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INCOME FROM HOUSE PROPERTY

The income from house property owned by a person is to be taxed on the basis of its annual letting value. The annual letting value is generally taken at the valuation made by the Municipal Authorities. In case the property is given on rent the actual rent is taken if it is higher than the municipal valuation.

            In case you are using the property for your own occupation the annual value is taken at nil and nothing is taxable. If you are fortunate to own more than one house then one of the houses can be claimed for exemption but the choice is yours. From FY 2019-20 i.e. AY 2020-21, you can claim exemption of self occupation for two hoses and will be considered as exemptfrom taxation. In case of other house or houses the municipal value will be considered as the annual value for the purposes of computation of income even it is being occupied by the members of your family. In case the property has been let out, the actual rent is considered as annual value, if it is more than municipal valuation.

           The method of computation of income from house property is very simple as given below:

Annual letting value			A
Less:	Municipal taxes actually paid		B
Net annual letting value			C = B-A
Less:	(1) 30% of annual letting value as deduction
	(2) Ground rent, insurance	X
	(2) Ground rent, insurance	X
	(3) Interest	Y
		Z
		X+Y+Z = D	D
Income from property			= C - D

The municipal taxes are allowed on the basis of actual payment and can include the arrears of taxes as and when paid. Copy of the receipt for payment of taxes must be retained for record purposes.
The deduction of 30% is allowable on the net annual letting value after deducting municipal taxes. It is a statutory deduction and is not dependent on actual expenditure.

If the property has been purchased or constructed with borrowed money the interest payable is allowed for deduction against the property income. The entire interest payable on loan is allowable as deduction and it is not necessary that the interest has actually been paid. Even the interest on loans taken during construction/acquisition of the property are allowed for deduction at 1/5th for five years from the year in which the construction/acquisition is completed.

IN cases of one house for which ALV is taken at nil, the deduction of interest is limited to Rs. 2 lakhs. From AY 2020-21, the total limit will continue to be Rs.2lakhs for both the houses taken together for which ALV is taken at nil on account of self occupation.

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