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Definition-House Property

2.1       [ Sec. 22 ] : DEFINITION THE HEAD House Property

The income from Houses, Building, Bungalows, Godowns etc. is to be computed and assessed to tax under the head “ INCOME FROM HOUSE PROPERTY” . The income under this  head is not based upon the actual income from the Property but upon Notional Income or the Annual Value of the Building.

Income is taxable under this head “Income from House Property” if the following 3 conditions are satisfied :

Condition-1 :    The property should consists of any building or lands appurtenant thereto.

Condition-2 :    The assessee should be owner of the property.

Condition-3 :    The Property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to Income Tax.

The ‘Annual Value’ of a ‘House Property’ is taxable as income in the hands of the owner of the property.

For tax purpose, properties are classified as “ Self-Occupied Property ”  and “ Let-out Property”.

There are certain Tax Benefits for interest on Housing Loan.

Self Occupied Property : 
Interest upto a maximum of Rs. 30,000/- will be allowed as deduction. However, if the house acquired or constructed with capital borrowed on or later 4-1-1999 interest upto a max. of Rs. 1,50,000 is allowed as deduction.

Principal amount of loan installment is allowed as deduction from total income, to the maximum extent of Rs. 1,00,000 p.a. under section 80C.

>>    The acquisition / construction should be completed within 3 years from the end of F/Y in which the capital was borrowed.

>>    Interest on loan during the period  of construction is allowed in equal installments over a period of 5 years commencing from year of completion.

>>    Interest certificate should be accompanied with income tax return showing the amount of interest payable / paid for the purpose of such acquisition construction of property.

Let-out
Property

A.
To calculate income from House Property, the first thing require is Rateable / Taxable Value of the Property. This is required to assess the reasonable value at which the property could yield if  let out from year to year. The base for this is higher of the following:

1.  Municipal Valuation of property.
2.  Actual Annual Rent received/ receivable.
3.  License Fees.

B.
From the Rateable Value, the municipal taxes actually paid by the owner towards general tax, water, sewerage tax etc., will be deducted. The amount so arrived at is known as “ Annual Value of the House Property”.

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