Wednesday, 17 December 2014 00:00

method of computation

FORMAT/ METHOD OF COMPUTATION:-

  • Income chargeable to tax under the head "Income from house property" in the case of a let-out property is computed in the following manner:

Particulars

Amount

Gross annual value

XXXX

Less:- Municipal taxes paid during the year

XXXX

Net Annual Value (NAV)

XXXX

Less:- Deduction under section 24

 

Deduction under section 24(a) at 30% of NAV

Deduction under section 24(b) on account of interest on borrowed capital

(XXXX)

(XXXX)

Income from house property

XXXX

COMPUTATION OF GROSS ANNUAL VALUE (LET OUT THROUGHOUT THE YEAR):-

  • Gross annual value of a property which is let-out throughout the year is determined in the following manner :
    • Step 1:Compute reasonable expected rent of the property
    • Step 2:Compute actual rent of the property
    • Step 3:Compute gross annual value (Gross annual value will be higher of amount computed at step 1 or step 2).

COMPUTATION OF GROSS ANNUAL VALUE (LET OUT FOR PART OF YEAR):-

  • Where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the reasonable expected rent than the actual rent so received or receivable (as reduced by the vacant allowance) shall be considered to be the Gross Annual Value of the property.

COMPUTATION OF ACTUAL RENT:-

  • Actual rent means the rent for which the property is let out during the year. While computing actual rent, rent pertaining to vacancy period is not to be deducted. However, unrealised rent (*) is to be deducted from actual rent if conditions specified in this regard are satisfied.

(*)Unrealised rent is the rent of the property which the owner of the property could not recover from the tenant,i.e.,rent not paid by the tenant. If following conditions are satisfied, then unrealised rent is to be deducted from actual rent of the year:

  • The tenancy isbona fide.
  • The defaulting tenant has vacated the property, or steps have been taken to compel him to vacate the property.
  • The defaulting tenant is not in occupation of any other property of the taxpayer.
  • The taxpayer has taken all steps to recover such amount, including legal proceedings or he satisfies the Assessing Officer that legal proceedings would be useless.

COMUTATION OF REASONABLE EXPECTED RENT:-

  • Reasonable expected rent will be higher of the following:
    • Municipal value of the property (Note 1); or
    • Fair    rent   of       the     property

COMPUTATION OF INCOME FORM SELF OCCUPIED PROPERTY THROUGHOUT THE YEAR:-

  • A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence. Income chargeable to tax under the head "Income from house property" in case of a self-occupied property is computed in following manner :

Particulars

Amount

Gross annual value

Nil

Less:- Municipal taxes paid during the year

Nil

Net Annual Value (NAV)

Nil

Less:- Deduction under section 24

 

Deduction under section 24(a) @ 30% of NAV

Deduction under section 24(b) on account of interest on borrowed capital

Nil

(XXXX)

Income from house property

XXXX

COMPUTATION OF INCOME FORM SELF OCCUPIED PROPERTY FOR THE PART OF YEAR:-

  • At times a property may be let-out for some time during the year and is self-occupied for the remaining period (i.e., let-out as well as self-occupied during the year). For the purpose of computation of income chargeable to tax under the head "Income from house property", such a property will be treated as let-out throughout the year and income will be computed accordingly.
  • However, while computing the taxable income in case of such a property, actual rent will be considered only for the let-out period.