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IT on house property
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It is the annual value of property, the profits of which are chargeable to income tax, writes C.H. Gopinatha Rao
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Get it right: Calculate the tax deductions on your house
Income from house property is a separate title of income chargeable to income tax under the head Income from House Property. It is the annual value of property, other than portions of such property occupied for the purposes of any business or profession, the profits of which are chargeable to income tax.
Any income arising out of vacant land is not covered under this section even though it may be received as rent, ground rent or lease rent. Such income would be assessable as income from other sources. Even rent arising out of open spaces or quarry rent is taxed as income from other sources.
Not charged
When the property is used by the owner for his business or profession, the income of that property is not charged in the hands of the owner. The income from letting out shops would be considered income from house property.
The term ‘buildings’ includes any building (whether occupied or intended for self-occupation), office building, godown, storehouse, warehouse, factory, halls, shops, stalls, platforms, cinema halls, auditorium etc.
Income arising out of the building or a part of the building is covered under this section. Land appurtenant includes land adjoining to or forming a part of the building.
It would depend on the nature of the land, whether it is appurtenant to the residential building, factory building, hotel building, club house, theatre etc. and will include courtyards, compound, garages, car parking spaces, cattle shed, stable, drying grounds, playgrounds and gymkhana.
Exemption
The income from the following house property is completely exempt from any tax liability:
Income from any farmhouse forming part of agricultural income;
Annual value of any one palace in the occupation of an ex-ruler;
Property income of a local authority;
Property income of an authority constituted for the purpose of dealing with and satisfying the need for housing accommodation or for the purposes of planning development or improvement of cities, towns and villages or for both (The Finance Act, 2002, w.e.f. 1.4.2003 shall delete this provision.);
Property income of any registered trade union;
Property income of a member of a Scheduled Tribe;
Property income of a statutory corporation or an institution or association financed by the Government for promoting the interests of the members either of the Scheduled Castes or Scheduled Tribes or both;
Property income of a corporation, established by the Central or any State Government for promoting the interests of members of a minority group;
Property income of a cooperative society, formed for promoting the interests of the members either of the Scheduled Castes or Scheduled Tribes or both;
Property income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities by an authority constituted under any law for the marketing of commodities;
Property income of an institution for the development of Khadi and village industries;
Self-occupied house property of an assessee which has not been rented throughout the previous year;
Income from house property held for any charitable purposes;
Property income of any political party.
Deductions permitted
Section 24 lays down that income chargeable under the head ‘Income from house property’ shall be computed after making the following deductions:
A sum equal to 30 per cent of the annual value.
If the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital.
Where such property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, on or after April 1, 2003, the amount of deduction under this clause shall not exceed Rs. 1,50,000.
The amount of deduction shall not exceed Rs. 30,000 where the property consists of a house or part of a house, which the owner occupies for his own residence or which cannot be occupied by him because his employment, business or profession is carried on at any other place and he has to reside at that other place in a building which is not his own.
The author is former National President, Institution of Valuers
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