House Property

19 Oct 2022

As per Income Tax Act, 1961, House property means ‘any property consisting of any buildings or lands appurtenant thereto of which the assesse is the owner’. It includes buildings, flats, office space, shops, factory sheds, agricultural lands, etc.

Income from House Property

As per Section 22 of Income Tax Act, 1961, Rental Income is taxable under the head ‘Income from House Property’, if assesse is the owner of the house property which also includes the beneficial ownership.

Types of House Property & its Taxability

There are 3 types of house property which are as follows:

1. Self-occupied property

This means the house property which the assessee & his family members use to reside in. If the assessee owns more than 1 house property, then he can claim any 2 of them as self-occupied house property & the rest are to be offered for taxation depending upon their status.

2. Let Out property

It means the assessee provides his house property on rent to others. The rental income received is treated as income from House property.

3. Deemed to be Let Out Property

If the assessee owns more than 1 house property, he can claim any 2 of them which are more beneficial to him as self-occupied & the other house property, if he has not given on rent then they will be treated as deemed to be let out & tax will be calculated on the deemed rent.

Computation of Income from House Property

Manner of determining Gross Annual Value

1. The higher of Municipal Value & Fair Rent is compared to Standard Rent.

2. Lower of the above is Expected Rent

3. From the Expected Rent & the Actual Rent whichever is higher is taken as Gross Annual Value.

Points to be kept in mind

  • If the House Property is used for business or profession then the income from such house property is treated as ‘Income from Business or Profession’.

  • Municipal taxes are allowed as deduction only on payment basis & if they are paid by the owner (i.e., municipal taxes paid by tenant are not allowed as deduction)

  • Loss from House Property can be set off against other heads of Income till a maximum limit of Rs.200000 & the balance if any can be carried forward & set-off against house property income upto 8 years.

  • Actual Rent means rent received as well as rent receivable from which unrealised rent can be subtracted.

Frequently Asked Questions

1. If a tenant sub-let the House Property to another tenant, then what is the treatment of the rent   received from such sub-letting.

Ans. For including income under Income from house property head, the basic condition is that the landlord should be the owner or beneficial owner of such house property, therefore the rent received from sub-letting of house property will come under Income from Other Sources or Income from Business or Profession as the case may be.

2.Can the assessee claim deduction for municipal taxes paid by the tenant?

Ans. While determining the NAV of House Property municipal taxes paid by owner are only allowed as deduction, therefore, the municipal taxes paid by the tenant cannot be claimed as deduction by the owner.

3.If the assessee owns 4 House Properties & all are occupied either by him or his family members & their GAV are 6 lakhs, 5.4 lakhs, 4 lakhs & 2.5 lakhs, then can he claim the House Properties with the highest GAV as self-occupied.

Ans. Yes, the assessee can claim the 2 House Properties with higher GAV’s as self-occupied & the other 2 House Properties will be deemed to be let out & taxed accordingly.

4.If one floor of House Property is self-occupied & the other is let-out, then what is the tax treatment?

Ans. In this case, the 2 floors will be considered as independent units of the House Property & the self-occupied one will be treated as self-occupied & the let-out will be treated as such & the income from such independent unit will be calculated under Income from House Property.