Income from House Property Questions and Answers
SECTION – A
Question 1.
Define Property.
Answer:
According to Sec 22 property is defined as:
- Any building or land appurtenant there to
- Of which the assessee is the owner
- And which is not used for purpose of assessee business or profession.
Question 2.
What is disputed ownership?
Answer:
If title of ownership in disputed in court of law, decision as to who is owner rests with Income Tax Department. Generally recipient of rental Income or person who is in possession of property as owner is treated as owner.
Question 3.
What do you mean by fully exempted Income.
Answer:
→ Income from farm house
→ Annual value of one palace of ex Indian ruler
→ Income from property owned by
- Local authority
- Trade union
- Scientific research association
- Charitable trust
- University or education institution existing for education purpose
- hospital or medical institution existing for philanthropic purpose
→ Income from self occupied house
→ Income from property used for assesses own business or profession.
→ Deductible from gross total income: Income of cooperation society:
- From letting godowns, ware house for storage of commodities meant for sale.
- From house property if gross total income not exceed 20,000 and society is not housing society, transport society, Urban consumer cosoperative society, manufacturing goods with aid of power.
Question 4.
What are the exceptions to the general rule that income from house property is taxable under head “income from house property”?
Answer:
The following are exceptions to general rule that income from house property is taxable under head income from house property.
- Building or staff quarters let to employees and others.
- Building let to authorities for locating banks, post office, police station etc.
- Composite letting of building with other assets
- Paying guest accommodation.
Question 5.
How to annual charge treated in income from House Property?
Answer:
As per Sec. 24(1) Annual charge is allowed as a deduction from net annual value.
Question 6.
What do you mean by composite rent?
Answer:
When a building is let out to a person along with other facilities for Example electricity, aircooler, water pump, the rent collected is called composite rent and the rent of the building can be separated from rent of the such facilities.
Question 7.
What do you mean standard rent?
Answer:
Where Rent Control Act is applicable, the rent fixed by the Act is called Standard Rent. In the case the gross annual vaiue will be the actual value received or standard rent, whichever is higher.
Question 8.
What do you mean by de-facto rent?
Answer:
De-facto rent means the amount arrived at after making adjustments in actual rent in respect to tenants obligations undertaken by the owner and owners obligations undertaken by the tenant.
Question 9.
What is expected rent?
Answer:
Rent obtain after deducting the expenses incurred by the owner of the building towards certain amenities provided to the tenants, such as lift maintenance, staircase lighting, garden maintenance, et. from actual rent receivable.
Question 10.
Write short note on the following: Municipal value of property.
Answer:
The municipal corporation or committee conducts periodical survey of the house properties in their local limits for the purpose of levying local taxes on the basis of the survey conducted the value (rental) are fixed which servers as the basis for levying tax. What are the value was fixed for the properties is called municipal value of property.
Question 11.
What is annual value?
Answer:
The annual value of a house property let out shall be deemed to be the sum for which the property might reasonably be expected to be let from year to year.
Question 12.
Answer:
The gross annual value is the annual value which will be
- de-facto rent or
- Municipal value or
- Fair rental value, whichever is higher. When property is subject to standard rent then gross annual value will be de-facto rent or standard rent whichever is higher.
Question 13.
What is deemed owner u/s 23(1).
Answer:
An individual who is not the real owner of property, but he is treated or deemed to be a owner of property for Income tax purpose is called as deemed owner.
Question 14.
What do you mean by municipal taxes?
Answer:
It is the tax levied by the Municipal Authority on the Municipal Value of the house property. Such municipal taxes paid by the owner will be allowed as deduction under Sec. 23.
Question 15.
What is annual value?
Answer:
Means period commencing on date of borrowing and ending on 31st of March immediately prior to date of completion of construction or date of acquisition or date of repayment of loan, whichever is less.
Question 16.
Explain gross annual value of let out properties.
Answer:
Gross annual value is reasonable expected rent of a property. If the actual rent received or receivable is more than the expected rent than the actual rent received or receivable is taken as gross annual value. If the property is vacant and due to vacancy the actual rent received or receivable is less than the expected rent than actual rent received or receivable is taken as gross annual value.
Question 17.
What is deduction allowable for pre-construction interest in the case of Income from House property?
Answer:
Deduction allowable for pre construction interest, in the case of income from H.P. is allowable as deduction u/s 24 in five equal annual installments. This is a deduction allowed as interest on loan for the period prior to the previous year, in which the house is completed.
Question 18.
Mention any two incomes from house property but taxable under a different head of income.
Answer:
The two incomes from house property but taxable under a different head of income are:
Rent paid by the paying guest, Rental income from subletting, if composite rent is not separable.
Question 19.
How do you treat the unrealised rent of the past recovered in the current previous year?
Answer:
Unrealized rent allowed in the earlier previous year but recovered during the previous year is taxable under the head income from house property. Further, it is taxable even if house is not owned by the assessee in the year of recovery. Any legal expenses incurred for the recovery of unreaiized rent is not deductible.
SECTION – B
Question 1.
Computation of Taxable Income from let out house Property.
Question 2.
What is unrealised rent? Enumerate the rules for deducing unrealised rent U/S 25 (1) (x).
Answer:
→ If the rent is not yet realised it is known as unrealised rent.
→ If following conditions are fulfilled, the amount of unrealised rent shall be deducted out of actual rent received.
- That the tenancy is bonafide
- That the tenant has vacated the house or steps have been taken to get the house vacated
- The tenant is not occupying any other house owned by the assessee
- That all efforts to realise the rent have failed or the assessing officer is satisfied that there is no way to recover the rent and
- Unrealised rent of earlier years is not deductible.
→ Treatment of Unrealised Rent: Amount of Unrealised Rent is deducted out of actual rent received for calculating Annual Rental Value if conditions as laid down are fulfilled.
→ Treatment of Unrealised rent recovered: Deemed as income of the year in which recovered.
Practical Problems:
Question 1.
A House Property whose municipal valuation is 52,000 has been let out at rate of 5,000 per month. Local taxes paid in respect of property amounted to 6,000 out of which land lord has paid 4,000 Balance of 2,000 being are met by tenant. Compute Annual Value of House property.
Solution:
| Particulars | ||
| Municipal value = OR Actual rent = (5,000 x 12) (w.e.h) Gross Annual Value Less: Municipal tax paid by owner Annual value |
52,000 60,000 |
60,000 |
Question 2.
Mr. Shashank is the owner of a house. The particulars of which are given below:
Fair rent 90,000; House let out at 10,000 per month; Municipal tax paid by Shashank 10,000 (10% of municipal value). Determine the annual value of the house if the house is vacant or a) one month b) three months.
Solution:
| Particulars | Case A | Case B |
| Fair Rent or Actual Rent (10,000 x 12) (w.e.h) Less: Vacancy period Gross Annual Value Less: Municipal tax paid Net Annual Value |
90,000 1,20,000 |
90,000 1,20,000 |
| 1,20,000 10,000 |
1,20,000 30,000 |
|
| 1,10,000 10,000 |
90,000 10,000 |
|
| 1,00,000 | 80,000 |
Question 3.
From the following information compute net annual value of house property of Mr. Ganesh for the A.Y. 2020-21.
Fair retnal value – 1,80,000 p.a.
Standard rent – 1,62,000 p.a.
Rent received – 16,500 p.m.
Unrealised rent for the year 2019-20 – 24,750
Loss due to vacancy -16,500
Municipal tax paid by owners – 21,600 being 10% of municipal value.
Question 4.
Determine the annual value of house property from the following details:
(a) Municipal value – 45,000
(b) Standard rent – 50,000
(c) Fair rent – 55,000
(d) Actual rent – 56,000
(e) Municipal tax 10% of municipal value
(d) Municipal tax paid in the previous year – 3,000
Question 5.
Mr. Praveen is owner of a house property in Mysore. The construction of the house was completed on 18th July 2018. He took a loan of 8,75,000 from Canara Bank on 1st Nov. 2016 at 11% p.a. The loan was outstanding during the year 2019-20 to the extent of 5,00,000. From the following information calculate his income from house property for the A.Y. 2020-21.
(a) Municipal value 1,44,000 p.a.
(b) Fair rental value 1,80,000 p.a.
(c) Standard rent 1,20,000 p.a.
(d) Rent received per month rs. 18,000
(e) Municipal tax paid is 10% of M.V. (25% paid by tenent)
(f) Loss due to vacancy 27,000
(g) Unrealised rent for the year 2019-20 10,000.
(h) Unrealised rent of 2018-19 was recovered during 2019-20 16,000
Question 6.
Determine the Net Annual Value House property for the A.Y. 2020-21
Particulars
Municipal value – 1,50,000
Fair rent – 1,70,000
Standard rent – 1,30,000
Actual rent p.m. – 15,000
Unrealised rent – 18,000
House vacancy period – 1 month
Municipal tax paid – 15,000
Question 7.
From the following information compute Net Annual Value of House Property for the A.Y. 2020-21.
Municipal value – 1,00,000
Fair Rental value – 1,80,000
Let out (per month) – 16,000
Standard Rent – 1,20,000
Unrealised rent for one month
Municipal tax paid by owner of House Property – 20,000
Municipal tax paid by tenant – 10,000
Question 8.
Roopa is the owner of the following house properties, Find out the net annual value for the assessment year 2020-21.
| Particulars | A | B | C |
| a) Municipal value | 1,80,000 | 1,80,000 | 3,60,000 |
| b) Fair rental value | 1,92,000 | 1,68,000 | 3,96,000 |
| c) Standard rent | 2,04,000 | 2,40,000 | 3,00,000 |
| d) Actual rent (P.A.) | 2,16,000 | 1,92,000 | 2,88,000 |
| e) Municipal tax paid | 12,000 | 24,000 | – |
| f) Municipal tax due | 12,000 | – | 24,000 |
Question 9.
Compute the annual value from the following information:
(a) Municipal rental value – 50,000
(b) Fair rental value – 72,000
(c) Let out – 8,000 per month
(d) Standard rental value – 60,000
(e) Municipal tax paid in P.Y.
P.Y. 2018-19 – 10,000
P.Y. 2019-20 – 10,000
Question 10.
Calculate the Gross Annual Value from the following details:
Municipal value – 61,000
Fair rentral value – 66,000
Standard rent – 59,000
Annual rent – 57,000
Vacancy period 1 1/2 months.
Question 11.
Mr. Ravi owns a flat which is assessed by local authority with Annual Value of 1,80,000. The flat was let out for 15,000 p.m.
However the tenant vacated the property on 30.9.19. For month of Oct 16 to Nov. 17 the flat was vacant.
In Dec. 2016 a new tenant occupied at rent of 16,000 p.m. Municipal tax paid 20,000 Compute Annual Value for AY.
Question 12.
Mrs. Savitha started construction of her house on 07.06.2017 and took housing loan of 6,00,000 at 12% per annum on 01.07.2016. The construction of house was completed on 22.06.2017 and was let out from 01.07.2019 on a monthly rent of 7,500.
You are required to calculate the amount of interest that can be claimed as deduction U/s 24 assuming that entire amount of loan was outstanding during the PY 2019-20.
Question 13.
Mr. Syed started the construction of house on 1.6.2016 and took a loan of 3,00,000 at 15% p.a. He took another loan of 9,00,000 at 18% p.a. on 1.4.2019. The construction was completed on 30.11.2019 and was self occupied from 1.12.2019.
Compute his income from House Property for the A.Y. 2020-21.
Question 14.
Mr Sandeep started construction of his house on 1-6-2016 and took a loan of 3,00,000 @ 15% p.a He took another loan of 5,00,000 @ 15% p.a on 1-4-2017 The construction was completed on 30-11¬2019 and was self occupied for resident from 1-12-2019 Compute his income from property for the assessment year 2020-21.
Question 15.
Smt. Jaya is the owner of a house at Agra, particulars in respect of which for the year ended 31st March, 2020 are as below:
a) Actual rent received 10,000
b) Municipal valuation 8,000
c) Total municipal tax 2,500
d) Municipal tax paid by Smt. Jaya 1,250
e) Municipal tax paid by the tenant 1,250
f) Interest paid during PY on loan taken for renewing the house 500
g) Repair charges 3,000
Compute her income from House Property for the A.Y. 2020-21.
Question 16.
Mr. X is the owner of a house property in Delhi.
The loan of 8,00,000 was borrowed on 1.11-2014 at 8% per annum Interest from Oriental Bank of Commerce for construction of this house. The construction was completed on 20.4.2017 Mr. X repaid 50,000 towards principal on 1.4.2018. After this date no amount was repaid and entire balance was outstanding.
This house has been let out since 1.1.2019 on a rent of ‘ 9,000 per month. From 1.1.2019 Mr. X utilised one-third portion of this house for his own residence and two-third portion has been let on a rent of ‘ 6,000 per month.
Mr. X paid the following towards this house:
i) Repairs 2,000
ii) Land revenue 1,000
iii) Collection charges 1,500
iv) Municipal tax 3,000
Compute the taxable income from house property for the assessment year 2020-21.
Question 17.
Mr. Shankar is the owner of three house Properties in Bangalore and I let-out all the houses throughout the year.
| Particulars | House-A | House-B | House-C |
| Fair Rent | 1,80,000 | 1,50,000 | 1,20,000 |
| Municipal valuation | 1,50,000 | 2,00,000 | 1,00,000 |
| Let out (per month) | 20,000 | 15,000 | 25,000 |
| Use by tenant | Residential | Office | Residential |
| Repair charges | 10,000 | – | 40,000 |
| Collection charges | 20,000 | 5,000 | – |
| Interest on loan: | |||
| a) for construction | 1,00,000 | – | – |
| b) For marriage of daughter | – | 60,000 | – |
| c) For repairs | – | – | 10,000 |
Municipal tax is 10% of Municipal valuation. Municipal tax of House – A was paid by owner but Municipal tax of house – B was not paid upto 31st March 2020 and Municipal tax of House – C was paid by tenant. The House – C was remained vacant for 2 months.
Compute Income from House Property for the A.Y. 2020-21 by making assumption housing loan in respect of house A and C was taken after 1.4.1999.
Question 18.
Mr. Shankar owns three houses in K.G.F. from the following particulars compute his taxable income from house property for the A.Y. 2020-21.
Question 19.
Mr. Girish is the owner of following house property in Mysore.
Particulars in respect of which for the year ended 31.3.2020 are as follows: Compute his income from the house property the AY 2020-21.
Question 20.
Mr. Sukruth is the owner of four houses in Bangalore. He gives the following particulars of these properties.
Question 21.
Mr. Jayaswamy owns a big house (erection completed on July 31st 2015). The house has three independent units. Unit-1 (50% of the floor area) is let out for residential purpose on a monthly rent of 8,200. Unit – 1 remained vacant for one month when it is not put to any use. A sum of 700 could not be collected from the tenant Unit – 2 (25% of the floor area) is used by him for the purpose of his profession, whild Unit – 3 (the remaining 25%) is utilised for the purpose of his residence. The other particulars of the house are as follows :
Municipal valuation : 80,000
Fair rent : 90,000
Standard rent under the Rent Control. Act : 1,00,000
Muncipal taxes : 12,000
Repairs : 14,000
Ground rent : 6,400
Annual charge created under the will by his father in favour of his sister : 10,000.
He has borrowed 4,00,000@ the rate of 10% from SBI for the construction of this house on 1st Aug. 2010 and nothing is repaid so far.
His income from profession is 1,05,000 (without debiting house rent and other incidental expenditure including admissible depreciation on the portion of the house used for profession : 9,000)
Determine his Taxable Income from House Property for the previous year 2019-20.
Question 22.
Akhila own three houses in Bangalore. The municipal valuations of which are 22,000, 36,000 and 31,0000 respectively. The following are further details about three houses.
1. The first house built in 2000 has been let out on a monthly rent of 3,500. The expenses in connection with this house are land revenue 100, Fire insurance premium 800, interest on loan for construction of the house 4,000, Municipal taxes 1,500. The house remained vacant for two months, Unrealised rent of the current year amounts to 7,000. The assessing officer has been satisfied about this unrealised rent.
2. The second house was built in 1984 and it is used for owners residential purposes. In connection with this house 800 was spent on repairs, 200 was paid as fire insurance premium. The house remained vacant for three months as the owner had to stay in Chennai in a rented house in connection with her profession.
3. The construction of third house was completed on 30 June 2010 and from 1st July 2016 it was letout for residential purposes on a rent of 2,500 p.,m. Municipal tax 3,200 and interest on loan 16,000 were paid during the year 2019-20. Compute her income from house property for the A.Y. 2020-21.
Question 23.
Dr. Trivedi constructed a big house in July 2005, of which municipal valuation is 80,000 per annum. While its standard rent under Rent Control Act ‘ 90,000 per annum.
The house was used in the following manner during the previous year.
a) 25% portion for self residence
b) 25% portion for own business
c) 50% portion let out for residential purpose for rent 5,000 per month Other particulars of the house are as follows:
i) Municipal tax 12,800 (actual payment during the previous year 2019-20 9,000)
ii) Repairs 4,500
iii) Fire insurance premium 2,000
He has taken a loan from housing board to construct the house at 12% p.a. 2 lakh. Interest was due 24,000 during the previous year out of which 20,000 was paid.
Compute income from house property for the A.Y. 2020-21.
Question 24.
Mr. Anand is the owner of three houses,in Bangalore, the particulars of which are given below:
Question 25.
Smt. Veena is the owner of a house property in Bengaluru completely let out for residential purpose consisting of 2 flats of different sizes. They are let out at 5,000 p.m. and 10,000 p.m. respectively. The municipal value of the house is 1,50,000. The rate of municipal tax is 10% which was paid by her. The other particulars of the house are as under:
a) The construction of the house was completed on 10.01.2015
b) A loan of 1,00,000 was taken on 1.4.2012 at 12% p.a.
c) The second flat remained vacant for 2 months during the previous year 2019-20.
d) The loan was fully repaid on 31.12.2019
e) The average outstanding loan amount for the period from 1.4.2019 to 31.12.2019 was 20,000.
Determine the income from house property of Smt. Veena for the AY 2020-21.
Question 26.
Smt. Kathyayini owns 3 house properties. House-I and House-II are used for her residential purposes and House-III is let out on a monthly rent of 8,000. Following are the other particulars of these house properties:
Question 27.
Mr. Mukesh is owner of three houses in Bangalore.
Question 28.
From the following particulars of house properties of Vishwanth. Compute his income from house property for the A.Y. 2020-21.
Question 29.
Mr. Suryakantha has three houses in Mandya particulars of which
| Particulars | House I | House II | House III |
| Use of house | Let out | Let out | S.O.P. |
| Standard rental value | 1,50,000 | 2,00,000 | – |
| Municipal rental value | 1,00,000 | 3,00,000 | 3,00,000 |
| Fair rental value | 1,80,000 | 1,80,000 | 3,50,000 |
| Actual rent per month | 15,000 | 20,000 | – |
| Municipal tax paid | 10% of | 10% of | 10% of |
| Repairs | Municipal value | Municipal Value | Municipal Value |
Surya borrows 3,00,000 at 20% p.a. for construction of House III (Date of borrowing: 1.6.2012 date of repayment of loan 10.5.2020) construction of all the houses is completed in May 2017.
Determine the taxable income of Suryakantha under the head income from House Property for the A.Y. 2020-21.
Question 30.
Mr. Harish is the owner of the following three House properties in Mysore. The details relating to which are as follows:
| Particulars | House – I | House – II | House – III |
| Actual Rent p.a. | 24,000 | 18,000 | – |
| Purpose of use of House Property | LOP | LOP | SOP |
| Standard Rent | 18,000 | 12,000 | nil |
| Municipal Value | 16,000 | 14,000 | 35,600 |
| Municipal tax (10% of M.V) Municipal tax paid by Harish | 1,600 | 700 | 3,560 |
| Municipal tax paid by the tenant | nil | 700 | nil |
| Repairs | 1,000 | 500 | 2,000 |
| Vacancy Period | nil | nil | |
| Interest on loan for repairing house | 800 | 600 | 2,000 |
| Unrealized rent allowed in the year 2015-16 recovered during the year for the first house | 4,000 | nil | nil |
Compute the taxable Income from House property of Mr. Harish for the Assessment Year 2020-21.
Question 31.
Sri Ramappa owns four houses (House – 2 and 4 are self occupied for residence, House – 3 is ued for own business and House – 1 is let out) and furnishes the following information for the financial year – 2019-20.
Compute his income from House Property for the relevant A.Y.
| Particulars | House – 1 | House – 2 | House – 3 | House – 4 |
| Municipal valuation | 49,000 | 28,000 | 87,000 | 90,000 |
| Fair rent | 42,000 | 25,000 | 80,000 | 1,05,000 |
| Standard rent | 38,200 | 15,000 | 75,000 | 90,000 |
| Rent (if property is let out) | ||||
| (throughout the previous year) | 42,000 | – | – | – |
| Unrealised rent | 3,500 | – | – | – |
| Municipal taxes: | ||||
| – Paid by Ramappa | – | 500 | 7,000 | 9,000 |
| – Paid by tenant | 5,000 | – | – | – |
| Repairs | 2,500 | 4,500 | 2,250 | 3,000 |
| Land revenue to State Govt. | 1,000 | 500 | 1,200 | 1,300 |
| Education Cess to Govt. | 250 | 200 | 300 | 350 |
| Water & Health Cess to Municipality | 500 | 100 | 400 | 800 |
| Date of completion of construction | 31-5-2015 | 31-5-2015 | 31-3-2015 | 1-4-2015 |
Property – 1 remained vacant for two months (March 16, 2017 to May 15, 2018). Mr. Ramappa borrows 50,000 75,000 and 1,00,000 for the construction of House – 1, House – 2 and House – 4 respectively on 15th June 2012 at the rate of 12% per annum. He, however-makes repayment of loan amount of’ 50,000,25,000 in respect of House – 1 and House – 2 respectively on December 31, 2016.
Question 32.
Mr. Prakash is the owner of following houses in Bangalore and the particulars of which are relating to previous year 2019-20.
| Particulars | House A | House B | House C |
| 1) Municipal value | 1,20,000 | 1,32,000 | 1,44,000 |
| 2) Fair rental value | 1,50,000 | 1,60,000 | 1,75,000 |
| 3) Standard rent | 1,44,000 | 1,50,000 | 1,60,000 |
| 4) Nature of use | Let out for Residence | Let out for Business | Self occupied for Residence |
| 5) Rent received (p.m.) | 15,000 | 18,000 | – |
| 6) Municipal tax paid by owner: (a) For the year 2018-19 (b) For the year 2019-20 |
6,000 12,000 |
6,600 13,200 |
– 14,400 |
| 7) Cost of repairs | 18,000 | 12,000 | – |
| 8) Interest on loan for construction | 45,000 | 60,000 | 2,25,000 |
| 9) Unrealised for the year 2019-20 | 12,000 | 18,000 | – |
| 10) Vacancy period (month) | 2 | 2 | – |
| 11) Year of completion | 2015 | 2014 | 2012 |
Compute the taxable income from House Property for the A.Y. 2020-21.