Income from house property

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You will come to know how to calculate taxable income from house property.


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PowerPoint Presentation : INCOME FROM HOUSE PROPERTY Any income which arises form property or land appurtenant thereto is to be charged under “Income from house property”. It is only the landlord/ owner who is charged to income under this head, therefore if the tenant subleases this property to a subtenant then he will be charged to tax under “Income from other sources”. Income which arises from property or land appurtenant thereto is to be charged under this head, however income from vacant plot of land is to be charged as “Income form business” or “Income form other sources”. For the purpose of charging income under this head, property is to be bifurcated on the following basis. Income from House Property Let out property (LOP) Vacant let out Property (VLOP) Self Occupied Property (SOP) Deemed let out Property (VLOP)

PowerPoint Presentation : 5. Under Income from House Property income is charged to tax under concept of “Gross Annual Value” Gross Annual Value (GAV) higher of, a) Reasonable Letting Value higher of, i) Fair Rental Value XX ii)Muncipal Ratable Value XX XX Subject to Standard Rent XX XX b) Actual Rent Received XX Gross Annual Value XX 6. Following are to be taxed under Business & Profession as Business Income :- a) Letting out property to employees. b) Letting out property after furnishing it for a specified commercial purpose.

PowerPoint Presentation : 7) Muncipal Tax Paid :- a) Muncipal tax is allowed as deduction only on actual payment basis only. b) Such taxes may be know by any other name like local taxes or muncipal taxes c) Thus just see what amount is actualy paid from 1 st April to 31 st March. d) Such taxes should not only be paid but as well as borne by the owner. e) If owner reimburses such paid amount from the tenant then such amount will not be allowed as deduction under this section. 8) Deduction available from Net Annual Value u/s 24 :- A) Standard Deduction u/s 24(a) : Standard Deduction @ 30% on Net Annual Value. B) Interest on Loan u/s 24(b) a) Interest on loan is allowed as a deduction on due basis b) The loan amount borrowed should be utilised for 5 purpose i) Purchase of the property ii) Construction of the property iii) Repairs of the property iv) Renewals of the property v) Reconstruction of the property c) Any brokerage commission or service charges paid to obtain the loan is not allowed as deduction.

PowerPoint Presentation : d) If Interest is paid or payable out side india then it will be allowed as deduction only if TDS has been deducted from such interest. How ever if TDS is not been deducted from such interest, then full amount of interest will not be allowed as deduction. e) If the funds are used for any other purpose like marriage etc. then such interest will not be allowed as deduction even if the house property is kept as a mortgage. f) Amount borrowed to repay old loan (taken for the above 5 purpose), the interest on such fresh loan is also allowed as deduction. g) Any interest on unpaid interest is not allowed as deduction. 9) Pre-construction & Post-construction interest :- a) Pre-construction interest :- Pre-construction period is from the date on which loan has been taken to the end of the year, before the year in which such construction has been completed . The interest during such pre-construction period is to be allowed in 5 equal installment commencing from the year in which such construction has been completed. b) Post-construction interest :- The post-construction period commences from the 1 st of april following the year in which such construction has been completed. Such interest is allowed as deduction on normal due basis.

PowerPoint Presentation : 10. Unrealised Rent u/s 25AA :- This is deducted from Actual Rent received only if, a) execution of legal agreement b) defaulting tenant has vacated the property or step have been taken to compel him to vacate the property. c) defaulting tenant is not in occupation of any other property of the assesee. d) assesee has either taken all reasonable steps to institute legal proc- eedings for the recovery of unpaid rent or has satisfied the assessing oficer that legal proceedings would be worthless. even if the assesee is no longer the owner of the house prop- erty then also recovery of unrealised rent is brought to tax under IFHP u/s 25AA 11. Arrears of Rent Received u/s 25B :- If the arrear of rent is received in current year which have not been taxed in the the previous year, then it will be taxed in the current year and thereafter stand- ard deduction @ 30% will be allowed.

PowerPoint Presentation : 12. Co-ownership u/s 26 :- At times there are 2 or more owner of the same property, in such a case find the share of income of all the owners. Compute Income from House Property seperately as a working note. There after make separate computation for each owner and prepare their computation of income as per the share of property given. 13. Deemed owners u/s 27 :- A) transfer of house property to spouse or to a minor child. B) member of co-operative society, company or other association. C) person who retain possession of any building as per section 53A of TOPA 1882 (Transfer of Property Act 1882) Section 53A of TOPA 1882 :- a) contract for consideration, in writing, duly signed, in relation to transfer of immovable porperty. b) transferee should have possession of the property c) transferee has performed or willing to perform, part of contract d) even if instrument of transfer in not registered. D) person holding power of attorney E) karta of a HUF F) holder of importible estate

PowerPoint Presentation : 14. Composite Rent :- a) let out of a property along with other facilities (eg. electricity, cooler, lift, wat- er pump, water tax etc.) b) if seperation possible Rent belonging to building – taxed under house property (IFHP). Rent belonging to other facility – taxed under other sources (IFOS). c) if seperation not possible composite rent XX less: cost of facilities (IFOS) ( XX ) rent of building (IFHP) XX 15. Treatment of losses under House Property :- a) Intersource adjustment u/s 70 : set off of loss from one source against income from other source under the same head of income in the same year, exception : i) loss from the activity of owing & maintaining race horses ii) loss cannot setoff from winnings from lotteries, cross- word, puzzles etc. b) Interhead adjustment u/s 71 : set off of loss one head against the income from another head in the same year, exception : i) loss in speculation business can be set off only against the profit in a speculation business.

PowerPoint Presentation : ii) long term capital loss can be setoff only against long- term capital gain. iii) loss from the activity of owing & maintaining race horse. iv) loss cannot setoff from winning of lotteries, crossword puzzles etc. c) Carryforward an set off of loss from House Property (wef AY 1999-2000) u/s 71B : Loss to the extent not set off u/s 70 & 71 is allowed to be carried forward for set off against future income from house property only, for a maximum of 8 assesment year immediately after the end of the relevant assesment year in which the loss was suffered.

PowerPoint Presentation : FORMAT 1. Let out property :- Gross Annual Value (GAV) higher of, a) Reasonable Letting Value higher of, i) Fair Rental Value XX ii)Muncipal Ratable Value XX XX Subject to Standard Rent XX XX b) Actual Rent Received (12 month) XX Gross Annual Value XX Less : Muncipal Tax Paid ( XX ) Net Annual Value (NAV) XX Less : Deduction u/s24 a) Standard deduction u/s 24(a) XX b) Interest on Loan u/s 24(b) XX (XX) Income From House Property XX

PowerPoint Presentation : FORMAT 2. Vacant let out property :- Gross Annual Value (GAV) higher of, a) Reasonable Letting Value higher of, i) Fair Rental Value XX ii)Muncipal Ratable Value XX XX Subject to Standard Rent XX XX b) Actual Rent Received (less than 12 month) XX Gross Annual Value XX Less : Muncipal Tax Paid ( XX ) Net Annual Value (NAV) XX Less : Deduction u/s24 a) Standard deduction u/s 24(a) XX b) Interest on Loan u/s 24(b) XX (XX) Income From House Property XX Note :- In case of VLOP if ARR is less than RLV only because of vacancy, then ARR is treated as GAV.

PowerPoint Presentation : FORMAT 3. Self occupied property :- Gross Annual Value NIL Less : Muncipal Tax Paid ( NIL ) Net Annual Value (NAV) NIL Less : Deduction u/s24 a) Standard deduction u/s 24(a) NIL b) Interest on Loan u/s 24(b) XX (XX) Income From House Property ( XX) Note : Deduction of interest of loan in case of SOP, Purchase/ Construction Before 1-4-1999 On or after 1-4-1999 Max- Rs. 30,000 Max- Rs. 1,50,000 b) Deduction of interest of loan in case of Repairs/ Renewals/ Reconstruction - Max Rs. 30,000

PowerPoint Presentation : FORMAT 4. Deemed let out property :- Gross Annual Value (GAV) higher of, a) Reasonable Letting Value higher of, i) Fair Rental Value XX ii)Muncipal Ratable Value XX XX Subject to Standard Rent XX XX b) Actual Rent Received NIL Gross Annual Value XX Less : Muncipal Tax Paid ( XX ) Net Annual Value (NAV) XX Less : Deduction u/s24 a) Standard deduction u/s 24(a) XX b) Interest on Loan u/s 24(b) XX (XX) Income From House Property XX

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