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Mr. Vikas owns a house property whose Municipal V…

Mr. Vikas owns a house property whose Municipal Value, Fair Rent and Standard Rent are ` 96,000, ` …

Mr. Vikas owns a house property whose Municipal Value, Fair Rent and Standard Rent are ` 96,000, ` 1,26,000 and ` 1,08,000 (per annum), respectively. During the Financial Year 2017-18, one-third of the portion of the house was let out for residential purpose at a monthly rent of ` 5,000. The remaining two-third portion was self-occupied by him. Municipal tax @ 11 % of municipal value was paid during the year. The construction of the house began in June, 2010 and was completed on 31-5-2013. Vikas took a loan of ` 1,00,000 on 1-4-2010 for the construction of building. He paid interest on loan @ 12% per annum and every month such interest was paid. Compute income from house property of Mr. Vikas for the Assessment Year 2018-19.

Jeeba Aug. 04, 2018

Pre-construction interest is allocated to both self-occupied(2/3rd) and let out(1/3rd) in five equal instalments from the completion of a house.

A) First Unit # Self-occupied
In case of self-occupied property, the annual value of house property is NIL. So tax paid in respect of self-occupied property will not be considered for a self-occupied part.

Gross Annual Value of self-occupied value will be Nil. So municipal tax paid shall not be considered for the self occupied part
Interest on house loan and preconstruction interest will be allowed as deduction.

So loss from self-occupied portion shall be interest plus preconstruction interest(8000+4800)= 12800

B) Second Unit # let out 1/3 of House Property:
Step 1: Calculation of Expected Rent
Expected Rent is higher of MV and FR but restricted to SR
MV is 96000, FR is 126000, SR is 108000.

Therefore ER will be 108000

Step 2: Calculation of GAV:
GAV is higher of ER or AR
ER is 108000/3=36000
Actual Rent is 45000
Therefore GAV is 45000

Step 3: NAV=GAV-Municipal Taxes Paid for 1/3 portion
=45000-3520 =41480

Step 4: NAV less Deductions under Section 24....
NAV= 41480
Less: Deduction @30%= 12444
Less; Interest= 4000
Less; preconstruction interest=2400

Step 5: Income From House Property

Total income/(Loss) from House Property(A+B)=22636-12800=9836