Indian Income Tax

Housing Property Tax In India

Basic Concepts: Section 22 to 27 of the Income Tax Act deal with taxability of income in respect of house property. The following basic conditions must be satisfied for income to be taxed under this head:-
  • The property consists of buildings or land adjacent thereto.
  • The assessee must own property.
  • The property must not be used for the purpose of business or profession of the assessee. It must be used only for renting out so as to derive rental income.
Therefore any income from a property which is not owned by the assessee will not be treated as ''income from house property'' but as other income and other provisions of the Income Tax Act will apply in this connection.

Deemed Owner

In certain cases, the assessee, though not the owner of the property, is deemed to be the owner of the property i.e. he is treated as owner of the property and income from that property will be treated as income from house property. The following are such situations:-
  1. The individual who transfer any property for inadequate consideration or who gifts that property of his spouse or to a minor child other than a married daughter will be treated as deemed owner of that property. ie though legally the owner of the property is spouse or minor child, the income from that property will be treated as income of this person who has transferred such property.
  2. The holder of an impartable estate will be treated as the owner of that entire property for example where an HUF jointly holds property on behalf of all its members, then joint HUF will be treated as the owner though legally the property in the name of an individual member of family.
  3. A member of co-op society, company or other association of persons to whom a building has been allotted under a house building scheme of society will also be treated as deemed owner of that property
  4. A person who has satisfied the provisions of section 53A of the transfer of property act will be treated as deemed owner of that property. Section 53A of the Transfer of Property Act deals with situations where though the agreement for buying of property has not been registered with the appropriate authority, the person who has purchased the property will be treated as the owner of the property.
  5. A person who has acquired right by way of long term lease of property will be treated as the owner of that property and income from that property will be taxable in his hands as under house property income. For this purpose long term lease means lease for period of more than 12 years.

Income from House Property

The property for which the annual value consists of buildings/lands appurtenant thereto of which the assessee is the owner shall be chargeable to income tax under the head "Income from House Property". A person may occupy the property for the purpose of business or profession, the profits of which are taxable.

Annual value of any property shall deemed to be:

  • The sum for which the property might reasonably be able to let/give from year to year
  • Where any part of the property is let and the rent received by the owner is in excess of the sum
  • Where any part of the property is let and was vacant during the whole or any part of the previous year and the actual rent received by the owner in respect thereof is less than the sum

To know in detail about Income from House Property click here: Income From House Property in India

Deductions Permitted

Deductions from income from house property are:

  • A sum equal to thirty percent of the annual value towards repairs and maintenance

  • Incase the property is acquired/constructed/repaired/renewed or even reconstructed with borrowed capital, then the amount of any interest payable on such capital.

Self Occupied House Property:

A property becomes a self occupied house property when it consists of a house or part of a house which:

  • Is in the owner's occupation as purpose of his own residence
  • Cannot be occupied by the owner because of his employment, business or profession carried on at any other place and has to reside at that other place in a building not belonging to him, the annual value of such house or part of the house shall be taken to be nil.
  • The amount of deduction towards interest payable on borrowed capital will not exceed Rs. 1,50,000/-
Ownership of House property:
  • An individual who transfers any house property to his or her spouse and the transfer not being in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred.
  • An impartible estate holder is deemed to be the individual owner of all the properties comprised in the estate.

Rent received from House Property

Following are the special provisions for arrears of rent received from house property:

  • Where the assessee is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and
  • Where the assessee has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year

To know in detail about Rent received from House Property click here: Taxable Rental Income of Property

Property owned by Co-owners:

If the property is owned by 2 or more co-owners, following are the important considerations

  • Where property consisting of buildings and/or land appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not be assessed as an association of persons.

  • Share of each person in the income from property shall be included in his total income

Also read article: Hints For Property Tax Planning

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