Answerhseet
N-RATHI CAREER FORUM
Marks: 40 Date: 01/10/23 Test: Direct Taxation CA INTER Time:1 Hr 20 Min
(Basic of Taxation & House Property)
Part A: Multiple Choice Questions
Case Study 1
Ananya Gupta, a citizen of India, lives with her family in New York since the year 2001. She visited India
from 21st March, 2023 to 28th September, 2023 to take care of her ailing mother. In the last four years,
she has been visiting India for 100 days every year to be with her mother. She owns an apartment at
New York, which is used as her residence. The expected rent of the house is $ 32,000 p.a. The value of
one USD ($) may be taken as ₹75. Municipal taxes paid in New York in January, 2024 are $ 2,000.
She took ownership and possession of her house in New Delhi on 25th March, 2023, for self-occupation,
while she is in India. The municipal valuation is ₹ 4,20,000 p.a. and the fair rent is ₹ 4,50,000 p.a. She
paid property tax of ₹ 22,000 to Delhi Municipal Corporation on 21st March, 2024. She had taken a loan
of ₹16 lakhs @ 10% p.a. from IDBI Bank on 1st April, 2019 for constructing this house and the
construction got completed on 20th March, 2022. No amount has been paid towards principal repayment
so far. The house is vacant for the rest of the year i.e., from October 2023 to March 2024.
She had a house property in Mumbai, which was sold on 28th March, 2023. In respect of this house, she
received arrears of rent of ₹3,00,000 on 4th February, 2024. This amount has not been charged
to tax earlier.
Based on the facts of the case scenario given above, choose the most appropriate answer to the following
questions, Assuming he exercises option of shifting out of the default tax regime provided under section
115BAC(1A) (1 & 2)
1.Ms. Ananya Gupta can claim benefit of “Nil” Annual Value u/s 23(2) in respect of – (2M)
(a)Her Delhi house
(b)Her New York house, since it is more beneficial; her Delhi house will be deemed to be let out and
expected rent would be the annual value.
(c) Her Delhi house alone; her New York house will be deemed to be let out and expected rent would
be the annual value.
(d) Both her Delhi house and New York house, since benefit of Nil Annual value u/s 23(2) is available
in respect of two house properties.
2. What is the income chargeable under the head “Income from house property” of Ananya Gupta
for A.Y. 2024-25? (1M)
(a) ₹15,65,000 (b) ₹ 3,09,600 (c) ₹ 1,00,000 (d) ₹ 10,000
3. Calculate amount of Surcharge if the total income of ₹ 2,35,00,000 include LTCG (20%) ₹
70,00,000 and STCG (111A) ₹ 80,00,000 & Assesse opts for default tax regime of 115BAC (2M)
(a) 7,27,500 (b) 5,97,500 (c) 4,8,5000 (d) None
4. Vidya received ₹ 90,000 in May, 2023 towards recovery of unrealised rent, which was deducted
from actual rent during the P.Y. 2021-22 for determining annual value. Legal expense incurred
in relation to unrealized rent is ₹ 20,000. The amount taxable under section 25A for A.Y. 2024-
25 would be - (1M)
(a) ₹ 70,000 (b) ₹ 63,000 (c) ₹ 90,000 (d) ₹ 49,000
5. Ram age 65 yrs. opts for default tax regime u/s 115BAC and his income for PY 23-24 is 7,12,000
Find the Marginal Relief & amount of tax payable.
(a)26,200,0 (b 1200 & 25,000 (c) 1200 & 0 (d)None
Part B: Descriptive
Q1(a)Mrs. Disha khanna, a resident of India, owns a house property at Bhiwani in Haryana. The
Municipal Value of the property is Rs.7,50,000, Fair Rent of the property is Rs.6,30,000 and
Standard rent is Rs.7,20,000 per annum.
The property was let out for Rs.75,000 per month for the period April 2023 to December 2023.
Thereafter, the tenant vacated the property and Mrs. Disha khanna used the house for self-
occupation. Rent for the months of November and December 2023 could not be realized from the
tenant. The tenancy was bona fide but the defaulting tenant was in occupation of another property
of the assessee, paying rent regularly.
She paid municipal taxes @ 12% during the year and paid interest of Rs.35,000 during the year
for amount borrowed towards repairs of the house property.
You are required to compute her income from “House Property” for the A.Y. 2024-25.
Ans.: Computation of Income from House Property (Assessment Year 2024-25)
Amount (Rs.)
Gross Annual Value (Note 1) 7,20,000
Less: Municipal Taxes paid (Rs.7,50,000 x 12/100) (90,000)
Net Annual Value (NAV) 6,30,000
Less: Deduction under section 24
Standard (30% of Rs.6,30,000) (1,86,000)
Interest on loan taken for repairs (35,000) (2,24,000)
Taxable Income from House Property 4,06,000
Working Notes:
1. The GAV of the house property is determined as under:
Step 1: computation of Expected Rent
(a) Municipal Valuation : Rs.7,50,000
(b) Fair Valuation : Rs.6,30,000
(c) Higher of (a) and (b) : Rs.7,50,000
(d) Standard Rent : Rs.7,20,000
Expected Rent = Lower of (c) and (d) = Rs.7,20,000
Step 2 : Computation of Gross Annual value
(i) Expected Rent (as per step 1) : Rs.7,20,000
(ii) Actual Rent Received (75,000 x9) : Rs.6,75,000 (note 2)
Gross Annual Value : The expected rent is higher than rent received/receivable. Thus, the expected rent
i.e. Rs.7,20,000 shall be GAV.
2. As per one of the conditions given in Rule 4, the defaulting tenant should not be in occupation of any
other property of the assessee. Hence, in the given case, unrealized rent of two months is not deductible
from rent received or receivable.
(b) Tarun, employed in a private company, commenced construction of a commercial complex in july,
2022. He borrowed Rs.50 lakhs from a bank @ 9% per annum. Interest up to 31-3-2023 was
Rs.2,20,000 and for the period for 1-4-2023 to 31-12-2023 Rs.2,30,000 ; Rs.1,40,000 towards
interest for the balance three months remained unpaid.
The construction of the building was completed on 31st December, 2023. The building was let out
w.e.f. 1-1-2024 for a monthly rent Rs.90,000. Municipal tax of Rs.1,20,000 was paid by cash on 10-
1-2024. He repaid Rs.1,90,000 towards principal during the previous year 2023-24, of which he
paid Rs.1,20,000 up to 31-12-2023. The municipal value of the property is Rs.9,00,000.
Compute the income from house property of Tarun for the assessment year 2024-25. (5M)
Sol: Computation of Income from House Property (Assessment Year 2024-25)
Amount
Gross Annual Value (Note 1) 2,70,000
Less: Municipal Taxes Paid (1,20,000)
Net Annual Value (NAV) 1,50,000
Less: Deduction under section 24
Standard (30% of Rs.1,50,000) (45,000)
Interest on Borrowed capital
Current Year (3,70,000)
Pre-construction period (2,20,000 x 1/5) (44,000) (4,59,000)
Taxable income from House Property (3,09,000)
Q2.Mr.X owns one residential house in Mumbai. The house is having two units. First unit of the house
is self-occupied by Mr. X and another unit is rented for Rs. 8,000 p.m. The rented unit was vacant
for 2 months during the year. The particular of house for the previous year 2023-24 are as under:
Standard rent : Rs.1,62,000 p.a.
Municipal valuation : Rs.1,90,000 p.a.
Fair rent : Rs.1,85,000 p.a.
Municipal tax : 15% of municipal valuation
Light and water charges : Rs.500 p.a.
Interest on borrowed capital : Rs.1,500 p.m.
Lease, Money : Rs.1,200 p.a.
Insurance charges : Rs.3,000 p.a.
Repairs : Rs.12,000 p.a.
Compute income from house property of Mr. X for the Assessment year 2024-25. If pay tax
under the default tax regime u/s 115BAC.
Also, show the computation of income under this head, if exercised the option of shifting out of
the default tax regime provided under section 115BAC(1A). (10M)
Sol: computation of Income from House Property (Assessment Year 2024-25)
Amount
I 1st Unit (self-occupied) (50% Portion)
Net Annual Value (Note 1) Nil
Less: Deduction under section 24
Interest on Borrowed capital (Rs. 1,500 x 12 x 50%) (9,000)
Income from House Property (unit 1) (9,000)
II 2nd Unit (Let Out) (50% Portion)
Gross Annual Value (Note 2) 80,000
Less: Municipal Taxes Paid (1,90,000 x 15% x 50%) (14,250)
Net Annual Value (NAV) 65,750
Less: Deduction under section 24
Standard (30% of Rs.65,750) (19,725)
Interest on Borrowed Capital (Rs.1,500 x 12 x 50%) (9,000)
Income from House Property (Unit 2) 37,025
Taxable income from House property (after intra head adjustment – 28,025
(note 3)
Working Note:
1. The NAV of self-occupied property is always taken as nil.
2. The GAV of 2nd unit is determined as under:
Step 1: computation of Expected Rent
(a) Municipal Valuation (1,90,000 x 50% ) : Rs.95,000
(b) Fair Valuation (1,85,000 x 50%) : Rs.92,500
(c) Higher of (a) and (b) : Rs.95,000
(d) Standard Rent (1,62,000 x 50%) : Rs.81,000
Expected Rent = Lower of (c) and (d) = Rs.81,000
Step 2: computation of Gross Annual Value
(i) Expected Rent (As per Step 1) : Rs.81,000
(ii) actual Rent received/receivable (after unrealized Rent)
(a) If there is no vacancy (8,000 x 12) : Rs.96,000
(b) In case of vacancy (8,000 x 10) : Rs.80,000
Gross Annual value: The rent received/receivable is lower than expected rent due to vacancy. Thus,
the rent received or receivable (considering vacancy) i.e. Rs.80,000 shall be GAV.
3. As per sec. 70, the loss from one house property can be set off against income from another property.
4. Light and water charges, insurance charges and painting expenses are not allowable as deduction
under section 24.
Q3. Two brothers Rama and Shankar are co-owners of a house property with equal shares. The property
was constructed during the financial year 2003-04. The property was constructed during the financial
year 2003-04. The property consists of 8 identical units and is situated at Salem. During the financial
year 2023-2024 each owner occupied 1 unit for residence and balance 6 units were let out at a rent
of Rs.14,000 per unit per month. The municipal value of property is Rs.9,00,000 and municipal tax
are 10% of municipal value, paid during the year. The other expenses are as follows:
(i) Repairs Rs.90,000
(ii) Insurance premium paid Rs.15,000
(iii) Interest payable on loan taken Rs.3,50,000
One of the let out remained vacant for 4 months during the year & Rama could not occupy his
unit for 6 months as he was transferred to Bangalore. He does not own any other house. The other
income of Rama and Shankar are Rs.3,50,000 and Rs.1,80,000 respectively for the Financial year
2023-24. The co-owners received during the year Rs.1,40,000 as unrealized rent for 2019-20 and
Rs.50,000 as arrears of rent. Compute the income under the head “Income from House Property” and
total income of the two brothers for the Assessment year 2024-25. (10M)
Sol: Computation of Income from House Property (Assessment Year 2024-25)
Amount
I Two self-occupied units of the house
Net Annual Value (Note 1) Nil
Less: Deduction under section 24
Interest on Borrowed Capital (Rs.3,50,000 x 2/8)
Income from House property (Self-occupied units)
II Six Let out units
Gross Annual Value (Note 2) 9,52,000
Less: Municipal Taxed paid (Rs.9,00,000 x 10% x (67,500)
6/8)
Net Annual Value (NAV) 8,84,500
Less: Deduction under section 24
Standard (30% of Rs.8,84,500) (2,65,350)
Interest on Loan (Rs,3,50,000 x 6/8) (2,62,500)
Income from let out units 3,56,650
Recovery of unrealized & Arrears of rent
Arrear of Rent received 50,000
Unrealized Rent for 2018-19 1,40,000
Total 1,90,000
Less: Deduction under section 25A
Standard (30% of Rs.1,90,000) (Note 3) (57,000)
Income from arrears/unrealized rent 1,33,000
Total Income from let out units 4,89,650
Taxable income from House property (after inter source adjustment-note 4) (4,02,150)
Computation of Total Income of Rama and Shankar
(Assessment Year 2024-25)
Rama Shankar Total
(i) Income from House Property 2,01,075 2,01,075 4,02,150
(ii) Other income 3,50,000 1,80,000 5,30,000
Total Income 5,51,075 3,81,075 9,30,150
Working Notes:
1. The NAV of self-occupied property is always taken as nil.
2. The actual rent received from 6 identical units may be calculated as under:
Annual Rent of 6 units (Rs.14,000 p.m. x 12 months x 6 units) : Rs.10,08,000
Less: Loss due to vacancy (Rs.14,000 x 4 months) : (Rs.56,000)
Actual rent received : Rs.9,52,000
Municipal Valuation (9,00,000 x 6/8) : Rs.6,75,000
Gross Annual Value : Rs.9,52,000
3. As per section 25A, the arrears of rent received are taxable in the year in which arrears have
been received. However, deduction shall be allowed @ 30% of such arrears and only the balance
amount is taxable.
As per section 70, the loss from one house property can be set-off against income from another property.
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