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Particulars	I House	II House	III House
Date of completion	1.1.1991	1.1.1993	1.8.1991
No. of residential units	2	1	3
Municipal value	1,20,000	72,000	60,000
Fair Rental Value	1,50,000	75,000	75,000
Standard rent	1,30,000	80,000	72,000
Rent per unit per annum	70,000	84,000	21,000
Municipal taxes	Rs. 12,000 (due but not paid)	Rs. 8,000 for last year paid in this year, and Rs. 9,000 of current year due but not paid.	Rs. 60,000 (It includes Rs. 54,000 paid as advance for next 9 years)

	I House	II House	III House
Higher if MV & Fair Rent
Standard Rent
(a) Lower of above two
(b) Actual Rent Received
Higher of (a) & (b)
Gross Annual Value
Less: Municipal Taxes
Net Annual Value

Question 3: Municipal value of a house is Rs. 90,000, Fair rent, Rs. 1,40,000, Standard rent Rs. 1,20,000. The house property has been let for Rs. 12,000 p.m. and was vacant for one month during the previous year 2007-08. Municipal taxes paid during the year were Rs. 40,000. Compute the annual value for assessment year 2008-09.


Situation 2: Where the property is let and was vacant for whole or part of the year and the actual rent received or receivable owing to such vacancy is less.
The annual value of the property shall be determined under this situation if all the following 3 conditions are satisfied:

• The property is let;
• It was vacant during the whole or part of the previous year;
• Owing to such vacancy, the actual rent received or receivable is less than the value determined under section 23(1)(a)
  

The gross annual value shall be the actual rent received or receivable.


(C) House Property which is part of the year let and part of the year occupied for own residence:
The period of occupation of property for own residence shall be irrelevant.
The annual value of such house property shall be determined as if it is let and annual value is calculated as above.


Question 4: R has a house property in Delhi whose Municipal Value is Rs. 1,00,000 and the Fair Rental Value is Rs. 1,20,000. It was self-occupied by R. from 1-4-2007 to 31-7-2007. W.e.f. 1-8-2007 it was let out at Rs. 9,000 p.m. Compute the annual value of the house property for the assessment year 2008-09 if the municipal taxes paid during the year were Rs. 20,000.


Treatment of unrealized rent [Explanation to section 23(1)]
As per the Explanation, the actual rent received or receivable mentioned in section 23(1)(b) and (c) shall not include the amount of rent which the owner cannot realize, subject to the rules made in this behalf.


Rules for unrealized rent
The amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,-

• the tenancy is bona fide;
  

• the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;
  

• the defaulting tenant is not in occupation of any other property of the assessee;
  

• the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.

Question 5: R furnishes the following particular in respect of a house property owned by him in Delhi.

	Rs.
Municipal value	2,00,000
Fair rent	2,40,000
Actual rent (per month)	21,000
Municipal tax paid during the year	20,000

The tenant vacated the property on 31-10-2007 and thereafter the property was let out for Rs. 25,000 p.m.
R. could not realize the rent for the months of September and October, 2007 due to the death of the earlier tenant.

• Compute the annual value of the property for the assessment year 2008-09.
• What will be your answer if the unrealized rent is for one month instead of two months.
  

Deductions from income from house property [Section 24]
Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:-

• Statutory deduction: From the net annual value computed, the assessee shall be allowed a statutory deduction of a sum equal to 30% of the net annual value.
  

• Interest on borrowed capital: Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital is allowed as a deduction. The amount of interest payable yearly should be calculated separately and claimed as a deduction every year. It is immaterial whether the interest has been actually paid or not paid during the year.

Interest attributable to the period prior to completion of construction: It may so happen that money is borrowed earlier and acquisition or completion of construction takes place in any subsequent year. Meanwhile interest becomes payable. In such a case interest paid/payable for the period prior to the previous year in which the property is acquired/constructed (as reduced by any part thereof allowed as a deduction under any other provisions of the Income-tax Act) will be aggregated and allowed in five successive financial years starting from the year in which the acquisition/construction was completed. Interest will be aggregated from the date of borrowing till the end of the previous year prior to the previous year in which the house is completed and not till the date of completion of construction.


Question 6: The assessee took a loan of Rs. 6,00,000 on 1-4-2005 from a bank for construction of a house on a piece of land he owns in Delhi. The loan carries an interest @ 10% per annum. The construction is completed on 15-6-2007. The entire loan is still outstanding. Compute the interest allowable for the assessment year 2008-09.


Question 7: R owns a house property in Delhi. From the particulars given below compute the income from house property for the assessment year 2008-09.

Rs.

Municipal value 2,00,000

Fair rent 2,52,000

Standard rent 2,40,000

Actual rent (per month) 23,000

Municipal taxes 20% of municipal value

Municipal taxes paid during the year 50% of tax levied

Expenses on repairs 20,000

Insurance premium 5,000

R had borrowed a sum of Rs. 12,00,000 @ 10% p.a. on 1-7-2005 and the construction of the property was completed on 28-2-2007.