10 FAQs on House Property Income
01. What is the meaning of “Income from house property”? Income from house property means the income that has the origin in a building being a flat, bungalow, shop etc. Such a building has the potential to generate income which you may get or not. However, such a potential to earn income or the actual income earned is taxed. And this is called as Income from House Property. The potential income is the notional income.
02. When should I declare the income from house property?
The income from house property should be declared if you own the house property or the properties and are legally entitled to receive the income from such property
Such a property must not be used by you for your business or profession
03. How is the house property treated for tax purposes as per the Income-tax Act? For income tax, the house property is classified into THREE types based on its occupation.
Self-Occupied Property which means the owner itself is considered to be in occupation of the property for his own residence,
Let Out Property (LOP) when the owner has let out his house property for the occupation of someone else and received the rent. In such case, rental income is taxed.
Deemed Let Out Property (DLOP), in this case the property is vacant but has got the potential to earn income and such potential income or the expected income (notional) is brought to tax.
04. What is the meaning of self-occupied property (SOP)? A self-occupied property (SOP) is the one which is used by the person for his own residential purpose. If this property is bought on home loan and interest is paid by the owner, the income from such property shall be negative or loss. If such a property is not on loan and no interest is paid by the owner, then income shall be NIL or negative to the extent of municipal taxes paid.
05. I own the property and I have neither given the property on rent nor occupied for myself. It is vacant. I do not earn income from this property. How should it be declared in the I-T Return?
If you do not own any other property and are residing at other place because of your work, then this property may be treated as Self Occupied Property (SOP) and should be declared in I-T Return as such.
If you own any other property which has already been treated as Self Occupied Property (SOP), then this property shall be treated as vacant and Deemed Let Out Property (DLOP) and the notional income has to be computed.
06. How is the income from sub-letting be shown in I-T Return? This income should be shown as the income from other sources and not as income from house property since the latter is applicable only in cases where you own the property and in case of sub-letting, the property is owned by someone else than you.
07. I have transferred my house property to my minor child who is not married. In whose hands will the income from the house property be taxed? Since you are the beneficial owner of the house property, the income shall be taxed in your hands.
08. What is meant by the gross annual value of the property? For the purposes of Income Tax, it is the amount which can be yielded from the property in a year as income, as rent, service charges, etc. This is the starting point for computation of house property income. This base value is used to make relevant additions/subtractions and then to compute the actual net income from house property.
09. How is the Gross Annual Value determined? In simplistic terms it is.
For Self-Occupied Property, the GAV is NIL or ‘0’
For let out property, two things are considered one rent amount received, two how much rent is calculated as per the municipal records, the higher of the two shall be the gross annual value
10. I have rented out a part of my house property and I stay in another part of the same house property. In such case, how will the income be computed? In this case, the two parts of the house shall be considered as independent house properties or taxable units.
The part in which you are staying shall be treated as a self-occupied property and the income shall be computed accordingly
The part which is given on rent shall be treated as let-out property and income shall be computed as income from let out property.