How to calculate Income from House Property?

Before we start learning how to figure the income from house property in India, let us understand the important terms used for the computation.

1. Annual Value: This is the property's capacity to earn annually.

2. Municipal Value: The value of the property evaluated by the municipal authorities to levy municipal tax is the municipal value. There are a number of factors they take into consideration while finding the municipal value.

3. Fair Rental Value: This is the rental value of property (with same features in the same area) earned.

4. Rent actually received/ receivable: It is the actual amount owner has acknowledged from the tenant considering features like who paid the electricity, water and other utility bills.

5. Standard Rent: It is a fixed rent as per Rent Control Act by which the actual rent cannot exceed. The act was formed to safeguard tenants from eviction.

6. Gross Annual Value (GAV): the value uppermost among Rent received/receivable, fair market value, and municipal valuation.
On Rent Control Act being applicable, GAV is either the Standard Rent or Rent received, whichever is the highest.
Net Annual Value (NAV) = GAV – Paid Municipal taxes.

7. Deductions: There are two deductions applicable in order to compute the real taxable income from house property:

8. Statutory deduction: This is the 30% of the NAV which is allowed for rent collection, repairs, etc. no matter what the actual expenditure has been. However, the deduction isn't application is Annual Value is 0.

9. Interest on borrowed capital: this deduction is given on accrual basis if one has borrowed money to buy or construct the house. The reduction possible is either Rs. 1, 50,000 or actual interest amount, and whichever is less. This is permissible only if the construction is complete within 3 years after 1 April 1999. In other cases, the deduction amount is Rs. 30,000 or actual interest, whichever is less.
Annual Value: Actual Value – NAV Deduction

Who is the owner/ deemed owner?

The owner is taxable for the income from house property. He/she is the person who earns the revenue from the same. Thus, the person being the one who is benefited financially from the property is entitled to pay taxes. An individual enjoys financial benefits from the same even if not an owner is called the deemed owner.

close
Top