Taxability of Income from House Property

As per Section 22 of the Income Tax , 1961 the annual value of property shall be chargeable to income tax under Income from House property.

The calculation of income from house property initiates with determination of annual value.

Section 23 of the Income Tax Act, 1961 deals with determination of Annual Value of property. The annual value shall be deemed to be-

1. If the property is let out, the amount of rent received or receivable. Section 23(1)
2. If property is self-occupied by the owner, the annual value is Nil. Section 23(2)
3. If property consist of more than one property, the provision of clause (2) of section 23 is applies at one house at the discretion of assessee.Section 23(4)

The proviso to Sec 23(1) says that that taxes levied by local authority shall be deducted in the year in which it is actually paid.

For.eg If X holds property A and it is let out @ 15000 per month in Financial year 2018-19. The municipal taxes levied is 2500 and paid by X in April-19. The deduction of 2500 will be available in FY-2019-20.

Section 24 of the Income Tax, 1961 allows deduction while computing income from house property i.e 30% of the annual value and interest on borrowed amount if property has been acquired, constructed, repaired, etc. 

Section 25A talks about arrear or unrealised rent realized subsequent from tenant- In this case the income shall be deemed to be of financial year in which such income received and eligible for deduction of 30% as per clause 2 of the section 25A.

This Article is written by CA Chanchal Jain for the providing the information of tax liability of income from house property.

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