Income from House Property – Tax Calculation for your house rent

Rent received as a legal owner from your owned building is taxable under the head “house property”. If you have a land which is attached or situated in the vicinity of your building then rent received from such land will also become part of the building rent and will be taxable along with your rent income.

If you have a vacant land or a plot and you have received rent out of it then the rental income will not be charged as building rent. Such rent will be charged to tax under the head “other sources”.

When a portion of your rent is collected as building rent and the other portion as services rendered for “services and amenities” then your building rent will be charged to tax under the head “house property” and the rent you received by rendering services and amenities will be charged to tax under the head “other sources” or under “business or profession”. 

There are four possibilities for finding out the income from house property;

1. Completely let out during the financial year
2. Self occupied during the financial year
3. Unoccupied
4. Deemed Let out

Except in the case of self occupied property and unoccupied property the gross annual value has to be calculated in the following way.

In case of self occupied property and unoccupied property the gross annual value has to be considered as nil and municipal taxes paid should not be allowed as a deduction resulting into a net annual value of ZERO.

Format of computing Income

Where your building has been used for the purpose of your business or profession then no income will be chargeable to tax. The income generated out of such business will be taxable under the head business or profession.

Relevant points

• Owned building used for the purpose of business or profession carried on by you is not chargeable to tax under the head house property but such business’s income will be chargeable to tax under the head “business or profession”.
• Municipal Taxes will be allowed as a deduction only when it has been paid by the owner during the financial year. If you paid any municipal taxes of the earlier year during this year then you can claim deduction for this year.
• Deduction under section 24 is available from the net annual value. This deduction is not inclusive i.e. only these two deductions are available from net annual value and no other deductions are allowed.
• If during the year you have received any arrear of rent then that amount will be taxable in the year of receiving such rent amount and deduction of 30% is available from such arrears of rent received.
• The house property income is exempt from tax in the following cases:
  1. farm house
  2. Annual value from any one palace of an ex- ruler
  3. local authority
  4. approved scientific research association
  5. university or other educational institution
  6. Hospital or other medical association
  7. Trade Union
  8. Held for charitable purposes
  9. Political party
  10. Property used for own business or profession
  11. One self occupied property

FAQ

Sir, we have a club where all the members are contributing and the entire amount received are used for our mutual benefit as we are running the club on the basis of principle of mutuality. Will our rental income be taxable under the head house property even though this is a club?

No, it will not be taxable, as income received from members and used for their own purpose does not constitute income as per IT act.

We have a building in T Nagar, Chennai. On the top of the building we have a hoarding which is used for advertisement. Will this amount be taxable under the head house property as it is attached to the building?

NO, income will be chargeable under the head house property only when such amount is derived from building or land appurtenant there to.

The hoarding at the top of your building can not be considered as a part of the building. Any advertisement receipt received from your hoarding will be taxable under the head other sources and the annual value of your building will be chargeable to tax under the head house property.