Computation of Income from a Self –

Occupied House Property

Notional
Particulars Income Rs
Gross Annual Value xxxxx
Less: Municipal Taxes -------
Net Annual Value xxxxx
Less: Specific Deductions u/s 24
1. Standard Deduction ------
2. Interest on Borrowed Capital ------
Income from House Property xxxxx
Self Occupied Property : Case 1: Annual value of one/two self
– occupied property

One/Two
Houses - Own Benefit only
Residence to Individual
and HUF

Annual Value – Not Let

NIL Out during
the Year

No Other
benefit
Conditions derived
Computation of Income from a Self –
Occupied House Property
Particulars Rs
Gross Annual Value xxxxx
Less: Municipal Taxes -------
Net Annual Value xxxxx
NIL ,
Less: Specific Deductions u/s 24 As NAV is
NIL
1. Standard Deduction ------
2. Interest on Borrowed Capital ------
Income from House Property xxxxx
Deduction of Interest on Borrowed Capital in Case of
Self Occupied Property
PURCHASE

INTEREST ON CAPITAL CONSTRUCTION

REPAIRS

RECONSTRUCTION

RENEWALS
Deduction of Interest on Borrowed Capital in Case of
Self Occupied Property
Interest on
Capital

Loan taken
Loan taken
before
after 1.4.1999
1.4.1999

Purchase, Repairs,
Construction, Purchase and Renewals,
Repairs, Renewals, Construction Reconstructio
Reconstruction n

Deduction of Deduction of Deduction of

Rs.30,000 Rs.2,00,000 Rs.30,000
Self Occupied Property : Case 1A: Annual value of More than
two self – occupied property
Owns More than Two
House- Own Residence

Annual Value – NIL

(For any two houses )

Others will be treated as

Deemed to be Let Out
Assuming
Them to
Be Let Out
Annual Value
determined on Notional
Basis
Illustration: Two Self Occupied Houses –CASE I
X has occupied two houses for his residential purposes, particulars of which are as follows:

House 1 House 2
Municipal Valuation 60,000 30,000
Fair rent 85,000 32,000
Standard Rent 65,000 36,000
Municipal taxes paid 10% 10%
Fire Insurance 600 360
Interest on capital borrowed 1,40,000 170000
for construction
Determine his taxable income for A.Y 2021-22
Income from House Property House I (SO) House II (SO)
Step 1: RER
Step 2: Actual Rent
Step 3: Step 1 or Step 2 w.i.h
Step 4: Loss of vacancy
Step 5: GAV (3-4) Actual -170000
Restricted to Rs.60,000 as
Less: Municipal Taxes total interest cannot be
(10% of Municipal Valuation) more than Rs.2,00,000 p.a.
Net Annual Value (NAV) NIL NIl
Less: Specific Deductions : NIL NIL
1. Standard Deduction (30% of (As NAV is NIL) (As NAV is NIL)
NAV)
2. Interest on Capital 1,40,000 60,000
INCOME/LOSS FROM HOUSE (1,40,000) (60,000)
PROPERTY
Self Occupied Property : Case 2: Annual Value of one /two
house properties which is not actually occupied by the owner
owing to employment or business/ profession carried on at
any other place

Annual Value – NIL Not Let

Out/Not Put
to any use

Assessee Must be the

owner of the property

Reason being
employment
Residing in another
house not owned by him
 Self Occupied Property : Case 3: Annual Value of a house
property which is partly self – occupied and partly let out

Different Self Occupied Unit Let Out

Residential Units • Annual Value will be • Annual Value like a
• Income calculated NIL Let Out Property
separately for each • Deduction for • Standard deduction
unit Interest on Capital and Interest on
will be allowed as Borrowed Capital
applicable (2,00,000 can be claimed
or 30,000)
Illustration On One Self –Occupied
Property With Different Units :Case 3
X owns a residential property. It has two equal residential units-
Unit 1 and Unit 2.
While Unit 1 is self –occupied by X for self- residential purpose,
Unit 2 is let out (rent being Rs.6,000 p.m., rent for 2 months
could not be recovered).
Municipal value of the property is Rs. 1,30,000, standard rent is
Rs.1,25,000 and fair rent is Rs.1,40,000.
Municipal tax is imposed @12% which is paid by X.
Other expenses for the previous year 2020-21 being repairs
Rs.250, insurance Rs.600, interest on capital (borrowed during
1998) for constructing the property Rs.63,000.
Calculate the income from house property of Mr. X for A.Y.
2021-22.
Income from House Property Unit I (SO)50% Unit II (LO)50%
Step 1: RER (50% of 1,25,000) 62,500 72000-
12000
Step 2: Actual Rent (AR- UR) 60,000
Step 3: Step 1 or Step 2 w.i.h 62,500
Step 4: Loss of vacancy NIL
Step 5: GAV (3-4) 62,500
Less: Municipal Taxes 7,800
(12% of 50% of 1,30,000)
Net Annual Value (NAV) NIL 54,700
Less: Specific Deductions : NIL 16,410
1. Standard Deduction50%(30% of (As NAV is NIL)
of 63,000
restricted to 50% of
NAV) 30,000 63,000
2. Interest on Capital 30,000 31,500
INCOME/LOSS FROM HOUSE (30,000) 6,790
PROPERTY
 Illustration On One Self –Occupied
Property With Different Units :Case 3
Rahim owns a house in Hyderabad. During the P.Y. 2020-21, 3/4th of
the house was self-occupied and 1/4th house was let out for
residential purposes at a rent of Rs.12,000 p.m. The tenant vacated
the property on 28th February, 2021. The property was vacant
during March, 2021. Rent for the month of January and February
2021 could not be realized in spite of the owner’s efforts.
Municipal value of the property is Rs.4,00,000 p.a., Fair Rent is
Rs.4,40,000 p.a. and Standard Rent is Ra.4,80,000 p.a. He paid
municipal tax @ 10% of municipal value during the year. A loan of
Rs.30,00,000 was taken by him during the year 2011 for the
purpose of acquiring the property. Interest on loan paid during the
year 2020-21 was Rs.1,48,000.
Calculate Rahim’s Income from House Property for the A.Y. 2021-22
Income from House Property Unit I (SO)75% Unit II (LO)25%
Step 1: RER (25% of 4,40,000) 1,10,000 144000-
24000
Step 2: Actual Rent (AR- UR) 1,20,000
Step 3: Step 1 or Step 2 w.i.h 1,20,000
Step 4: Loss of vacancy 12,000
Step 5: GAV (3-4) 1,08,000
Less: Municipal Taxes 10,000
(10% of 25% of 4,00,000)
Net Annual Value (NAV) NIL 98,000
Less: Specific Deductions : NIL 29,400
1. Standard Deduction (30% of (As NAV is NIL) 25% of
75% of 1,48,000
NAV) 1,48,000

2. Interest on Capital 1,11,000 37,000

INCOME/LOSS FROM HOUSE (1,11,000) 31,600
PROPERTY
Self Occupied Property : Case 4: Annual Value of a house
property which is self- occupied for a part of the year and let
out for remaining part of the year

Let Out & Self Occupied for

part of the year

Benefit of NIL Annual Value

not available
Income
calculated
like a Let
Out House
Treated to be Let Out
property for the whole
year
Illustration On Let Out For Part Of The Year
And Self-occupied For Some Part Of The Year
– Case -4
X owns a property at Delhi (municipal value: Rs1,64,000, fair
rent Rs.2,16,000, standard rent Rs.1,80,000).
The house is let out up to January 31,2021(monthly rent being
Rs.14,000) .
From February 1, 2021, the property is self-occupied for own
residential purposes.
Expenses incurred by X are: Municipal tax Rs.6,000 (actually
paid) , Repairs: Rs.2,100, Insurance Rs.1,100, Interest on capital
borrowed (date of borrowing being 10.6.2000) for acquiring the
property : Rs.1,23,000.
Does it make any difference if the property is let out up to
January, 31, 2021 @ Rs.19,000 p.m.? There is no unrealized rent.

 
Income from House Property Rent @14,000 Rent @19,000
Step 1: RER 1,80,000 1,80,000 10
Months
Step 2: Actual Rent 1,40,000 1,90,000
Step 3: Step 1 or Step 2 w.i.h 1,80,000 1,90,000
Step 4: Loss of vacancy NIL NIL
Step 5: GAV (3-4) 1,80,000 1,90,000
Less: Municipal Taxes 6,000 6,000

Net Annual Value (NAV) 1,74,000 1,84,000

Less: Specific Deductions : 52,200 55,200
1. Standard Deduction
(30% of NAV)
2. Interest on Capital 1,23,000 1,23,000
INCOME/LOSS FROM HOUSE (1,200) 5,800
PROPERTY
PRACTICAL EXERCISE
X (age : 31 years) owns four houses particulars of which are as follows :
Particulars House I House II House III House IV
Municipal Valuation 2,00,000 16,000 86,000 5,00,000
(MV)
Fair Rent (FR) 2,50,000 22,000 92,000 5,55,000
Rent (if property is let - - - 5,72,000
out throughout the
year)
Unrealised rent - - - 90,000
Municipal tax paid by X 17,000 800 3,000 45,000
Repairs Nil 2,000 950 Nil
Land Revenue 800 - 230 900
Particulars House I House II House III House IV
Interest on capital borrowed 2,000 800 810 10,000
for repairs of house property
Interest on capital borrowed 5,700 - - -
for construction of house
property
Interest on capital borrowed 200 - 600 100
for payment of municipal
taxes
Nature of Occupation Self Self Self Let-out for
occupied for occupied occupied Residence
Residence for Business for
Residence
House IV remains vacant for the month of January 2021.Determine the taxable
income of X for the assessment year 2021-22.
Income from House House I House III House IV
Property of Mr. X (SO) (SO) (LO)
Step 1: RER 5,55,000
Step 2: Actual Rent 4,82,000
Step 3: Step 1 or Step 2 5,55,000
w.i.h 4: Loss of vacancy
Step 47,667
Step 5: GAV (3-4) 5,07,333
Less: Municipal Taxes 45,000
Net Annual Value (NAV) NIL NIL 4,62,333
Less: Specific Deductions : NIL NIL
1. Standard Deduction (30% (AS NAV is (AS NAV is 1,38,699
of NAV) NIL) NIL)
2. Interest on Capital 7,700 810 10,000
INCOME FROM HOUSE (7,700) (810) 3,13,634
PROPERTY
One House Fully Let Out and Other House Self Occupied for
part of the year and Let out for some part of the year –
Combination of Let Out House and Case 4

•  R is a Sales-tax Officer at Jaipur.

• He owns two residential houses. The first is in Delhi and was
constructed on 31.12.1995. This has been let out on a rent of Rs
3,000 p.m. to a company for its office.
• The second house is in Jaipur which has been occupied by him
for his own residence. He took a loan of Rs 90,000 on 1.8.2017 @
8% per annum interest for the purchase of this house. The entire
loan is still outstanding.
Particulars 1st house (Delhi) 2nd house (Jaipur)
Municipal Valuation 24,000 18,000
Fair Rent ---- 24,000
Municipal tax 10% of Municipal 8% of Municipal
Value Value

Expenses on repairs 2,000 6,000

Fire Insurance premium 200 ----
Ground rent 175 130
Land revenue 1,000 650
Interest on loan ---- 7,200
 The ground rent of the Delhi house and the municipal tax and
land revenue of the Jaipur house are unpaid.
R was transferred to Mumbai on 1.12.2020 where he resides
in a house at a monthly rent of Rs 4,000 and his house at
Jaipur was let out on the same day on a rent of Rs 2,000 per
month.
Compute the “Income from House Property” in respect of Mr.
R for the assessment year 2021-22.
 
Income from House Property Delhi House Jaipur House
3,000
Step 1: RER 24,000 * 12
24,000 2,000
*4
Step 2: Actual Rent 36,000 8,000
Step 3: Step 1 or Step 2 w.i.h 36,000 24,000
Step 4: Loss of vacancy NIL NIL
Step 5: GAV (3-4) 36,000 24,000
Less: Municipal Taxes 2,400 NIL
(10% of Municipal Valuation) (Unpaid)
Net Annual Value (NAV) 33,600 24,000
Less: Specific Deductions : 10,080 7,200
1. Standard Deduction
(30% of NAV)
2. Interest on Capital NIL 7,200
INCOME/LOSS FROM HOUSE 23,520 9,600
PROPERTY
Part of the house is self-occupied and part of the house is let out – Case 3
 
X owns a big house (construction completed on 31.3.2016). The house
has 3 independent units.
Unit I (50% of the floor area) is let out for residential purpose on monthly
rent of Rs.8,200. Unit I remains vacant for 1 month when it is not put to
any use. A sum of Rs.700 could not be collected from the tenant .
Unit II (25% of the floor area) is used by X for the purpose of profession,
while
Unit III (the remaining 25%) is utilized for the purpose of his residence.
Other particulars of the house are as follows:
Municipal valuation: Rs.60,000, Fair Rent Rs.70,000, Standard Rent
Rs.90,000, Municipal taxes:Rs.15,000, Repairs: Rs.4,000, Interest on
capital borrowed for renewal of the property : Rs.36,000, Ground Rent:
Rs.6,400.
Calculate his taxable income for A.Y.2021-22.
Income from House Property Unit I (LO) 50% Unit III (SO) 25%
98400
Step 1: RER (50% of 70,000) 35,000 -700
Step 2: Actual Rent 97,700
Step 3: Step 1 or Step 2 w.i.h 97,700
Step 4: Loss of vacancy 8200
Step 5: GAV (3-4) 89,500
Less: Municipal Taxes
( 50% of 15,000) 7,500
Net Annual Value (NAV) 82,000 NIL
Less: Specific Deductions : NIL
1. Standard Deduction (30% of (As NAV is NIL)
NAV) 50% of 24,600 25% of
36,000 36,000
2. Interest on Capital 18,000 9,000
INCOME/LOSS FROM HOUSE
PROPERTY 39,400 (9,000)
 Annual Value of one self-occupied property – Case 1
 
X has occupied three houses for his residential purposes
Particulars I (Rs.) II (Rs.) III (Rs.)
Standard rent (SR) 63,000 1,85,000 73,000
  Municipal Valuation (MV) 70,000 1,90,000 69,000
Fair Rent (FR) 53,000 1,78,000 71,000
Municipal Taxes Paid 4,000 42,000 6,000
Repairs Nil Nil Nil
Ground Rent 600 ---- 800
Insurance Premium 900 2,000 1,200

X borrows from a relative Rs. 40,000 @ 9 per cent per annum

for construction of House II (date of borrowing June 1, 2019).
Determine the taxable income of X for the assessment year
2021-22
Income from House House I House II House III
Property of Mr. X (DLO) (SO) (SO)
Step 1: RER 63,000
Step 2: Actual Rent NA
Step 3: Step 1 or Step 2 63,000
w.i.h 4: Loss of vacancy
Step NA
Step 5: GAV (3-4) 63,000
Less: Municipal Taxes 4,000
Net Annual Value (NAV) 59,000 NIL NIL
Less: Specific Deductions : NIL NIL
1. Standard Deduction (30% 17,700 (AS NAV is (AS NAV is
of NAV) NIL) NIL)
2. Interest on Capital NIL 3,600 NIL
INCOME FROM HOUSE 41,300 (3,600) NIL
PROPERTY
 Case- Two Self Occupied Houses

Mr. X is the owner of two residential properties-one in New

Delhi and the other one in Mumbai. In one of the properties
he stays along with his wife while as in another property his
son stays.

Whether there will be the tax applicability in respect of

these properties which are standing in Mr. X’s name?

• No- Mr. X can own two houses for self residential purposes
and will not be taxed on the annual value of these
properties.
 Case- Benefit of Self Occupation to
HUF
• Can benefit of self-occupation of house property
under the section 23(2) be denied to a HUF on the
grounds that it, being a fictional entity, cannot
occupy a house property?

• No – HUF can also claim benefit of Nil Annual Value

for 2 self occupied properties.
 Planning Joint Investment for Maximum
Benefit
Mr. Planner and his wife are both working in a large private sector
company and their annual taxable income is more than
Rs.10,00,000 each. They want to take a house investing Rs,
1,00,00,000. They are in a position to get a housing loan for this
amount @10% interest p.a.
How should they plan to avail of the loan so as to ensure that they
can enjoy the maximum tax benefits under the Income Tax Act?

• They should take a joint loan and co-own the property.

• Both of them will be able to take NIL value benefit of the
property owned by them and each of them can claim an interest
on capital of 2,00,000 p.a. under Section 24 and each of them
can claim deduction under Section 80C for the housing loan
instalment paid towards the principal amount.
 Deduct Now, Pay Later, But Save Tax For Sure!
I am desirous of investing in a house and need a housing loan of
Rs.25,00,000.  An institutional loan would mean adhering to a strict
schedule of interest and instalment payments and hence I am
considering the option of availing such loan at 8% interest per annum
from my senior citizen father, who would have no objection in
granting me accommodation in payments so as to suit my liquidity
convenience.  Being in the top tax bracket, I would like to know if I
can avail tax deductions for housing interest and instalment
payments, if they are not actually paid during the year, but deferred
for payment in the later years as per my convenience.

• Yes you can avail deduction of interest paid on loan to father from
house property income
• Interest income will be taxable in the hands of the father- but he
can avail tax benefits of a senior citizen
Best of Both – HRA and Interest Deduction
My basic salary and DA amount to RS.8,00,000 p.a. I am having my
self owned house at my native place at Rajkot, which is lying
vacant on account of my recent posting at Baroda. Since am
staying at a rented house at Baroda paying an annual rent of
Rs.72,000 and I am receiving HRA of Rs.40,000 my questions are as
under:
Can I continue to avail the benefit of deduction of Rs. 60,000 p.a.
in respect of interest paid by me on housing loan for my self
owned house at Rajkot, though I am not physically occupying the
same?
• Yes interest deduction can claimed from the income of self
occupied house in Rajkot
Can I also claim the benefit of exemption in respect of exemption
the HRA received by me, although I am the owner of one
residential accommodation?
• Yes HRA exemption can also be claimed from salary income in
respect of the house in Baroda