELF-OCCUPIED at the OPTION OF THE
ASSESSEE and the OTHER HOUSE/HOUSES would be DEEMED AS LET OUT and income of each
individual house shall be computed in the manner discussed above by applying the relevant law.
• Houses Treated As Self-Occupied: Maximum aggregate deduction permissible u/s 24(b) for interest
on borrowed capital in respect of two self-occupied houses shall remain Rs 30,000/Rs 2,00,000.
• House/Houses Deemed as Let Out: Expected Rent would be considered as GAV. Further, the limit of
Rs 30,000/Rs 2,00,000 in respect of interest on borrowed capital would not apply in respect of
property which has been deemed to be let out. Such limit would apply only in respect of those houses
which have been considered as self-occupied.
Case 5: Section 23(5) {HOUSE PROPERTY HELD AS STOCK-IN-TRADE}

• Annual value of house property will be charged u/h ‘income from house property’, where it is held by the
assessee as stock-in-trade of a business.
• Where a property consisting of any building or land appurtenant held as stock-in-trade is not let
out, its annual value shall be taken as nil. This benefit would be available for a period of two
years from the end of the financial year in which certificate of completion of construction of the
property has been obtained from the competent authority.
• After the expiry of two years from the end of the financial year in which certificate of completion of
construction of the property is obtained from the competent authority, income has to be computed on a
notional basis by taking the Expected Rent as GAV.
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Illustration on Recovery of Unrealised Rent & Arrears of Rent

Mr Anand sold his residential house property in March 2022.
In June 2022, he recovered rent of Rs 10,000 from Mr Gaurav, to whom he had let out his house for two years
from April 2015 to March 2017. He could not realise two months rent of Rs 20,000 from him and to that extent
his actual rent was reduced while computing income from house property for AY 2017-18.
Further, he had let out his property from April 2018 to February 2022 to Mr Satish. In April 2020, he had
increased the rent from Rs 12,000 to Rs 15,000 per month and the same was a subject matter of dispute. In
September 2022, the matter was finally settled and Mr Anand received Rs 69,000 as arrears of rent for the
period April 2020 to February 2022.
Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr Anand, and if so in which
year?
Solution:
Relevant Law:
• As per Section 25A of the Income Tax Act, 1961, recovery of unrealised rent/arrears of rent is taxable in the
year of receipt u/h ‘income from house property’ irrespective of the fact whether the assessee is the owner of
the property or not at the time of receipt of unrealised rent/arrears of rent.
• Further, a deduction of 30% is available and only 70% amount is taxable.
Present Case:
• Mr Anand has sold his residential house property in March 2022.
• He has recovered unrealised rent of Rs 10,000 in June 2022 and arrears of rent amounting to Rs 69,000 in
September 2022.
• Both the amounts shall be taxable during PY 2022-23 (ie year of receipt) u/h income from house property
irrespective of the fact whether Mr Anand is the owner of the property or not during PY 2022-23.
• Further, a deduction of 30% is available u/s 25A and an amount of Rs 55,300 (Rs 79,000 x 70%) shall be taxable
u/h income from house property.
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TREATMENT OF UNREALISED RENT / ARREARS OF RENT:
Section 25A
RECOVERY OF UNREALISED RENT AND ARREARS OF RENT
Part 1 - UNREALISED RENT
Meaning of Unrealised rent is that portion of rent which the owner has not been able to realize
Unrealised Rent from the tenant and which has been proved to be lost or irrecoverable (ie bad debt).
Treatment of • The amount of unrealised rent should be deducted from the gross amount of rent
Unrealised Rent to arrive at the effective amount of Actual Rent Received/Receivable.
- Section 23(1)
• Deduction of unrealised rent would be available only when all the following four
conditions given under Rule 4 of the Income Tax Rules are satisfied:
❑ the tenancy is a bonafide tenancy;
❑ the defaulting tenant is not in occupation of any other property of the assessee;
❑ the defaulting tenant has vacated, or steps have been taken by the assessee to
compel the tenant to vacate the property; and
❑ 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.
Recovery of • Any unrealised rent recovered subsequently by the assessee would be:
Unrealised Rent ❑ taxable in the year of receipt
– Section 25A
❑ under the head ‘income from house property’
❑ irrespective of the fact whether the assessee is the owner of that property
or not at the time of receipt of unrealised rent.
• A deduction of 30% is available in respect of unrealised rent recovered

subsequently and balance 70% shall be taxable.
Part 2 - ARREARS OF RENT

Meaning of Sometimes the rent of a house property may be increased with retrospective effect
Arrears of Rent (ie from a back date) and the assessee may receive arrears of rent pertaining to
previous periods in the current period.
Treatment of • Arrears of rent pertaining to previous periods would be:

Arrears of Rent ❑ taxable in the year of receipt
– Section 25A
❑ under the head ‘income from house property’
❑ irrespective of the fact whether the assessee is the owner of that property
or not at the time of receipt of arrears of rent.
• A deduction of 30% is available in respect of arrears of rent and only 70% of

such arrears would be taxable.
Example: Mr X has let out his house to PNB @ Rs 50,000 p.m. On April 1, 2022, Mr X increases the rent
of his house to Rs 60,000 p.m. with retrospective effect from November 1, 2021 . Arrears of rent from
November 2021 to March 2022 (Rs 10,000 for 5 months) would be taxable in PY 2022-23. A deduction of
30% is available in respect of such arrears of rent amounting to Rs 50,000 and only Rs 35,000 would be
taxable u/h ‘income from house property’.
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MISCELLANEOUS TOPICS:
HOUSE PROPERTY DIVIDED INTO DIFFERENT PORTIONS
• There is no need to treat the whole property as a single unit for computation of income. Every
portion would be treated as a separate house and income shall be computed accordingly.
• If Fair Rent/Municipal Valuation/Standard Rent are not given separately, then such figures would be
apportioned between the let-out area portion & self-occupied portion on the basis of built-up floor area
or any other reasonable basis.
• If property taxes are given on consolidated basis, such municipal taxes also need to be apportioned on
the basis of built-up floor area or any other reasonable basis.
INCOME FROM CO-OWNED PROPERTY (MULTIPLE OWNERS) {Section 26}

• In case a house property is self-occupied by all the co-owners, the limit of Rs 30,000/Rs 2,00,000
in respect of interest on borrowed capital shall be considered separately for each person.
• Where a property/part of the property owned by co-owners is let out, income shall be first
computed as if this property/part is owned by one person only and thereafter the income so computed
shall be apportioned amongst the co-owners as per their definite share.
• If any house property is owned by a partnership firm or company, it will be considered to be income of
partnership firm or company and not that of partners or shareholders.
SUB-LETTING OF HOUSE PROPERTY {Section 56}

Meaning of Sub-letting covers a situation where a tenant (who has taken a house property on rent)
Sub-letting himself gives the same property on rent to another person.
Treatment • Income of the original owner:

Income of the original owner would be computed under the head ‘house property’.
• Income of the tenant who has sub-let the property to a third person:
Income of such person is generally computed under the head ‘income from other
sources’. All expenses incurred to earn such income are allowed as deduction.
TREATMENT OF COMPOSITE RENT

Meaning of Where a house property is let out by a person along with various facilities like generator,
Composite security, air-conditioner, furniture, etc and a combined rent is charged from the tenant
Rent towards the use of house property and the facilities, such combined rent is commonly
known as composite rent.
Treatment • Rent of house property & rent of other facilities is separable:

❑ Rent of house property is taxable under the head ‘house property’.
❑ Rent of other facilities is taxable under the head ‘PGBP’ or ’other sources’.
• Rent of house property & rent of other facilities is not separable:

❑ Rent is taxable under the head ‘business/profession’ if assessee is engaged in the
business of such renting (eg hotels, PGs, auditoriums, etc).
❑ Rent is taxable under the head ‘other sources’ if assessee is not engaged in the
business of such renting.
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TREATMENT OF HOUSE PROPERTY LOCATED OUTSIDE INDIA

• In case of ROR:
Income from house property located outside India would always be taxable in the hands of ROR
irrespective of the fact whether such income is received in India or not.
• In case of NOR/NR:
Income from house property located outside India would be taxable in the hands of NOR/NR only
when such income is directly received in India.
• Where a house property is situated outside India, deduction is available in respect of municipal
taxes levied by local authority of the country in which the property is situated.
TREATMENT OF LOSSES UNDER HOUSE PROPERTY

• Intra-Head Adjustment (Section 70): Losses of one house can be set-off against the income of
another house/houses during the same year.
• Inter-Head Adjustment (Section 71): Losses under the head house property pertaining to a
particular year can be set-off against any other income for that particular year, however no such
adjustment would be permitted from casual income. However, with effect from PY 2017-18, such
adjustment is allowed maximum to the extent of Rs 2 lakhs and the excess loss shall be carried
forward for being set-off in future years as per the provisions of Section 71B.
• Carry-Forward of House Property Losses (Section 71B): Unadjusted house property losses can
be c/f for maximum 8 years and in such future years, such losses can be set-off only against HP income.
INCOME FROM HOUSE PROPERTY TAXABLE UNDER BUSINESS/PROFESSION
House Property Owned by Assessee Used for His Own Business/Profession

– Sections 22 & 30:
➢ Income of any house property owned by any person used by him for the purposes of his
own business/profession is taxable u/h ‘Business/Profession’ (u/h House Property).
➢ While computing income u/h ‘Business/Profession’, rent in respect of such house property is not
allowed to be debited to the Profit & Loss A/c prepared u/h ‘PGBP’ and therefore the income of
such business/profession gets increased to that extent.
➢ No deduction is allowed u/s 24(a) in respect of expenditure such as municipal tax, repairs,
depreciation, land revenue, ground rent etc. However, such expenditure on actual basis is
allowed to be debited to the Profit & Loss A/c prepared u/h ‘Business/Profession’.
Letting-Out of Building which is Supplementary to the Business:

➢ Income from letting out any house property for any purpose is taxable u/h PGBP provided
such letting out is supplementary to the business/profession of the assessee.
➢ All expenses in relation to such house property are allowed to be debited to the Profit &
Loss A/c prepared u/h ‘Business/Profession’.
➢ Examples: Rent received by a school from letting out its auditorium for conducting coaching
classes, rent income from letting out of houses by a company to its employees, etc.
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OWNER IN CASE OF DISPUTED OWNERSHIP / DEEMED OWNER – Sections 22 & 27
OWNER IN CASE OF DISPUTED OWNERSHIP {Section 22}

• An owner of a house property is liable to pay income tax in respect of income earned by him from such
house property.
• If the title of ownership of a house property is under dispute in a court of law, the decision about
who is the real owner lies with the Court.
• In cases where the decision of the Court is pending, the power to decide who is the owner of the
house property in the meanwhile lies with the Income Tax Department. Generally, the beneficial
owner of such house property is considered to be the owner and thus liable to pay tax in respect of
income from such property. Example: Ownership of a house property is disputed amongst Mr A & Mr B;
however rent is being received by Mr B. In this case, Mr B is most likely to be considered the owner of
such house property till the time Court announces its decision and the amount of tax paid by Mr B can be
adjusted after the Court’s decision.
DEEMED OWNER {Section 27}

As per Section 27, the following persons though not the legal owners of a property are deemed to be
the owners for the purposes of Sections 22 to 26:
• Transferor of a house property to spouse for inadequate consideration:

If an individual transfers any house property to his/her spouse otherwise than for adequate
consideration, the transferor shall be deemed to the owner of the property so transferred.
This provision would not apply where a house property has been transferred to spouse in
connection with an agreement to live apart.
• Transferor of a house property to a minor child for inadequate consideration:

If an individual transfers any house property to his/her minor child otherwise than for adequate
consideration, the transferor shall be deemed to the owner of the property so transferred. This
provision doesn’t apply where a house property has been transferred to a minor married daughter.
• Holder of an impartible estate (a property which is not legally divisible):

The holder of an impartible estate shall be deemed to be the individual owner of all properties
comprised in the estate.
• Member of a Cooperative Society, etc:

If any cooperative society, company or other association of persons allots/leases any house property to
any member under its House Building Scheme, such member is deemed as the owner of such house
property although the legal owner of such property is the cooperative society/company/ association.
• Person in possession of a property:

A person who is allowed to take or retain the possession of any building or part thereof in part
performance of a contract of nature referred to in Section 53A of the Transfer of Property Act shall
be deemed to be the owner of that house property. This covers the cases where possession of the
property has been handed to a proposed buyer and consideration has been paid/promised to be
paid by the proposed buyer to the proposed seller but the house property has not yet been
registered in the name of the proposed buyer.
• Person to whom a property is leased out for not less than 12 years:
In such cases, lessee is deemed as the owner even though the lessor is the legal owner of the house
property.
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QUESTIONS FOR PRACTICE

Chargeability u/s 22
Question 1
Enumerate the head of income under which the following incomes would be taxable:
(i) Income earned by Mr Bhushan from letting out house property.
(ii) Income earned by Mr Bhushan from selling one house property.
(iii) Income earned by ABC Ltd from letting out an open land.
(iv) Income earned by ABC Ltd from letting out 500 flats (such flats are stock-in-trade for ABC Ltd).
(v) ABC Ltd has constructed flats within its premises for letting out to the employees.
(vi) ABC Ltd is engaged in the business of providing paying guest accommodation in its own building.
(vii) Mr X is engaged in the business of warehousing.
(viii) Income earned by Mr X from sub-letting of house property.
House Property Let Out Throughout The Year – Section 23(1)(a),(b)

Question 2
Jayashree owns five houses in Chennai, all of which are let-out. Compute the GAV of each house from the information
given below:
Particulars House I House II House III House IV House V
Municipal Value (Rs) 80,000 55,000 65,000 24,000 75,000
Fair Rent (Rs) 90,000 60,000 65,000 25,000 80,000
Standard Rent (Rs) NA 75,000 58,000 NA 78,000
Actual Rent Received/Receivable (Rs) 72,000 72,000 60,000 30,000 72,000
Question 3
Mr Vaibhav own five houses at Cochin, all of which are let out. Compute the gross annual value of each house from the
information given below:
Particulars House-I House-II House-III House-IV House-V
Municipal Value (Rs) 1,20,000 2,40,000 1,10,000 90,000 75,000
Fair Rent (Rs) 1,50,000 2,40,000 1,14,000 84,000 80,000
Standard Rent (Rs) 1,08,000 NA 1,44,000 NA 78,000
Actual Rent Received/Receivable (Rs) 1,80,000 2,10,000 1,20,000 1,08,000 72,000
Question 4
Assessee is owner of a building. It was let out for Rs 18,000 p.m. Municipal value of the building is Rs 20,000 p.m. and
FRV of the building is Rs 16,000 p.m. Following are the expenses of the building: municipal taxes paid Rs 2,000 p.m,
repairs are Rs 4,000 p.m, insurance premium Rs 12,000 p.m. Interest on loan taken for house property Rs 80,000 p.a.
Compute income u/h house property.
Question 5
Assessee is owner of a building. It was let out for Rs 15,000 p.m. Municipal value of the building is Rs 10,000 p.m.
and FRV of the building is also Rs 10,000 p.m. Following are the expenses of the building: municipal taxes paid by the
owner Rs 15,000 p.m, repairs Rs 21,000 p.m, insurance premium Rs 2,000 p.m. Interest on loan taken for property
Rs 5,000 p.m. Compute income u/h house property.
Question 6
Assessee is owner of a building. It was let out for Rs 35,000 p.m. Municipal value of the building is Rs 90,000 p.m.
and FRV of the building Rs 30,000 p.m. Following are the expenses of the building: municipal taxes paid by the
14
owner Rs 10,000 p.m, repairs Rs 9,000 p.m, insurance premium Rs 12,000 p.m. Interest on loan taken for property
Rs 15,000 p.a. Compute income u/h house property.
House Property Partly Let Out & Partly Vacant – Section 23(1)(c)
Question 7
Assessee is owner of a building. It was let out for Rs 20,000 p.m. but it remained vacant for 2 months. MV of the
building is Rs 18,000 p.m. and FRV of the building is Rs 16,000 p.m. Compute GAV of the house property.
Question 8
Assessee is owner of a building. It was let out for Rs 65,000 p.m. but it remained vacant for 5 months. MV of the
Question 9
Assessee is owner of a building. It was let out for Rs 70,000 p.m. But it remained vacant for 3 months. MV of the
Question 10
X owns 3 House Properties situated in Delhi. The particulars of the houses are as under:
Particulars House 1 House 2 House 3
(1) Municipal Value (Rs) 1,00,000 1,50,000 2,00,000
(2) Fair Rent (Rs) 1,40,000 1,80,000 2,40,000
(3) Standard Rent (Rs) 1,20,000 2,00,000 -
(4) Actual Rent p.m. (Rs) 12,000 17,500 21,000
(5) Period of vacancy Nil 1 month 6 months
(6) Municipal taxes payable for the entire year (Rs) 20% of MV 40,000 50,000
(7) Municipal taxes paid during the year (Rs) 20,000 80,000 30,000
Compute the income u/h house property of all the 3 properties.
Question 11
Mrs A let out her house on a rent of Rs 10,000 p.m. But for 2 months the house remained vacant. FRV of the house
is also Rs 10,000 p.m. Interest paid on loan taken for repairing house for the entire PY was Rs 42,000. Expenses on
municipal taxes paid were Rs 5,000 and land revenue Rs 8,000. Calculate income u/h HP.
Question 12
Assessee is owner of a building. It was let out for Rs 18,000 p.m. But it remained vacant for 2 months. Municipal value
of the building is Rs 18,000 p.m. and FRV of the building Rs 16,000 p.m. Following are the expenses of the building:
municipal taxes Rs 2,000, repairs Rs 4,000, interest on loan taken for repair Rs 80,000, insurance premium Rs 12,000.
Compute income u/h house property.
Question 13
Pathan has a house in Hyderabad. For 7 months, he let out the house to Sania Malik on a rent of Rs 20,000 p.m. and
the house remained vacant for the other 5 months. FRV of the house for 5 months is Rs 1,10,000. Interest on loan
for the entire PY is Rs 50,000 which was taken for repair of the house. Municipal taxes paid Rs 3,000 p.m.
Calculate the income.
Question 14
Sachin Tendulkar has given his house on rent of Rs 1,000 p.m. But the house could not be let out for 5 months &
during this period it was not occupied by any person. FRV of the house is Rs 10,000. Interest of the current year
is Rs 5,000 & total interest of the pre-construction period is Rs 10,000. Municipal taxes paid by the tenant were
Rs 4,000. Compute income u/h HP.
15
Question 15
What would be your answer in Question 14 if the house was vacant for 2 months? Under which clause GAV shall be
determined?
One House Which Is Self-Occupied – Section 23(2)

Question 16
Assessee is owner of a building. It was occupied by the assessee for his own residence. Expected rent of the house
property is Rs 1,00,000 p.m. For the above house property, municipal taxes of Rs 20,000 were paid by the owner.
Compute net annual value of the house property.
Question 17
Assessee purchased a building in Shahadra. It was self-occupied by the assessee for his own residence. Rent collected
by owner of a similar property in Shahadra is 65,000 p.m. Assessee had to pay municipal taxes of Rs 1,00,000 which
were outstanding from last 3 years in relation to the building purchased. Compute net annual value of the house
property.
Question 18
Mr X constructed a building in Dehradun. It was occupied by the assessee for his own residence. Rent collected
from a similar property in Dehradun is Rs 25,000 p.m. Municipal taxes paid for the house property amounted to
Rs 15,000. Compute net annual value of the house property.
Question 19
Poorna has one house property at Indira Nagar in Bangalore. She stays with her family in the house. The rent of
similar property in the neighbourhood is Rs 25,000 p.m. The municipal valuation is Rs 23,000 p.m. Municipal taxes paid
are Rs 8,000. The house was constructed in the year 2016 with a loan of Rs 20,00,000 taken from SBI Housing
Finance Ltd. The construction was completed on 30.11.2018. The accumulated interest up to 31.3.2018 is Rs 1,50,000.
During PY 2022-23, Poorna paid Rs 2,40,000 to SBI which included Rs 1,80,000 as interest. Compute Poorna's income
from house property for PY 2022 -23.
Question 20
Mr Manas owns two house properties one at Bombay, wherein his family resides and the other at Delhi, which is
unoccupied. He lives in Chandigarh for his employment purposes in a rented house. For acquisition of house property at
Bombay, he has taken a loan of Rs 30 lakhs @ 10% p.a. on 1.4.2021. He has not repaid any amount so far. In respect of
house property at Delhi, he has taken a loan of Rs 5 lakhs @ 11% p.a. on 1.10.2021 towards repairs. Compute the
deduction which would be available to him u/s 24(b) for PY 2022 -23 in respect of interest payable on such loan.
Question 21
Ganesh has three houses, all of which are self-occupied. The particulars of the houses for PY 2022-23 are as under:
Particulars House I House II House III
Municipal valuation p.a. Rs 3,00,000 Rs 3,60,000 Rs 3,30,000
Fair rent p.a. Rs 3,75,000 Rs 2,75,000 Rs 3,80,000
Standard rent p.a. Rs 3,50,000 Rs 3,70,000 Rs 3,75,000
Date of completion/purchase 31.3.2000 31.3.2002 01.4.2015
Municipal taxes paid during the year 12% 8% 6%
Interest on money borrowed for repair of property during the current
- Rs 55,000 -
year
Interest for current year on money borrowed in April 2015 for
- - Rs 1,75,000
purchase of property
Compute Ganesh’s income from house property for PY 2022-23 and suggest which houses should be opted by Ganesh
to be assessed as self-occupied so that his tax liability is minimum.
16
One House Which Is Self-Occupied As Well As Let Out – Section 23(3)

Question 22
Assessee purchased a building and it was self-occupied by the assessee for his own residence for 5 months.
After 5 months, assessee had let out the same at a rent of Rs 75,000 p.m. Municipal valuation of the building is
Rs 65,000 p.m. Assessee paid municipal taxes of Rs 1,00,000 which were outstanding from last 3 years in
relation to the building purchased. Compute income u/h house property.
Question 23
Assessee purchased a building and it was self-occupied by the assessee for his own residence for 8 months. After
8 months, assessee had let out the same for 4 months at a rent of Rs 1,00,000 p.m. Water taxes paid by the owner
to the central government are Rs 15,000. Municipal valuation of the building is Rs 65,000 p.m. Compute income u/h
house property.
Question 24
Mrs X took ownership & possession of a flat in Chennai, which is used for self-occupation. During PY 2022-23, the
flat was used by her for 5 months only. For the remaining 7 months, it was let out at a rent of Rs 75,000 p.m.
Municipal valuation is Rs 32,000 p.m. & the fair rent is Rs 4,20,000 p.a. Compute income u/h house property.
Question 25
A has a house property in Delhi whose municipal value is Rs 1,00,000 and the fair rental value is Rs 1,20,000. It was
self-occupied by A from 1.4.2022 to 31.7.2023. Wef 1.8.2022, it was let out at Rs 9,000 p.m. Compute income u/h
house property for PY 2022 -23 if the municipal taxes paid during the year were Rs 20,000.
More Than One House/House Divided Into Different Portions

Question 26
Assessee is owner of two buildings and both the buildings are self-occupied. Municipal value of the building B is
Rs 18,000 p.m. and its FRV is Rs 16,000 p.m. Compute income u/h house property. Following are the expenses of
the buildings:
• Building A: Municipal taxes Rs 2,000; repairs Rs 4,000; interest on loan taken for repair Rs 80,000; insurance
premium Rs 12,000.
• Building B: Municipal taxes Rs 2,000; repairs Rs 4,000; interest on loan taken for repair Rs 80,000; insurance
premium Rs 12,000.
Question 27
Mr V has two self-occupied houses. One in Delhi and other in Bangalore. He has sought your advice as to the tax
treatment of these two houses.
• Delhi House: FRV is Rs 1,00,000; MV is Rs 2,00,000; municipal taxes paid Rs 20,000; interest on loan taken
for construction of house is Rs 50,000; repairs Rs 30,000.
• Bangalore House: FRV is Rs 5,00,000; municipal taxes paid Rs 2,00,000; interest on loan taken for construction
of house is Rs 2,70,000; land revenue paid Rs 50,000.
Question 28
Assessee has a building of two floors. Ground floor was let out for Rs 20,000 p.m. while the first floor was occupied
for his own residence. Municipal value of the building is Rs 18,000 p.m. and FRV of the building is Rs 16,000 p.m.
Compute income u/h house property. Following are the expenses of the building:
• Municipal taxes – Rs 20,000;
• Repairs - Rs 4,000;
• Interest on loan taken for repair - Rs 1,80,000;
• Insurance premium - Rs 12,000.
17
Question 29
Assessee has a building of two floors. One was let out for Rs 10,000 p.m. and the other was occupied for his own
business or profession. Municipal value of the building is Rs 18,000 p.m. and FRV of the building is Rs 16,000 p.m.
Compute income u/h house property. Following are the expenses of the building:
• Municipal taxes – Rs 2,000
• Repairs – Rs 4,000
• Interest on loan taken for repair – Rs 80,000
• Insurance premium – Rs 12,000.
Question 30
Mrs B is the owner of a two storied house in Madras. Compute Mrs B's income from house property for PY 2022-23:
• She gets a monthly rent of Rs 7,000 from her tenant in the ground floor.
• The first floor, identical in all respect with the ground floor used to be occupied by a friend of Mrs B from whom
she charged a rent of Rs 5,000 p.m. During the year ended 31.03.2023, the friend stayed in Mrs B's house up to
31.12.2022. On 01.01.2023, it was again let out to tenant at a rent of Rs 7,000 p.m.
• Details of expenses incurred by Mrs B during the year ending 31.03.2023 in respect of the house were as under:
Particulars Amount (Rs)
Cost of repairing ground floor 7,500
Cost of repairing first floor 50,000
Interest on loan taken for construction of first floor 20,000
Municipal taxes paid by owner 6,000
Monthly salary of an employee for collecting rent 1,000
Question 31
Mr X owns one residential house in Mumbai. The house is having two units. First unit of the house is self-occupied by
Mr X and another unit is rented for Rs 8,000 p.m. (excluding facilities for which charged separately). The rented unit
was vacant for 2 months during the year. Compute income of Mr X from house property for PY 2022 -23 if the
particulars of the house for PY 2022-23 are as under:
Standard rent Rs 1,62,000 p.a.
Municipal valuation Rs 1,90,000 p.a.
Fair rent Rs 1,85,000 p.a.
Municipal tax paid 15% of municipal valuation
Light and water charges Rs 500 p.m.
Interest on borrowed capital Rs 1,500 p.m.
Lease money Rs 1,200 p.a.
Insurance charges Rs 3,000 p.a.
Repairs Rs 12,000 p.a.
Question 32
Mr Krishna owns a residential house in Delhi. The house is having two identical units. First unit of the house is self-
occupied by Mr Krishna and another unit is rented for Rs 12,000 p.m. The rented unit was vacant for three months
during the year. The particulars of the house for PY 2022-23 are as under:
Standard rent Rs 2,20,000 p.a.
Municipal valuation Rs 2,44,000 p.a.
Fair rent Rs 2,35,000 p.a.
Municipal tax paid by Mr Krishna 12% of municipal valuation
Light and water charges Rs 800 p.m.
Interest on borrowed capital Rs 2,000 p.m.
Insurance charges Rs 3,500 p.a.
18
Painting expenses Rs 16,000 p.a.

Compute income from house property of Mr Krishna for AY 2023-24.
Question 33
Mr Vikas owns a house property whose municipal value, fair rent and standard rent are Rs 96,000, Rs 1,26,000 and
Rs 1,08,000 (per annum) respectively. During FY 2022-23, one-third of the portion of the house was let out for
residential purpose at a monthly rent of Rs 5,000. The remaining two-third portion was self-occupied by him.
Municipal taxes @ 11% of municipal value were paid during the year. The construction of house began in June 2015 and
was completed on 31.05.2018. Vikas took a loan of Rs 1,00,000 on 01.07.2015 for construction of building. He paid
interest on loan @ 12% p.a. and every month such interest was paid. Compute income from house property of Mr Vikas
for PY 2022 -23.
Question 34
Prem owns a house in Madras. During PY 2022-23, 2/3rd portion of house was self-occupied and 1/3rd portion was let
out for residential purposes at a rent of Rs 8,000 p.m. Municipal value of the property is Rs 3,00,000 p.a., fair rent is
Rs 2,70,000 p.a. and standard rent is Rs 3,30,000 p.a. He paid MT @ 10% of municipal value during the year. A loan
of Rs 25,00,000 was taken by him during the year 2018 for acquiring the property. Interest on loan paid during the
PY 2022-23 was Rs 1,20,000. Compute Prem’s income from house property for PY 2 022-23.
Pre-Construction Period Interest

Question 35
Mr Jai Jain started the construction of the house on 01.04.2017 with borrowed capital of Rs 22,00,000 @ 10% p.a.
He completed the house on 01.04.2018. During PY 22-23, the house was let out for Rs 20,000 p.m. Municipal taxes
paid were Rs 30,000. Loan is still outstanding. Calculate income of PY 22-23.
Question 36
What will be your answer in Question 35 if the house occupied is a self-occupied house?
Question 37
Arvind had taken a loan of Rs 5,00,000 for construction of property on 1.10.2021 . Interest was payable @ 10% p.a.
The construction was completed on 30.6.2022. No principal repayment has been made up to 31.3.2023. Compute the
interest allowable as deduction u/s 24 for AY 2023-24.
Question 38
Mr Raphael constructed a shopping complex. He had taken a loan of Rs 25 lakhs for construction of the said property
on 01.08.2020 from SBI @ 10% for 5 years. The construction was completed on 30.06.2021. The shopping complex
has been let out for the whole year and rental income received is Rs 30,000 per month. Municipal taxes paid for
shopping complex Rs 8,000.
Arrears of rent received from shopping complex Rs 1,20,000. Interest paid on loan taken from SBI for purchase
of house for use as own residence for the period FY 2022-23 is Rs 3 lakhs. Compute income from house property
of Mr Raphael for AY 2023-24 as per the Income Tax Act, 1961.
Treatment Of Unrealized Rent/Recovery Of Unrealized Rent

Question 39
An owner of a building has given it on a rent of Rs 20,000 p.m. But he could not realize rent for 2 months. Municipal
value of building is Rs 18,000 p.m. and FRV of the building is Rs 16,000 p.m. Municipal taxes Rs 2,000; repairs Rs 4,000;
interest on loan taken for repair Rs 80,000; insurance premium Rs 12,000. Compute income u/h HP.
Question 40
Y furnishes the following particulars in respect of a house property owned by him in Delhi.
Municipal Value Rs 2,00,000
19
Fair Rent Rs 2,40,000

Actual Rent (per month) Rs 21,000
Municipal tax paid during the year Rs 20,000
The tenant vacated the property on 31.10.2022 and thereafter the property was let out for Rs 25,000 p.m.
Y could not realize the rent for the month of Sept 2022 and Oct 2022 due to the death of the earlier tenant.
(a) Compute income u/h house property for PY 2022 -23.
(b) What will be your answer if the unrealized rent is for one month instead of two months?
Question 41
Compute gross annual value in the following cases for PY 2022 -23:
Particulars Situation 1 Situation 2 Situation 3 Situation 4
Fair Rent (p.m.) (Rs) 11,000 13,000 14,000 16,000
Municipal Valuation (p.m.) (Rs) 12,000 11,000 9,000 18,000
Standard Rent (p.m.) (Rs) 13,000 12,000 8,000 17,000
Rent Received/Receivable (p.m.) (Rs) 8,000 12,500 21,000 17,000
Vacancy - 2 months 1 month 3 months
Unrealised rent 1 month - 3 months 1 month
Question 42
Anirudh has a property whose municipal valuation is Rs 1,30,000 p.a. The fair rent is Rs 1,10,000 p.a. & the standard
rent fixed by the Rent Control Act is Rs 1,20,000 p.a. The property was let out for a rent of Rs 11,000 p.m.
throughout the PY. Unrealised rent was Rs 11,000 and all conditions prescribed by Rule 4 are satisfied. He paid
municipal taxes @ 10% of municipal valuation. Interest on borrowed capital was Rs 40,000 for the entire year.
Compute the income from house property of Anirudh for PY 2022 -23.
Question 43
Ganesh has a property whose municipal valuation is Rs 2,50,000 p.a. The fair rent is Rs 2,00,000 p.a. whereas standard
rent fixed by the Rent Control Act is Rs 2,10,000 p.a. The property was let out for a rent of Rs 20,000 p.m. However,
the tenant vacated the property on 31.1.2023. Unrealised rent was Rs 20,000 and all conditions prescribed by Rule 4
are satisfied. He paid municipal taxes @ 8% of municipal valuation. Interest on borrowed capital was Rs 65,000 for
the year. Compute income from house property of Ganesh for PY 2022 -23.
Question 44
Smt Rajalakshmi owns a house property at Adyar in Chennai. The municipal value of the property is Rs 5,00,000; fair
rent is Rs 4,20,000 and standard rent is Rs 4,80,000. The property was let-out for Rs 50,000 p.m. up to December
2022. Thereafter, the tenant vacated the property and Smt Rajalakshmi used the house for self-occupation. Rent
for the months of November & December 2022 could not be realized in spite of the owner’s efforts. All the
conditions prescribed under Rule 4 are satisfied. She paid municipal taxes @ 12% during the year. She had paid
interest of Rs 25,000 during the year for amount borrowed for repairs for the house property. Compute her income
from house property for PY 2022 -23.
Question 45
Mrs Disha Khanna, a resident of India, owns a house property at Bhiwani in Haryana. Municipal Value of the property
is Rs 7,50,000, Fair Rent of the property is Rs 6,30,000 and Standard Rent is Rs 7,20,000 per annum. The property
was let out for Rs 75,000 p.m. for the period from April 2022 to December 2022.
Thereafter, the tenant vacated the property and Mrs Disha Khanna used the house for self-occupation. Rent for the
months of November and December 2022 could not be realized from the tenant. The tenancy was bonafide but the
defaulting tenant was in occupation of another property of the assessee, paying rent regularly.
She paid municipal taxes @ 12% during the year and paid interest of Rs 35,000 during the year for amount borrowed
towards repairs of the house property.
You are required to compute her income from “House Property” for PY 2022 -23.
20
Treatment Of Losses Under House Property

Question 46
Mr X has loss u/h house property Rs 13,00,000; income u/h salary Rs 8,00,000; income u/h PGBP Rs 6,00,000;
LTCG Rs 20,00,000 and casual income Rs 5,00,000. Compute his tax liability for PY 2022 -23.
Question 47
Mr X has loss u/h house property Rs 20,00,000; income u/h salary Rs 10,00,000; income u/h PGBP Rs 11,00,000;
LTCG Rs 20,00,000 and deductions u/s 80C to 80U is Rs 2,00,000. Compute his tax liability for PY 2022 -23.
Treatment Of Income From Co-Owned Property (Multiple Owners)

Question 48
M & N are two equal co-owners of the property situated in Goa, which has 2 units of identical size. M & N have
self-occupied one unit each for their residence. The municipal valuation of the house is Rs 2,00,000 p.a.
FRV of the house is Rs 2,50,000 p.a. The other particulars of the house property are as under:
Taxes paid to local authority Rs 80,000 p.a.
Expenses on repairs Rs 1,00,000 p.a.
Interest on money borrowed (for construction of the house) Rs 4,20,000 p.a.
Compute the income u/h house property for each co-owner.
Question 49
P & Q are the two equal co-owners of the property situated in Delhi, which has 2 units of identical size. Both the
units are let out to one tenant at a combined rent of Rs 50,000 p.m. The house remained vacant for 1 month.
The municipal valuation of the house is Rs 40,000 p.m. The other particulars of the house property are as under:
• Municipal taxes paid – Rs 80,000 p.a.
• Insurance premium paid – Rs 10,000 p.a.
• Interest on money borrowed (for construction of the house) – Rs 6,00,000 p.a.
Question 50
R, S and T are 3 equal co-owners of the property situated in Delhi, which has 3 units of identical size. All 3 units are
let out to one tenant at a combined rent of Rs 1,20,000 p.m. The house remained vacant for 3 months. The municipal
valuation of the house is Rs 1,00,000 p.m. The other particulars of the house property are as under:
Particulars Amount (Rs)
Municipal taxes paid by tenant 1,20,000 p.a.
Rent collection charges 6,000 p.m.
Interest on money borrowed (for repair of the house) 6,00,000 p.a.
Question 51
Raman is a co-owner of a house property along with his brother.
• Municipal value of the Property – Rs 1,60,000
• Fair Rent – Rs 1,50,000
• Standard Rent under the Rent Control Act – Rs 1,70,000
• Rent received (monthly) – Rs 15,000
The municipal taxes of Rs 5,100 have been paid by the tenant. The loan for the construction of this property is jointly
taken. The interest charged by the bank is Rs 25,000 out of which Rs 21,000 has been paid and Rs 4,000 has not been
paid. Interest paid on the unpaid interest is Rs 450. To repay this loan, Raman and his brother have taken a fresh loan
and interest charged on this loan is Rs 5,000.
Compute the income from this property chargeable in the hands of Mr Raman for PY 2022 -23.
21
Treatment Of Composite Rent

Question 52
Mr Z lets out his house at a rent of Rs 16,000 p.m. (charges for facilities are paid separately). The rented unit was
vacant for 1 month during the year. Compute total income of Mr Z for for PY 2022-23 if the particulars of the house
property are as under:
• Municipal valuation - Rs 95,000 p.a.;
• Fair rent - Rs 1,44,000 p.a.;
• Municipal tax paid by owner - 10% of municipal valuation;
• Following charges have been recovered by the owner from the tenant for providing additional facilities:
➢ Electricity and water charges - Rs 400 p.m.;
➢ Charges for AC facility provided - Rs 2,500 p.m..
• To provide additional facilities, the owner has incurred maintenance charges of Rs 1,000 p.m. Such maintenance
charges have not been incurred during the time of vacancy; and
• Interest on borrowed capital - Rs 80,000 p.a.
Question 53
Mr A is the owner of a house property in Bangalore. It has been let out for Rs 2,40,000 inclusive of all facilities.
The tax payable by the owner comes to Rs 20,000 on MV of Rs 2,00,000 but Mr A has taken an agreement from
the tenant stating that the tenant would pay tax direct to the municipality. Compute total income of Mr A if the
particulars of amount recovered for other facilities and deductions claimed by landlord are given below:
S.No. Particulars Amount (Rs)
(1) Water charges (as per agreement) 7,000
(2) Lift Maintenance 6,000
(3) Salary of Gardner 3,500
(4) Lighting of Stairs 3,500
(5) Mr A claims the following deductions (related to house property)
• Repair 20,000
• Land Revenue paid 3,000
• Collection charges 5,500
Note: No maintenance charges were incurred towards provision of other facilities.
22
Examination Problems :
Question 1 :
Mr. K is the owner of two properties. He furnishes the following particulars; compute NAV of the property for the
Assessment Year 2023-24
House 1 House 2
GMV 70000 -
Net municipal value - 81,000
Notional rent 60,000 70,000
Standard rent - 1,00,000
Municipal tax paid @10% @ 15 %
For the previous year 2022-23 5,000 -
For the previous year 2020-21
Paid on 2022-23 3,000 -
Rent received 66,000 -
Vacancy period 1 month -
Rent per month - 9,000
Unrealized rent - 7,000
Situated at Kanpur Kolkata
Question 2
Mr. P is the owner of three properties at Kolkata. He has let out three properties for residential purpose of the
tenant. From the following particulars compute income from house property for the previous year 2022 -23
House 1 House 2 House 3
GMV 30,000 ? 35,000
Annual rent 42,000 - 30,000
Notional rent 36,000 28,000 30,000
Standard rent 30,000 35,000 36,000
unrealized rent 7,000 3 months 2,500
vacancy period 1 month 2 months 3 months
municipal tax 10% 10% 15%
net municipal value ? 54,000 ?
rent received - 21,000 -
interest on loan 5,000 6,000 7,000
23
Question 3
Mr. D furnishes the following information to P.Y. 2022-23
Particulars House 1 House 2
Situated at Kolkata Kanpur
Used for Let out for residential Purpose Self-occupied for residential purpose
GMV ---- 90,000
Net municipal value 1,80,000 -
Notional rent 1,50,000 70,000
Standard rent 1,70,000 60,000
Rent receivable 10,000 p.m -
Unrealized rent 1 month -
Vacancy period 2 moths -
Municipal tax 10% 7%
Interest on loan 60,000 20,000
Unrealized rent received (for P.Y 2018-19) 7,000 -
a) Municipal tax in case of house 1, 60% for P.Y 2022-23 and Rs. 5,000 for the P.Y 2021-22 paid during the P.Y
2022-23
b) Interest on loan in case of house 1 of Rs. 40,000 and in case of house 2 Rs. 5,000 paid during the P.Y 2022-23
Compute income from house property of Mr. D for the A.Y 2023-24.
Question 4
Mr. M is the owner of three houses, the particulars of which for the previous year 2022-23 are as follows:-
Particulars H1 H2 H3
GMV 5,00,000 5,60,000 2,00,000
Notional rent 4,40,000 4,80,000 2,40,000
Standard rent 4,20,000 3,00,000 Not applicable
Rent received 2,20,000 2,20,000 2,00,000
Vacancy period 1 month - -
Municipal tax @ 20% @ 15% @ 10%
Date of construction completed 14.9.2020 31.5.2020 17.6.2020
Date of loan taken 10.3.2017 - 1.4.2017
Date of loan repaid - - 15.2.2019
Interest on loan taken 1,80,000 - 60,000
Situated at Kolkata Delhi Durgapur
NOTES
(1) HOW USED – H1: let out for residential purpose.
H2 : 3/4th for own residence and 1/4th for tenants residence.
H3 : from 1.4.2022 to 31.10.2022 for own residence and remaining period for let out
purpose. From 1.3.2023 to 31.3.2023 remains vacant
(2) Mr. M has taken a loan carrying interest @ 18% p.a. by mortgaging H-1, but actually utilized for construction
of H-2 . accumulated interest prior to completion of construction of H-2 amounted to Rs. 40,000. Interest of
Rs. 30,000 relating to the current previous year remains unpaid.
Compute income from the house property of Mr. M for the A.Y 2023 -24.
24
Question 5
P owns three houses at different places. The particulars of the house are as follows:-
Situated at Kolkata Mumbai Delhi
GMV 60,000 ? 63,000
Rateable value (NMV) ? 1,26,000 ?
Municipal tax 10% 10% 10%
Sewerage tax 5% 5% 5%
Education cess (HEC) 1% 2% --
Rent received 72,000 1,05,000 --
FR / Notional rent 80,000 1,50,000 --
Standard rent 70,000 1,60,000 70,000
Amenities to tenants:
--Lift maintenance 2,000 -- --
--water charges 1,000 -- --
--Lighting of stairs 2,000 -- --
Unrealized rent for the P.Y 3 months 3 months --
Vacancy ------ 2 months 3 months
Arrear rent received 2,000 -- --
Loan taken (amount) 2,00,000 3,00,000 4,00,000
Date of loan taken 1.5.2017 1.5.2017 1.5.2017
Date of completion of construction 10.7.2020 107.2020 10.7.2020
Unrealized rent received --- 2,000 --
(Rs. 6,000 has been allowed as deduction for the P.Y
2016-17)
Date of repayment of loan 31.1.2022 31.1.2019 31.1.2023
Rate of interest 12% p.a. 10% p.a. 15% p.a.
NOTES:
(1) H-1 – let out for residential purpose
(2) H-2 – let out business purpose
(3) H-3 – self occupied for residential purpose.
From the above particulars of the houses, compute his income for the assessment year 2023-24
25
Question 6
Mrs. Sonia sen owns the following houses in Kolkata. Compute her income from house property for the P.Y. 2022-23
Purpose House A(let out for residence) House B (self-occupied)
GMV 2,40,000 3,60,000
FR p.a. 2,00,000 3,20,000
Standard rent p.a. 2,20,000 N.A.
Repairs 5,000 6,750
Municipal tax 10% (75% paid) 10% (50% paid)
Rent received 2,16,000 --
Vacancy period 3 months --
Other information:
I. Arrear rent of Rs. 45,000 has been received for house A during the previous year (not included in the rent
received)
II. A housing loan of Rs. 20,00,000 was taken from State Bank of India @12% p.a. interest for construction of
house B on 1.7.2016. The construction was completed within 2 years(on 30.6.2018) after taking loan. The
entire loan is remaining outstanding.
Question 7
MR. Abdul Hasan own three houses at Ranchi. He furnishes the following particulars for the P.Y 2022-23
House no. 1 : The house was constructed in 2020 and let out to a friend at a monthly rent of Rs. 10,000 upto
31.1.2023 and thereafter, it was let out at its FR of Rs. 15,000 per month. He has paid Rs. 15,000 as municipal taxes
@10% of municipal value. He has also paid fire insurance premium of Rs. 2,000
House no. 2: Ground floor is let out @Rs.20, 000 p.m. first floor, identical to ground floor, is occupied by him for his
residence. Municipal taxes paid @20% amounted to Rs 80,000
House no. 3 : The house was constructed in 2009 and is used for his business. The annual value of this house is
Rs. 1, 00,000 and he spent Rs. 5,000 as municipal taxes and Rs.2, 000 for repairs.
Other information
A loan of Rs.40, 00,000 has been taken on 1.6.2019 for construction of House no. 2. Construction of the house was
completed on 1.6.2020. He repaid the entire loan on 31.12.2022. Interest on loan is payable @ 12% p.a.
Compute his income from house property for the P.Y 2022-23.
Question 8
MR. B Poddar, a resident of India, owns a house in Kolkata 50% of the house was let out for the residential purpose
on a monthly rent of Rs. 5,000. However this portion remained vacant for one month during 2022-23. 25% of the
house was used by the owner for the purpose of his own business, while remaining 25% of the house was used for
the purpose of his residence.
The following are the particulars in respect of the house property.
FR (for let out property) Rs.48,000 p.a. municipal tax paid for the house @10% Rs.9,000. Repairs Rs.17,500, a loan of
Rs.1,50,000 was taken on 1st April 2018 @10%p.a. as interest for the construction of the house which was completed
on 30th June 2020. Nothing was repaid on loan account so far.
Compute his income from house property for the assessment year 2023-24.
26
Question 9
Mr. Mrinal Chakraborty and his family members have occupied three houses for their residential purpose. The
particulars of the house, which were constructed by Mr. Chakraborty, are as follows:
Municipal value 8,00,000 15,00,000 22,50,000
FR 18,00,000 22,50,000 27,50,000
Standard rent 15,00,000 18,00,000 30,00,000
Municipal tax paid 1,20,000 1,50,000 2,70,000
Fire insurance premium
i. Paid 80,000 1,20,000 --
ii. Due -- -- 90,000
Interest on loan (taken for purpose of 75,000 1,10,000 1,50,000
construction)
Repairs Nil 1,50,000 3,00,000
You are required to compute taxable income of Mr. Mrinal Chakraborty for the P.Y. 2022-23.
Question 10
MR. Y owns three houses in Kolkata .the particulars for the year ended 31.3.23 are given below:
House 1 : Purpose of use – let out for residence, municipal tax – 5,000, fire insurance premium – 3,000, interest on
loan paid – 3,200, repairs – 7,000. Standard rent – 40,000. Rent received – 35,000. Vacancy period – 2 months.
Municipal value – 36,000.
House 2 : Purpose of use – Self-occupied. Municipal tax – 3,500. Fire insurance premium – 2,500. Interest on loan
paid – 3,600. Repairs – 5,400. Municipal value – 35,000
House 3 : Purpose of use – for own business. Municipal tax – 4,000. Fire insurance premium – 3,600. Interest on loan
paid – 12,000. Repairs – 6,000. Municipal value – 48,000
Compute income from house property for the P.Y 2022-23 after considering the following additional information:
i. Municipal tax of Rs. 1,500 in respect of House 1 was in arrear
ii. Interest on loan of Rs. 1,400 in respect of House 2 was in arrears.
Question 11
MR. R is the owner of a house in Kolkata. The house is divided in two equal residential units. One unit is used for own
residential purpose and the other unit is rented for Rs.8, 000 p.m. the rented unit was vacant for two months during
the P.Y the particulars of house for the previous 2022-23 are as under:
Standard rent – 1, 62,000p.a. municipal valuation – 1,90,000p.a. FR – 1, 85,000p.a. municipal tax – 15%of municipal
value, light and water charges – 500 p.m. interest on borrowed capital – 2,500p.m. Repairs – 3,200 p.a.
Compute income from house property of Mr. R for the P.Y 2022-23.
Question 12
MR. X furnished the following information for the previous year 2022-23
House 1 – where situated – Kolkata, how used – let out, construction started on 5.2.2013. Construction complete on
15.5.14, GMV – 30,000, FR – 60,000, annual rent - 72,000. Standard rent – 55,000
27
Vacancy period – 3 months. Municipal tax – 10% of municipal value. Repairs paid – 2,500. Loan taken for
construction @8% p.a. (Date of taking loan – 30.9.2011) – 1,00,000
House 2: where situated – Durgapur, how used – self-occupied, construction started on – 1.10.2016, construction
completed on – 20.10.2018, GMV – 25,000, FR – 40,000, municipal tax – 1,200, loan taken for construction @ 8%
p.a.(date of taking loan – 1.6.2016) – 2,00,000
Other information: In case of house 1 , municipal tax for the last quarter remains unpaid while unpaid municipal tax
of Rs.475 for the year 2021-22 was paid during 2022-23. Compute ‘Income from House Property’ of Mr. X for the P.Y
2022-23.
Question 13
Mr. De owns two houses in Kolkata. The first one is occupied by him for his residence and the second house,
consisting of two flats of equal sizes, is let out to tenants @Rs. 7,000 p.m. per flat for residential purposes.
Following are the particulars regarding his houses for the financial year ended 31st march 2023
Particulars First house Second house
Construction started 18.8.2017 30.11.2016
Construction completed 15.6.2020 30.10.2017
Municipal tax @ 15% 40,500 21,600
Insurance premium 6,000 4,000
Vacancy period -- One flat for three months
Mr. De borrowed Rs. 6, 00,000 for the construction of first house @10% p.a. on 1.9.2018. He also borrowed
Rs. 8, 00,000 for the construction of second house @12% on 1.3.2017. He paid interest regularly but loans remain
unpaid on 31.3.2023.
Compute Mr. De’s income from house property for the P.Y. 2022-23.
Question 14
Mr. P owner of three houses in Chennai furnished the following information: compute his income from house
property for the P.Y. 2022-23
House 1 (let out): standard rent under Rent Control Act – 36,000, GMV – 34,000, rent received – 37,500, FR –
45,000, repairs – 2,000, municipal tax (10% on municipal value) – 40% due, interest on loan taken for the
construction of the house – 2,000, brokerage for arranging loan – 500, vacancy period – 2 months, collection charges
– 3,000, recovery of unrealized rent ( previously allowed as deduction) – 5,000, Legal charges for recovery of arrear
rent – 200, fire insurance premium – 1,000(due).
House 2 (self-occupied): Standard rent under Rent Control Act – 63,500, GMV – 56,500, FR – 67,500, municipal tax
(10% on municipal value) – fully paid , interest on loan taken for the construction of the house – 4,000, brokerage for
arranging loan – 1,000, vacancy periods – 6 months, fire insurance premium – 1,500
House 3 (self-occupied): GMV – 30,000, FR – 45,000, repairs – 3,000, munipal tax (10% on municipal value) – fully
paid, interest on loan taken for the construction of the house – 3,000, brokerage for arranging loan – 750, vacancy
period – 6 months, fire insurance premium – 1,000
28
Question 15
Mr. B is the owner of three houses properties in Kolkata. From the following information compute income from
house property of Mr. B relating to the P.Y 2022-23.
House 1: date of commencement of construction – 1.4.2017, Date of completion of construction – 1.4.2019, How
used – for residential purposes of tenant, Rent received – 1,60,000, GMV – 1,80,000, Municipal tax – 12%, Repair
expense – 5,000, Vacancy period – 2 months
House 2: Date o f commencement of construction – 5.6.2010, Date of completion of construction – 15.2.2013, How
used – For business purposes of tenant, Rent received – 2,00,000, GMV – 1,00,000, Municipal tax – 12%, Repair
expenses – 8,000
House 3: Date of commencement of construction – 7.5.2005, Date of completion of construction – 16.7.2012, How
used – occupied for own residence, GMV – 80,000, Municipal tax – 12%, Repair expenses – 7,000
Additional information:
i. Rs. 7,50,000 was borrowed by Mr. B on 1.4.2016 @10% p.a. for HDFC for construction of the first house. The
loan is still pending.
ii. During the P.Y. 2022-23 Mr. B recovered Rs.10,000 as arrear rent in respect of the second house. Such
receipt is not included in rent received for the year.
Question 16
Mr. M is the owner of three houses. From the following particulars of the houses, compute his income from house
property for the A.Y. 2023-24.
First house: The houses is situated in Delhi. It was let out with effect from 1.4.22 for Rs. 20,000p.m. which was
vacated by tenant on 31.1.2023 and remained vacant for 2 month. Net municipal value of the house is Rs.180,000.
Municipal tax @20% of municipal value has been paid by him. The FR and standard rent of the house are Rs.
2,20,000 and Rs.2,00,000 respectively. Interest paid by him on money borrowed for the purchase of the house
property was Rs.60,000. Construction of the house was completed on 31.12.2018. In the previous year 2022-23,
Rs.15,000 has been recovered for unrealized rent relating to the previous year 2020-21.
Second house: The house is situated in Kolkata, which he has transferred to his wife in 2015 without any
consideration. The municipal value of the house is Rs.5,00,000. He however, uses this house for his own residence.
Municipal tax paid for the house was Rs.18,750. He took a loan for the purpose of repairing of the house. The loan
amount is still outstanding. The interest on loan due for the P.Y 2022-23 was rs. 1,65,000 out of which the paid rs.
145,000 during the P.Y 2022-23.
Third house: The house consists of two identical flats and situated in Kolkata. One flat has been used by him for his
own business and other one has been let out to a tenant. He received rs.30,000 as rent from the house . net
municipal value of the house is rs. 90,000. Municipal tax @10% has been by him. He paid rs. 17,500 as interest on
loan borrowed for the purpose of the house
29

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RAJESH NANGALIA CLASSES 9903133927

House let out throughout the year/partly let out/

Section 23(5) House property held as stock-in-trade

Section 24(a) Statutory deduction/standard deduction

Section 24(b) Interest on borrowed capital

Section 25 Interest in case of loan taken from outside India

INCOME FROM HOUSE PROPERTY

Section 22 {Charging Section}

❑ Sale Of House Property:

❑ Income From Business Of Letting-Out House Property:

❑ Income From House Property Held As Stock-In-Trade:

Computation of Income Under the Head “HOUSE PROPERTY”

Sections 23(1)(a) & 23(1)(b)

• Standard Rent: Highest possible rent as per Rent Control Act

Proviso to Section 23(1)

• Section 24(b) – Interest on Borrowed Capital:

COMPUTATION OF INCOME U/H HOUSE PROPERTY - SPECIAL CASES:

• Step 3: Compare Expected Rent with Gross Rent Received/Receivable.

Municipal Taxes Allowed in the normal manner

Case 2: Section 23(2) {SELF-OCCUPIED HOUSE OR UNOCCUPIED HOUSE}

Deduction u/s 24(b) Allowed in the normal manner

Case 4: Section 23(4) {MULTIPLE HOUSES WHICH ARE SELF-OCCUPIED}

Case 5: Section 23(5) {HOUSE PROPERTY HELD AS STOCK-IN-TRADE}

Illustration on Recovery of Unrealised Rent & Arrears of Rent

TREATMENT OF UNREALISED RENT / ARREARS OF RENT:

• A deduction of 30% is available in respect of unrealised rent recovered

Part 2 - ARREARS OF RENT

Treatment of • Arrears of rent pertaining to previous periods would be:

• A deduction of 30% is available in respect of arrears of rent and only 70% of

INCOME FROM CO-OWNED PROPERTY (MULTIPLE OWNERS) {Section 26}

SUB-LETTING OF HOUSE PROPERTY {Section 56}

Treatment • Income of the original owner:

TREATMENT OF COMPOSITE RENT

Treatment • Rent of house property & rent of other facilities is separable:

• Rent of house property & rent of other facilities is not separable:

TREATMENT OF HOUSE PROPERTY LOCATED OUTSIDE INDIA

TREATMENT OF LOSSES UNDER HOUSE PROPERTY

INCOME FROM HOUSE PROPERTY TAXABLE UNDER BUSINESS/PROFESSION

House Property Owned by Assessee Used for His Own Business/Profession

Letting-Out of Building which is Supplementary to the Business:

OWNER IN CASE OF DISPUTED OWNERSHIP / DEEMED OWNER – Sections 22 & 27

OWNER IN CASE OF DISPUTED OWNERSHIP {Section 22}

DEEMED OWNER {Section 27}

• Transferor of a house property to spouse for inadequate consideration:

• Transferor of a house property to a minor child for inadequate consideration:

• Holder of an impartible estate (a property which is not legally divisible):

• Member of a Cooperative Society, etc:

• Person in possession of a property:

QUESTIONS FOR PRACTICE

House Property Let Out Throughout The Year – Section 23(1)(a),(b)

One House Which Is Self-Occupied – Section 23(2)

One House Which Is Self-Occupied As Well As Let Out – Section 23(3)

More Than One House/House Divided Into Different Portions

Painting expenses Rs 16,000 p.a.

Pre-Construction Period Interest

Treatment Of Unrealized Rent/Recovery Of Unrealized Rent

Fair Rent Rs 2,40,000

Treatment Of Losses Under House Property

Treatment Of Income From Co-Owned Property (Multiple Owners)