Income Tax on House Property
- The property is owned by the assessee.
- The property is let out and the income generated through it is only in the form of rent. The property is not be used for business or profession purpose by the assessee.
- The property comprises of building or land adjacent thereto.
Note: It is important to note that if you are not the owner of the property and are still generating income from the same, that would not be taxable in the head of 'income from house property' but will fall under the purview of other income and other provisions of the Income Tax Act.
- If you are the owner of an estate that is impartable then you would be considered to be the owner of the estate. For example - When an HUF jointly holds a property in its name on behalf of its memebers then joint HUF will be considered to be the owner, however, the property may be in name of an individual member of the family.
- If you have acquired the long term lease of property then you will be the deemed owner of the property and the income generated through the property will be taxable under the head of income from house property. A period of more than 12 years would be considered to be a long term period.
- If you, as an individual, transfer your property for inadequate considerations or give that property as gift to your minor child, other than a married daughter or your spouse then though legally the person to whom you have gifted the property is the owner yet the income generated would be considered to be taxable in your hands under the head from income from house property.
- If you are a member of a co-operative society, association of person or company where you have been allotted a building under the house building scheme of society then you will be considered the deemed owner of the building.
- If you have satisfactorily complied with the provisions of Section 53A of Transfer of Property Act then you will be considered as the deemed owner of the property. This section caters to a scenario wherein though the agreement of buying the property has not been registered yet the one who has purchased the property is considered to be the owner of the property.
Calculation of Income from House Property
The highest of the following three would be considered as the annual income from the property that has been let-out by you -
- Municipal Value of the property.
- Fair Rent - This is the rent of properties in your locality that are similar to the property that you own. The value of these properties is determined by the Income Tax Department.
- Actual Rent received by you.
- A long term lease of property held by you.
- Your spouse has received a property from you as gift under Section 56(2) of the Income Tax Act 1962
- You have a number of properties in your name out of which few have been given on rent by you and few are still not let out.
- If you have borrowed money in order to renovate, build or buy a property that is not self-occupied then the interest paid or accrued on the amount borrowed in the relevant year would serve as deduction when you compute the net annual value for yourself.
- An amount up to 30 % of the annual value towards maintenance and repair will serve as deduction when you compute the net annual value.