Neha Sapra

Neha Sapra

other important points related to income from house property

WHAT IS PRE CONSTRUCTION PERIOD:-

  • While computing income chargeable to tax under the head "Income from house property" in case of a let-out property, the taxpayer can claim deduction undersection 24(b)
  • Deduction on account of interest is classified in two forms,interest pertaining to pre-construction period and interest pertaining to post-construction period.
  • Post-construction period interest is the interest pertaining to the relevant year (the year for which income is being computed).
  • Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.
    • Date of repayment of loan; or
    • 31st March immediately prior to the date of completion of the construction/acquisition of the property.
  • Thus, total deduction available to the taxpayer undersection 24(b)

TAX TREATMENT IF A PERSON OCCUPIED MORE THAN ONE PROPERTY FOR HIS RESIDENCE:-

  • The Self occupied benefit (treating property as SOP and claiming GAV as Nil) is available only in respect of one property occupied by the owner for his residence.
  • If a person occupies more than one property for his residence, then the SOP benefit will be granted only in respect of any one property as selected by him and other property/properties will be treated as "Deemed to be let-out". Income from deemed to be let-out property is computed in the same manner as discussed in the case of "Let-out" Property.

AMOUNT OF DEDUCTION FOR INTEREST ON HOUSING LOAN:-

  • The provisions relating to deduction undersection 24(b)section 24(b)in respect of self-occupied property will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post-construction period (if any)
  • However, in the case of self-occupied property, deduction undersection 24(b) cannot exceed Rs.2,00,000 or Rs. 30,000 (as the case may be). If all the following conditions are satisfied, then the limit in respect of interest on borrowed capital will be Rs.2,00,000:If any of the above condition is not satisfied, then the limit of Rs. 2,00,000 will be reduced to Rs. 30,000. 
    • Capital is borrowed on or after 1-4-1999.
    • Capital is borrowed for the purpose of acquisition or construction (not for repair, renewal, reconstruction).
    • Acquisition or construction is completed within 3 years from the end of the financial year in which the capital was borrowed.
    • The person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as re-finance of the principal amount outstanding under an earlier loan taken for acquisition or construction of the property.

TAX TREATMENT OF UNREALISED RENT WHICH IS SUSEQUENTLY REALISED:-

  • Any subsequently recovery of unrealized rent shall be deemed to be the income of taxpayer under the head “Income from house property” in the year in which such rent is realized (whether or not the assesse is the owner of that property in that year).

TAX TREATMENT OF ARREARS OF RENT:-

composite rent of a house property

TREATMENT OF COMPOSITE RENT BELONGS TO LET OFF BUILDING ALONG WITH OTHER ASSETS:-

  • Composite rent includes rent of building and rent towards other assets or facilities. The tax treatment of composite rent is as follows:-
    • In a case where letting out of building and letting out of other assets are inseparable (i.e., both the lettings are composite and not separable, e.g., letting of equipped theatre), entire rent (i.e. composite rent) will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources”, as the case may be. Nothing is charged to tax under the head “Income from house property”
    • In a case where, letting out of building and letting out of other assets are separable (i.e., both the lettings are separable, e.g., letting out of refrigerator along with residential bungalow), rent of building will be charged to tax under the head “Income from house property” and rent of other assets will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources”, as the case may be. This rule is applicable, even if the owner receives composite rent for both the lettings. In other words, in such a case, the composite rent is to be allocated for letting out of building and for letting of other assets.

TREATMENT OF COMPOSITE RENT BELONGS TO LET OFF BUILDING ALONG WITH SERVICE CHARGES:-

  • In such a case, composite rent includes rent of building and charges for different services (like lift, watchman, water supply, etc.): In this situation, the composite rent is to be bifurcated and the sum attributable to the use of property will be charged to tax under the head “Income from house property” and charges for various services will be charged to tax under the head “Profits and gains of business and profession” or “Income from other sources” (as the case may be).

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.




What are the cases under which a person who is not Registered Owner (Deemed Owner) of House Property has to pay tax on Rental Income of such Property.

What are the cases under which a person who is not Registered Owner of Property has to pay tax on Rental Income of such Property.

Rental income from property is charged to tax under the head "Income from house property in the hands of the owner of the property". If a person receiving the rent is not the owner of the property, then rental income is not charged to tax under the head "Income from house property" (E.g. Rent received by tenant from sub-letting). In the following cases a person may not be the registered owner of the property, but he will be treated as the owner (i.e.,deemed owner) of the property and rental income from property will be charged to tax in his hands:

(1) If an individual transfers his or her house property to his/her spouse (not being a transfer in connection with an agreement to live apart) or to his/her minor child (not being married daughter) without adequate consideration, then the transferor will be deemed as owner of the property.

(2) Holder of impartible estate is deemed as the owner of the property comprised in the estate

(3) A member of co-operative society, company or other association of persons to whom a building (or part of it) is allotted or leased under house building scheme of the society, company or association, as the case may be, is treated as deemed owner of the property.

(4) A person acquiring property by satisfying the conditions of section 53A of the Transfer of Property Act, will be treated as deemed owner (although he may not be the registered owner). Section 53A of said Act prescribes following conditions:

    (a)  There must be an agreement in writing.

    (b)  The purchase consideration is paid or the purchaser is willing to pay it.

    (c)  Purchaser has taken the possession of the property in pursuance of the agreement.

(5) In case of lease of a property for a period exceeding 12 years (whether originally fixed or provision for extension exists), lessee is deemed to be the owner of the property. However, any right by way of lease from month-to-month or for a period not exceeding one year is not covered by this provision.

What types of Incomes are covered under the head Income from House Property

WHAT TYPE OF INCOMES IS COVERED:-

Rental income from a property being building or land appurtenant thereto of which the taxpayer is owner is charged to tax under the head “Income from house property”.​​

RENTAL INCOME FROM SUB- LETTING:-

  • Rental income in the hands of owner is charged to tax under the head “Income from house property”.
  • Rental income of a person other than the owner cannot be charged to tax under the head “Income from house property”. Hence, rental income received by a tenant from sub-letting cannot be charged to tax under the head “Income from house property”. Such income is taxable under the head “Income from other sources” or profits and gains from business or profession, as the case may be.

RENTAL INCOME FROM SHOP:-

  • Rental income from a property, being building or land appurtenant thereto, of which the taxpayer is the owner is charged to tax under the head “Income from house property”. To tax the rental income under the head “Income from house property”, the rented property should be building or land appurtenant thereto. Shop being a building, rental income will be charged to tax under the head “Income from house property”.

EXPENSES TO BE DEDUCTED WHILE CALCULATING INCOME FROM HOUSE PROPERTY:-

  • While computing income chargeable to tax under the head "Income from house property" in the case of a let-out property, only following items can be claimed as deductions from gross annual value. In other words, deduction cannot be claimed for any expenditure incurred by the taxpayer other than following:
    • Deduction on account of municipal taxes paid by the taxpayer during the year (*).
    • Deduction under section 24(a) @ 30% of Net Annual Value.
    • Deduction under section 24(b)​​

(*) Only municipal taxes paid by the owner during the year can be deduced, hence, municipal taxes due but not paid during the year cannot be deducted or taxes borne by the tenant cannot be deducted.

DEDUCTION OF INTEREST PAID ON LOANS TAKEN FROM FRIENDS:-

  •  If the loan is taken for purchase, construction, repair, renewal or reconstruction of the house, interest on such loan can be claimed as deduction.
  • If the loan is taken for personal or other purposes then the interest on such loan cannot be claimed as deduction.

DEDUCTION OF INTEREST PAID ON HOUSING LOANS:-

  • While computing income chargeable to tax under the head "Income from house property" in case of a let-out property, the taxpayer can claim deduction under section 24(b)
  • In case of a let-out property, there is no limit on the quantum of interest which can be claimed as deduction under section 24(b). However, in case of a self-occupied property, limit is Rs. 2,00,000 or Rs. 30,000, as the case may be

INCOME FROM SELF OCCUPIED PROPERTY:-

Oops!!! I did mistake in filling ITR, what to do now???

Oops!!! I did mistake in filling ITR, what to do now???

Hey relax, if you have done any mistake in filling ITR, you need not to get worried.

It will take your some time to get the return revise.

Revised return:-

v  Return of income can be revised as per section 139(5) of Income Tax Act,1961

v  Revised return is valid provided it must be within time limits

v  Revised return can be filled before the expiry of one year from the end of relevant assessment year.

v  Revised return can be filled if the original return is filled within the due dates specified in section 139(1)

For example:-

For F.Y 2013-14, A.Y. will be 2014-15. So we can file revise return for F.Y 2013-14 up to 31.03.2016 (end of AY 2015-16)

v  Return can be revised any number of times but within the time limits.

v  Revised return will substitute the original return.

Steps to revise your return online:-

  1. If you have filed original return online, then you have to revise it online.
  2. Open the excel file where you originally filled the return.
  3. Enable macros
  4. Select section 139(5) in place of section 139(1) as revised return.
  5. Change the return according to the mistake
  6. Click on compute tax, generate XML file by validating each sheet.
  7. Upload the file to income tax e-filling site.
  8. Download the revised ITR and sign it
  9. Send original and revised ITR sheet to CPC Bangalore

 

Steps to revise your return manually:-

Oops My PAN Lost, How Can I get New PAN

WHAT IF MY PAN LOSTS:-

If the PAN card is lost then you can apply for duplicate PAN card by submitting the Form for "Request for New PAN Card or/ and Changes or Correction in PAN Data" and a copy of FIR may be submitted along with the form.

If the PAN card is lost and you don't remember your PAN, then in such a case, you can know you PAN by using the facility of "Know Your PAN" provided by the Income Tax Department. This facility can be availed of from the website of Income Tax Department - www.incometaxindia.gov.in

You can know your PAN online by providing the core details like Name, Father's Name and Date of Birth. After knowing the PAN you can apply for duplicate PAN card by submitting the "Request For New PAN Card Or/ And Changes Or Correction in PAN Data".

WHOM TO CONTACT FOR ANY ENQUIRY:-

The Income Tax Department or NSDL can be contacted in any of the following means

Mode

Income Tax Department

NSDL

Website

www.incometaxindia.gov.in

www.tin-nsdl.com

Call Center

1800-180-1961

020-27218080

Email ID

 

This email address is being protected from spambots. You need JavaScript enabled to view it.

SMS

 

SMS NSDLPAN <space> Acknowledgement No. & send to

57575 to obtain application status.

Address

 

INCOME TAX PAN SERVICES UNIT (Managed by NSDL e-Governance

Infrastructure Limited), 5th Floor, Mantri Sterling, Plot No. 341, Survey

No. 997/8, Model Colony, Near Deep Bunglow Chowk, Pune - 411 016.

 

Transactions for which PAN is mandatory

Transactions for which PAN is compulsory:-

Following are the specified financial transactions in which quoting of pan is mandatory:

• Sale or purchase of any immovable property valued at five lakh rupees or more 

• Sale or purchase of a motor vehicle or vehicle (other than two wheeler vehicles).

• making a time deposit with a banking company exceeding fifty thousand rupees or deposit in post office savings bank exceeding fifty thousand rupees.

• making an application for telephone connection including cellular telephone.

• payment in cash for purchase of bank drafts or pay orders or banker's cheques for an amount aggregating to fifty thousand rupees or more during  any one day or deposit in cash aggregating to fifty thousand rupees or more with a bank during any one day.

• A contract of a value exceeding one lakh rupees for sale or purchase of securities.

• Opening of a bank account. In case of a minor, pan of father, mother or guardian, as the case may be, shall be mentioned.

• Payment to hotels and restaurants against their bills for an amount exceeding twenty-five thousand rupees at any one time.

• payment in cash in connection with travel to any foreign country of an amount exceeding twenty-five thousand rupees at any one time.(travel to foreign country does not include travel to Bangladesh, Bhutan, Maldives, Nepal, Pakistan, or Sri Lanka, or travel to Saudi Arabia for haj or travel to china on pilgrimage to Kailash Mansarover.) 

• making an application for issue of credit card or debit card.

• Payment of an amount of fifty thousand rupees or more to a mutual fund for purchase of its units.

• Payment of an amount of fifty thousand rupees or more to a company for acquiring shares issued by it.

• Payment of an amount of fifty thousand rupees or more to a company or an institution for acquiring debentures or bonds issued by it.

• payment of an amount of fifty thousand rupees or more to the reserve bank of India for acquiring bonds issued by it.

• Payment of an amount aggregating fifty thousand rupees or more in a year as life insurance premium to an insurer.

• Payment to a dealer:

(i) Of an amount of five lakh rupees or more at any one time; or

(ii) Against a bill for an amount of five lakh rupees or more for purchase of bullion or jewellery

A person not holding pan and intending to enter into the above specified transactions can furnish form no. 60 (form 61 in case of person having only agricultural income). 

Holding more than One PAN, What Penalties can be imposed

PENALTY FOR HOLDING MORE THAN ONE PAN:-

A person cannot hold more than one PAN. If a PAN is allotted to a person, then he cannot apply for obtaining another PAN. A penalty of Rs.10,000/- is liable to be imposed under​​Section 272B of the Income-tax Act, 1961 for having more than one PAN.

If a person has been allotted more than one PAN then he should immediately surrender the additional PAN card(s).

Penalty for Non-Compliance of Provision of PAN

PENALITY FOR NON COMPLIANCE OF PROVISIONS OF PAN:-

SECTION 272B provides for penalty in case of default by the taxpayer in complying with the provisions relating to PAN, i.e., not obtaining PAN, even though he is liable to obtain PAN or knowingly quoting incorrect PAN in any prescribed document in which PAN is to be quoted or intimating incorrect PAN to the person deducing tax or person collecting tax. Penalty of Rs.10,000 undersection 272B can be levied

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