EDITION
2024
IGS THE CHARTER OF SUCCESS
CA-INTERMEDIATE
MAY-2024 EXAMS
AN IGS PUBLICATION
RELEVANT FOR MAY 2024 AND NOV. 2024 EXAMS
1
Dedicated to
My parents
(Sh. Darshan Singh Dabas and Smt. Vijay Lakshmi)
Who are visible Gods for me on the earth
© Author
All rights reserved. No part of this book shall be reproduced, stored in a retrieval system, or transmitted by any
means without written permission from the author.
Price:
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1. INCOME UNDER THE HEAD HOUSE PROPERTY
Chargeability [ Section 22]
Income from letting out of house property is chargeable to tax under the head House Property.
The process of computation of income under the head “Income from house property” starts with the
Determination of annual value of the property
The annual value of any property comprising of buildings or lands appurtenant thereto of which the assessee
is the owner is chargeable to tax under the head “Income from house property”.
If the income is from sale or purchase of house property, it will be taxable under the head Capital
If the sale or purchase is part of a business, income is taxable under the head Business/Profession
House property shall include all types of house properties i.e. residential houses, shops, godowns, cinema
building, workshop building, hotel buildings etc.
The term house property shall include not only the buildings but also the lands appurtenant thereto
i.e. the term house property shall include even any open land which is part and parcel of the building.
If any person has let out only land, which is not essential part of any building, income is taxable under the
head other sources.
If any person has business of letting out of open land, income shall be taxable under the head business or
Profession.
If any person is holding house property as stock-in-trade i.e. for sale/purchase of house property, income shall
be taxable under the head business or profession.
Where the assessee is a builder/construction company, the house property would be its stock-in-trade and rental
income therefrom would be assessable under the head “ income from house property.
Where the assessee is engaged in the business of letting out of properties , income therefrom would be
Assessable under the head business or profession
If any person is holding house property for the purpose of sale/purchase but it has been let out for some
time, income shall be taxable under the head House Property.
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METHOD OF COMPUTATION
Gross Annual Value (W.note -1) xxx
Less: Municipal taxes paid by owner xxx
Annual Value (Net Annual Value) xxx
Less: Deduction u/s 24
(a) Standard deduction @30% xxx
(30% of Annual value)
(b) Interest on borrowed capital xxx xxx
Income from house property u/s 22 xxx
Illustraition-1 Compute income from house property of Mr. X for the assessment year 2024-25:
Gross annual value of the house is ₹ 2,50,000, Municipal tax paid during the year ₹ 20,000.
Interest on capital borrowed ₹ 61,000.
Solution-1 Computation of income of Mr. X under the head House property for assessment year 2024-25
Particulars ₹
Gross Annual value 2,50,000
Less: Municipal tax paid (20,000)
Annual value u/s 23 2,30,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 69,000
( 30% of ₹ 2,30,000)
(b) Interest on borrowed capital ₹ 61,000 (1,30,000)
Income under the head house property u/s 22 1,00,000
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Illustration-2 Compute income from House property of Mr. X for the Assessment year 2024-25
Gross annual value ₹ 1,40,000, municipal tax 12,000 due but not paid, interest on loan borrowed for
Construction ₹ 50,000
Solution Computation of income under head of Mr. X for Assessment year 2024-25
Particulars ₹
Gross Annual value 1,40,000
Less: Municipal tax paid (w.n. -1) nil
Annual value u/s 23 1,40,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 42000
( 30% of ₹ 1,40,000)
(b) Interest on borrowed capital ₹ 50,000 92,000
Income under the head house property u/s 22 48,000
w.n.-1 Municipal tax is not paid hence no deduction allowed.
Illustration -3 Compute income from House property of Mr. X for the Assessment year 2024-25
Gross annual value 5,00,000, Municipal tax ₹ 80,000 for last year paid in current year, and ₹ 90,000 of
Current year due but not paid, Interest on loan taken for construction ₹2,30,000.
Solution Computation of Income under the head House Property of Mr. X for Assessment Year 2024-25
Particulars ₹
Gross Annual value 5,00,000
Less: Municipal tax paid (80,000)
Annual value u/s 23 4,20,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 1,26,000
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(30% of ₹ 4,20,000)
(b) Interest on borrowed capital ₹ 2,30,000 (3,56,000)
Income under the head house property u/s 22 64,000
Illustraition-4 Compute income from House property of Mr. X for the Assessment year 2024-25
Gross Annual value ₹ 8,40,000, Municipal tax ₹ 160,000 (it includes Rs 1,20,000 paid as advance for
Next 3 years), Interest on borrowed capital for construction ₹ 2,65,000.
Solution Computation of Income under the head House Property of Mr. X for Assessment Year 2024-25
Particulars ₹
Gross Annual value 8,40,000
Less: Municipal tax paid (1,60,000)
Annual value u/s 23 6,80,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 2,04,000
( 30% of ₹ 6,80,000)
(b) Interest on borrowed capital ₹ 2,65,000 (4,69,000)
Income under the head house property u/s 22 2,11,000
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Annual Value
The annual value of any property shall be the sum for which the property might reasonably be expected to be let
from year to year.
Section-23 Determination of annual value
Section 23(1) For the purposes of section 22, the annual value of any property shall be deemed to be
(a) the sum for which the property might reasonably* be expected to let from year to year; or (generally)
(Expected Rent= Municipal value or Fair Rental value whichever is higher. But it(cannot Exceed standard Rent.)
[Expected Rent is always computed for 12 months except when construction is completed or house is
purchased/sold in the middle of the year.]
(b) if the actual rent received or receivable is in excess of the sum referred to in clause (a), the amount so
received or receivable; or
(C) Where the property is let and was vacant during the whole or any part of the previous
Year and owing to* such vacancy the actual rent received or receivable is less than the sum
Referred to in clause (a), the amount so received or receivable (because of , on account of)
From the above amount the taxes actually paid to any local authority in respect of the Property shall be
deducted in determining the annual value.
The municipal taxes have been borne by the owner, and
These have been actually paid during the previous year by the owner.
Municipal taxes are allowed as deduction only in the previous year in which these are paid even if they relate
to past or future yea₹
The deduction of municipal taxes for future years shall be allowed if the assessee follows cash system of
accounting
Municipal taxes due but not paid shall not be allowed deduction.
A municipal tax includes water tax, house tax, fire tax and sewerage tax etc. But if any taxes are paid to
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State govt. then deduction shall not be allowed.
For a property situated outside India, municipal taxes paid to the local authority in which
the property is situated is allowed deduction.
Case law (note for exam)
HIGH COURT OF MADRAS
CIT v R. Venugopal Reddiar (1965) 58 ITR 439 (Mad)
Facts: Assessee a resident of India derived certain income from house property situated in Burma.
He had paid some amount of taxes to the relevant authority of Burma.
Question: Can the assessee claim deduction for such municipal taxes paid to govt. of Burma from income
of house property situated in Burma on which he is liable to pay Income tax in India?
Held: Income tax has laid down the following:
“Taxes levied by any local authority in respect of the property shall be deducted from Annual value of
the property”. Interestingly, since the house is situated outside India any local authority of India cannot impose
tax upon that house property and thus the word local authority covers the authority situated outside India also.
Further it is not written anywhere that deduction shall be given only if taxes are paid to the Local authority
of India. Thus, the assessee can claim deduction for the taxes paid to Burma’s local authority.
Deduction shall be allowed only if taxes are paid by the owner
∴ if the taxes are paid by tenant then no deduction shall be allowed.
NAV (Annual value) can be negative if municipal taxes actually paid during the year are more than GAV.
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Determination of Gross annual value
In determining the annual value there are four factors which are normally taken into consideration. These are:
a. Rent received or receivable
b. Municipal Value: This is the value as determined by the municipal authorities for levying municipal taxes on
house property.
c. Fair rent: the rent of similar types of buildings in the same locality, if it is let for a year.
d. Standard rent: The Standard rent is fixed under the Rent Control Act. If the standard rent has been fixed for any
property under the Rent Control Act, the owner cannot be expected to get a rent higher than the standard rent
fixed under the Rent Control Act, i.e., the highest possible rent as per Rent Control Act.
Case 1 Where the property is let out throughout the previous year [Section 23(1)(a)/(b)]
Treatment Where the property is let out for the whole year, then GAV would be higher of-
(a) Expected Rent (ER) and
(b) Actual Rent received or receivable during the year
FORMAT COMPUTATION OF GROSS ANNUAL VALUE
1. Municipal value xxx
2. Fair rent or Fair rental value xxx
3. Whichever is higher xxx
4. Standard rent xxx
5. Expected rent (lower of 3 and 4) xxx
6. Actual rent received or receivable xxx
Gross annual value (GAV) (higher of 5 and 6 ) under section 23(1)(a)/(b) xxx
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Illustration-5 M₹ X has let out one House property @ ₹62,000 p.m., Municipal Valuation ₹72,000 p.m., Fair Rent ₹90,000
p.m., Standard Rent ₹1,00,000 p.m., Municipal Tax paid ₹40,000 and Interest on loan taken for construction
₹2,28,000. Compute Income under the head house property.
Solution Computation of Income under the head House Property of Mr. X for Assessment Year 2024-25
Particulars ₹
Gross Annual value (w.n.-1) 10,80,000
Less: Municipal tax paid (40,000)
Annual value u/s 23 10,40,000
Less: Deduction u/s 24
Standard deduction @30% ₹ 3,12,000
( 30% of ₹ 10,40,000)
Interest on borrowed capital ₹ 2,28,000 (5,40,000)
Income under the head house property u/s 22 5,00,000
Working note:- 1 COMPUTATION OF GROSS ANNUAL VALUE
1. Municipal value (₹ 72,000 x 12) 8,64,000
2. Fair rent or Fair rental value (₹ 90,000 x 12) 10,80,000
3. Whichever is higher 10,80,000
4. Standard rent (₹ 1,00,000 x 12) 12,00,000
5. Expected rent (lower of 3 and 4) 10,80,000
6. Actual rent received or receivable ( ₹ 62,000 x 12) 7,44,000
Gross annual value (GAV) (higher of 5 and 6 ) under section 23(1)(a)/(b) 10,80,000
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Illustration-6 Mr. X has one house property which is let out@ ₹80,000 p.m. Fair rent ₹ 90,000 p.m.,
Municipal Valuation ₹70,000 p.m., Standard Rent ₹81,000 p.m. Municipal tax paid ₹60,000
and interest paid on loan for construction of house property is ₹ 50,000.
Compute his Income under the head House property
Solution Computation of Income under the head House Property of Mr. X for Assessment Year 2024-25
Particulars ₹
Gross Annual value (w.n.-1) 9,72,000
Less: Municipal tax paid (60,000)
Annual value u/s 23 9,12,000
Less: Deduction u/s 24
Standard deduction @30% ₹ 2,73,600
( 30% of ₹ 9,12,000)
Interest on borrowed capital ₹ 50,000 (3,23,600)
Income under the head house property u/s 22 5,88,400
Working note:- 1 COMPUTATION OF GROSS ANNUAL VALUE
Municipal value (₹ 80,000 x 12) 9,60,000
Fair rent or Fair rental value (₹ 90,000 x 12) 10,80,000
Whichever is higher 10,80,000
Standard rent (₹ 81,000 x 12) 9,72,000
Expected rent (lower of 3 and 4) 9,72,000
Actual rent received or receivable ( ₹ 80,000 x 12) 9,60,000
Gross annual value (GAV) (higher of 5 and 6 ) under section 23(1)(a)/(b) 9,72,000
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Illustration-7 Mr. X owns five houses in Chennai, all of which are let-out. Compute the GAV of each house from the
Information given below:
Particulars House-1(₹) House -2(₹) House -3(₹) House – 4 (₹) House -5
Municipal value 80,000 55,000 65,000 24,000 75,000
Fair Rent 90,000 60,000 65,000 25,000 80,000
Standard Rent N.A 75,000 58,000 N.A 78,000
Actual rent 72,000 72,000 60,000 30,000 72,000
Solution Partiuclars House -1(₹) House -2 (₹) House -3 (₹) House - 4 (₹) House -5
GAV 90,000 72,000 60,000 30,000 78,000
H.Q:1 Mr. X owns five houses at Cochin. Compute the gross annual value of each house from the information given
below:
Particulars House-1 (₹) House-2 (₹) House-3 (₹) House-4 (₹) House-5
Municipal value 1,20,000 2,40,000 1,10,000 90,000 75,000
Fair Rent 1,50,000 2,40,000 1,14,000 84,000 80,000
Standard Rent 1,08,000 N.A 1,44,000 N.A 78,000
Actual rent 1,80,000 2,10,000 1,20,000 1,08,000 90,000
Solution Particulars House-1 House-2 House-3 House-4 House-5
GAV
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Case-2 Where let out property is vacant for part of the year
Sub-case-(i) Where let out property is vacant for part of the year and owing to vacancy, the actual rent is lower than the
Expected rent (ER). [Section 23 (1)(c)]
Treatment The actual rent received or receivable will be the GAV of the property
Format Computation of Gross annual value
1. Municipal value xxx
2. Fair rent or Fair rental value xxx
3. Whichever is higher xxx
4. Standard rent xxx
5. Expected rent (lower of 3 and 4) xxx
6. Actual rent received or receivable xxx
If there was no vacancy, in that case rent received/receivable would have been ₹xxx X 12 =
As the actual rent received or receivable owing to vacancy is less than the Expected rent , therefore
Gross annual value shall be ₹ xxx as per section 23(1)(c).
Illustration-8 Municipal value of a house is ₹ 90,000, Fair Rent, ₹ 1,40,000; Standard rent ₹ 1,20,000. The house
Property has been let out for ₹ 12,000 p.m. and was vacant for three month during the p/y 2023-24.
Municipal taxes paid during the year were ₹ 40,000. Compute the annual value for Assessment year 2024-25.
Solution Computation of income under the head house property for Assessment year 2024-25. ₹
Gross Annual value (w.n.-1) 1,08,000
Less: Municipal tax paid 40,000
Annual value u/s 23 68,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 20,400
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( 30% of ₹ 68,000)
(b) Interest on borrowed capital ₹ nil (20,400)
Income under the head house property u/s 22 47,600
Computation of Gross annual value
1. Municipal value 90,000
2. Fair rent or Fair rental value 1,40,000
3. Whichever is higher 1,40,000
4. Standard rent 1,20,000
5. Expected rent (lower of 3 and 4) 1,20,000
6. Actual rent received or receivable (₹ 12000 x 9) 1,08,000
In this case, if there was no vacancy, rent received/receivable would have been ₹12,000 x 12 = 1,44,000
As the actual rent received or receivable owing to vacancy is less than the Expected rent , therefore
Gross annual value shall be ₹1,08,000 as per section 23(1)(c).
Illustration - 9 Municipal value of a house is ₹ 9,000 p.m., Fair Rent, ₹ 10,000 p.m.; Standard rent ₹ 12,000 p.m., The house
Property has been let out for ₹ 8,000 p.m. and was vacant for one month during the p/y 2023-24.
Municipal taxes paid during the year were ₹ 10,000. Interest on borrowed capital for construction ₹35,000
Compute the Income form house property for Assessment year 2024-25.
Solution Computation of income from house property for Assessment year 2024-25.
Particulars ₹
Gross annual value (w.n. – 1) 1,20,000
Less: municipal tax (10,000)
Annual value u/s 23 1,10,000
Less: Deduction u/s 24
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(a) Standard deduction @30% ₹33,000
(30% of ₹ 1,10,000)
(b) Interest on borrowed capital ₹35,000 (68,000)
Income under the head house property u/s 22 42,000
Working note -1: Computation of Gross annual value
1. Municipal value (₹ 9,000 x 12) 1,08,000
2. Fair rent or Fair rental value (₹ 10,000 x 12) 1,20,000
3. Whichever is higher 1,20,000
14. Standard rent (₹ 12,000 x 12) 1,44,000
5. Expected rent (lower of 3 and 4) 1,20,000
6. Actual rent received or receivable ( ₹ 8,000 x 11) 88,000
If there was no vacancy, in that case rent received/receivable would have been ₹8000 x 12 = ₹96,000
and it is still less than expected rent, therefore GAV shall be expected rent.
Therefore, Gross Annual value under section 23(1)(a)/(b) shall be ₹1,20,000
H.Q.: 2 Compute gross annual value in the following cases for the assessment year 2024-25:
Particulars House-1 House-2 House-3 House-4
Fair Rent (p.m.) 9,000 13,000 16,000 12,000
Municipal Valuation (p.m.) 10,000 9,000 18,000 9,000
Standard Rent (p.m.) 12,000 11,000 16,000 7,000
Rent received/Receivable (p.m.) 7,000 11,500 16,000 20,000
Vacancy 1 month 1 month 2 months 2 months
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Solution-1 Computation of Gross annual value for Assessment year 2024-25
(a) Fair Rent
(b) Municipal Valuation
(c) Higher of (a) or (b)
(d) Standard Rent
(e) Expected Rent {Lower of (c) or (d)}
(f) Rent Received/Receivable
If there was no vacancy, in that case rent received/receivable would have been ₹ x 12 = ₹
and it is still less than expected rent, therefore GAV shall be expected rent.
Gross Annual Value ₹
Solution-2 Computation of Gross annual value for Assessment year 2024-25
(a) Fair Rent
(b) Municipal Valuation
(c) Higher of (a) or (b)
(d) Standard Rent
(e) Expected Rent {Lower of (c) or (d)}
(f) Rent Received/Receivable
If there was no vacancy, in that case rent received/receivable would have been ₹ x 12 = ₹
hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent
Rent received/receivable
Gross annual value ₹
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Solution - 3 Computation of Gross annual value for Assessment year 2024-25
(a) Fair Rent
(b) Municipal Valuation
(c) Higher of (a) or (b)
(d) Standard Rent
(e) Expected Rent {Lower of (c) or (d)}
(f) Rent Received/Receivable
If there was no vacancy, in that case rent received/receivable would have been ₹ x 12 = ₹
hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent
Rent received/receivable
Gross annual value ₹
Solution - 4 Computation of Gross annual value for Assessment year 2024-25
(a) Fair Rent
(b) Municipal Valuation
(c) Higher of (a) or (b)
(d) Standard Rent
(e) Expected Rent {Lower of (c) or (d)}
(f) Rent Received/Receivable
If there was no vacancy, in that case rent received/receivable would have been ₹ x 12 = ₹
hence rent received/receivable is lower in this case due to vacancy, therefore GAV shall be the rent
Rent received/receivable
Gross annual value ₹
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Case 3: In case of self-occupied property or unoccupied property [Section 23(2)]
a. Where the property is self-occupied for own residence or unoccupied throughout the previous year, its Annual
Value be Nil, provided no other benefit is derived by the owner from such property.
b. The expression “unoccupied property” refers to property which cannot be occupied by the owner by reason of
his employment, business or profession at a different place and he resides at such other place in a building not
Belonging to him.
c. The benefit of “Nil” Annual value is available only for upto self-occupied or unoccupied house properties i.e.,
For either one house property or two-house properties.
d. The benefit of “Nil” Annual value in respect of upto two self-occupied house properties is available only to
an Individual/ HUF
e. No deduction for municipal taxes is allowed in respect of such property/Properties as annual value means value
Determined after deduction of municipal taxes.
Illustration -10 Assessee is owner of a building. It was occupied for his own residence. Municipal value of the building is
Rs. 15,000 p.m. and Fair Rent of the building Rs.18,000 p.m. . Following are the expenses of the building
Municipal taxes Rs. 2,000, Repairs Rs. 4000, Interest on loan taken for construction Rs. 1,50,0000. Compute
Income under the House Property for Assessment year 2024-25.
Solution Computation of Income under the House property for the Assessment year 2024-25
Annual Value u/s 23 Nil
Less: Deduction u/s 24
(a) Standard deduction nil
(30% of annual value)
(b) Interest on loan 1,50,000 (1,50.000)
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Income under the head house property u/s 22 (1,50,000)
HQ-3 Assessee is owner of a building. He is residing in the building, Municipal value Rs. 1,50,000 p.a., Fair rent
Rs. 1,74,000 p.a. and Standard rent Rs. 1,80,000. Municipal tax paid Rs. 15,000 and Interest on loan for
Construction Rs. 25,000. Repair Expenses Rs. 15,000. Compute Income under the head House Property
For assessment year 2024-25
Solution Computation of Income under the head House Property for assessment year 2024-25
Annual Value u/s 23
Less: Deduction u/s 24
(a) Standard deduction
(30% of annual value)
(b) Interest on loan
Income under the head house property u/s 22
Case-4 Where a house property is let-out for part of the year and self-occupied for part of the year [Section23(3)]
1. If a single unit of a property is self-occupied for part of the year and let-out for the remaining part of the year,
Then the ER for the whole year shall be taken into account for determining the GAV.
2. The ER 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 GAV.
3. However, municipal tax for the whole year is allowed as deduction provided it is paid by the owner during the
previous year.
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Illustration-11 Assessee is owner of a building. It was let out for Rs. 20,000 p.m. But was occupied for his own residence for
2 months. Municipal value of the building is Rs. 18,000 p.m. and FRV of the building Rs. 16,000 p.m.
Following are the expenses of the building: - Municipal taxes Rs. 2,000 Repairs Rs. 4,000 interest on loan taken
For construction of building Rs. 80,000 insurance premium Rs. 12,000. Compute Income u/h House property.
Solution Compute Income under the head house property for assessment year 2024-25
Gross Annual value (w.n.-1) 2,16,000
Less: Municipal tax paid 2,000
Annual value u/s 23 2,14,000
Less: Deduction u/s 24
(a) Standard deduction @30% ₹ 64,200
(Annual value X 30%)
(b) Interest on borrowed capital Rs. 80,000 1,44,200
Income under the head House property u/s 22 69,800
Working note:
1. Municipal value (Rs. 18,000 x 12) 2,16,000
2. Fair Rent (Rs. 16,000 x 12) 1,92,000
3. Higher of (1) or (2) 2,16,000
4. Standard Rent N. A
5. Expected Rent {Lower of (3) or (4)} 2,16,000
6. Rent Received/Receivable (Rs. 20,000 x 2) 40,000
Higher of (5) or (6) Shall be Gross annual value as per section 23(1)(a) Rs. 2,16,000
Since the house has been self-occupied for two months & let out for remaining period, it shall be deemed to be
Let out for 12 months
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