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Determining Annual value for House property

Determining Annual value for House property

Determining Annual value for House property involves 3 steps:

Step 1-Determination of Gross Annual Value

Step 2- (Gross Annual Value  – municipal tax paid by the owner during the previous year)

Step 3-The balance will be the Net Annual Value, which as per Income Tax is the annual value.

  1. Determining Annual value for House property for different types of house properties

(1) Determining Annual value for House property Where the property is let out throughout the previous year[section 23(1)(a)/(b)]

Where the property is let out whole year, then Gross Annual Value will be higher of

(a)Expected Rent   and

The Expected Rent is higher of1.Fair rent  and2.Municipal ValueBut restricted to standard rent.

 

(b)Actual rent received or receivable during the year.

(2) Determining Annual value for House property Where let out property is vacant for part of the year[section 23(1)(c)]

Here actual rent is lower than the Expected Rent then actual rent received or receivable will be the Gross Annual Value of the property.

(3) Determining Annual value for House property In case of self occupied property or un occupied property[section 23(2)]

(a)Where property is self occupied or un occupied throughout the previous year then

Annual value is Nil

Provided no other benefit is derived by the owner from such property.

(b)The benefit of exemption of one self occupied property is available only to an Individual/HUF.

(c) un occupied property refers to a property which cannot occupied by the owner by reason of his employment, business or profession at a different place and resides at such other place in a building not belonging to him.

(4) Determining Annual value for House property Where house property is let out for part of the year and self occupied for part of the year[section 23(3)]

(a)If a single unit of a property is let out for part of the year and self occupied for part of the year then the expected rent for the whole year shall be taken into account for determining the Gross Annual value.

(b) the expected rent for the whole year shall be compared with the actual rent for the let out period and whichever is higher shall be adopted as the Gross Annual value.

(c)however property taxes paid by the owner during previous year shall be allowed as deduction.

(5) Determining Annual value for House property In case of deemed to be let out property[section 23(4)]

In case of deemed to be let out property the expected rent shall be adopted as the Gross Annual value.

(6) Determining Annual value for House property In case of a house property ,a portion let out and a portion self occupied.

(a)Income from any portion or part of a property which is let out shall be separately under the “let out property” category and the other under the “self occupied property”.

 

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