Income from House Property
Introduction
Income arising from any property, being building or land appurtenant thereto, is taxable under the head “Income from House Property.” Properties are categorised as let-out, self-occupied, or deemed let-out, and their income is computed based on annual value, considering factors such as municipal valuation, fair rent, and actual rent. The annual value of up to two self-occupied properties can be considered nil under specific conditions.
Chargeability of Income
- Property Characteristics: Only buildings or appurtenant land qualify; income from vacant land is excluded.
- Ownership: Income is taxable only in the hands of the owner or deemed owner.
- Usage Exceptions: Properties used for the owner’s business/profession or let inseparably with plant/machinery are taxed under other heads.
Taxable Heads for Exceptions
The income from a house property is taxable under the head ‘Income from House Property’, regardless of whether the property is residential or commercial or the purpose for which it is used. However, there are certain exceptions:
- Own Business/Profession: If used directly, income is not taxed under this head.
- Composite Letting: Inseparable letting with assets is taxed as “Other Sources” or “Business Income.”
- Organized Letting: Residential letting is taxed under “House Property,” while commercial letting depends on specifics.
Computation of Income
- Annual Value: Calculated based on municipal valuation, fair rent, standard rent or actual rent.
- Deductions:
- Municipal taxes paid.
- Standard deduction at 30% of net annual value.
- Interest on borrowed capital for property acquisition or improvement.
- Additions:
- Arrears of rent or unrealised rent
Exemptions and Reliefs
- Income from farm building ( Section 2(1A)(c) ) : Any income derived from farm building shall be considered as agriculture income, and consequently exempt from tax.
- Agricultural Income ( Section 2(1A) ) : Income from farm buildings near agricultural land is exempt.
- Trust Property ( Section 11 ) : Income applied for charitable or religious purposes is exempt.
- Ex-Ruler’s Palace ( Section 10(19A) ) : Exemption for one palace of a former ruler.
- Local Authorities ( Section 10(20) ) : Exemption for income chargeable under this head.
- Educational/Medical Institutions ( Section 10(23C) ) : Qualifying institutions are exempt.
- Registered Trade Union ( Section 10(24) ) : Any income chargeable under the head ‘house property’ of a registered trade union is exempt from tax.
- Self-Occupied Properties ( Section 23(2) ) : Annual value of up to two properties is nil.
- Co-operative Societies ( Section 80P ) : Eligible deductions for income from specific operations.