Taxmann's Taxation (Tax) | CRACKER

Chapter-wise Marks

PART B : INDIRECT TAXES

2018 2019 2020 2021 2022

S. No. CHAPTER NAME May Nov. May Nov. Nov. Jan. July Dec. May Nov. 16 GST in India 3 2 17 Supply under GST 5 5 4 4 6 18 Charge of GST 8 3 5 11 4 5 5 2 19 Exemptions from GST 3 3 4 6 5 2 20 Time of supply 4 4 5 21 Value of Supply 5 5 6 6 6 6 22 ITC 4 4 5 4 6 5 5 23 Registration 9 11.5 9 5 4 10 10 9 5 5 24 Tax Invoice, Debit and credit Notes 3 5 9 5 3 7 10 7 7 25 Payment of Taxation 11 14.5 10 11 13 8 8 13 8 11 26 Returns 5 2 7 3 3 10 3 5

Previous Exams Trend Analysis (May 2018 Onwards) (New Syllabus)

PARTS A AND B (INCOME TAX & INDIRECT TAXES)

Year Question

No.

Compulsory Chapter Name Marks Category

May 2018 1 Yes Computation of Total Income & Tax payable 10 Practical 2 Capital gains 10 Practical 3 Residence & Scope of Total Income 10 Practical 4 Income from Salary 10 Practical 5A Income from Other Sources 3 Practical 5B Agricultural Income 7 Practical 6A Capital gains 5 Practical 6B Provisions for filing of returns and selfassessment 5 Theory

6B or Provisions for filing of returns and selfassessment 5 Practical 7A Provisions for filing of returns and selfassessment 6 Practical

7B Basic Concepts 4 Practical

8(a) Yes Payment of Taxation 6 Practical 8(b) Yes ITC 4 Practical 9(a) Value of Supply 5 Practical 9(b) Charge of GST 5 Theory 10(a) Time of supply 4 Practical 10(b) Exemptions from GST 3 Practical 10(c) Charge of GST 3 Practical 11(a) Registration 4 Practical 11(b) Tax Invoice, Debit and Credit Notes 3 Practical 11(c) GST in India 3 Practical

12(a) Payment of Taxation 5 Theory

12(b) Registration 5 Theory 12(c) Returns 5 Theory

Nov. 2018 1 Yes Computation of Total Income & Tax payable 10 Practical

2(a) Residence & Scope of Total Income 6 Practical 2(b) Advance Tax, TDS and TCS 2 Practical

Year Question No.

PREVIOUS EXAMS TREND ANALYSIS

Compulsory Chapter Name Marks Category

Advance Tax, TDS and TCS 2 Practical 3(a) Income from house Property 7 Practical 3(b) Provisions for filing of returns and selfassessment 3 Theory

2(c)

4(a) Capital gains 6 Practical 4(b) Profits and Gains from Business or Profession 4 Practical

5(a) Income from Salary 6 Practical 5(b)(i) Income from Salary 2 Practical 5(b)(ii) Income from Other Sources 2 Practical

6(a) Set-Off and carry forward of Losses 5 Practical 6(b) Income from Other Sources 5 Practical 6(c) or Computation of Total Income & Tax payable 5 Practical 7(a) Profits and Gains from Business or Profession 6 Practical

7(b) Provisions for filing of returns and selfassessment 4 Practical

8(a) Yes Payment of Taxation 6 Practical 8(b) Yes ITC 4 Practical 9(a) Value of Supply 5 Practical 9(b) Supply under GST 5 Theory 10(a) Payment of Taxation 4 Theory 10(b) Exemptions from GST 3 Theory 10(c) Charge of GST 3 Practical 11(a)(i) Registration 1.5 Theory 11(a)(ii) Payment of Taxation 1.5 Theory

11(b) Tax Invoice, Debit and Credit Notes 5 Practical 11(c) Returns 2 Theory 12(a) Registration 5 Theory 12(b) Registration 5 Theory 12(c)(i) GST in India 2 Theory 12(c)(ii) Payment of Taxation 3 Theory

May 2019 1 Yes Computation of Total Income & Tax payable 14 Practical

2(a) Residence & Scope of Total Income 7 Practical 2(b)

Advance Tax, TDS and TCS 7 Practical

3(a) Income from house Property 8 Practical

3(b) Capital gains 6 Practical

4(a) Set-Off and carry forward of Losses 10 Practical 4(b) Provisions for filing of returns and selfassessment 4 Theory

4(b) or Provisions for filing of returns and selfassessment 2 + 2 Theory

Year Question No.

PREVIOUS EXAMS TREND ANALYSIS

Compulsory

Chapter Name Marks Category

5 Yes Payment of Taxation 8 Practical

6(a) Value of Supply 6 Practical 6(b) Exemptions from GST 4 Theory

7(a) Tax Invoice, Debit and Credit Notes 4 Theory

7(b) Payment of Taxation 2 Theory

7(c) Registration 4 Theory 8(a) Charge of GST 5 Theory 8(b) Tax Invoice, Debit and Credit Notes 5 Theory 8(c) Registration 5 Theory

Nov. 2019 1 Yes Computation of Total Income & Tax payable 14 Practical

2(a) Residence & Scope of Total Income 7 Theory

2(b) Advance Tax, TDS and TCS 7 Theory

3(a) Profits and Gains from Business or Profession 4 Theory

3(b) Capital gains 6 Theory 3(c) Capital gains 4 Theory 4(a) Computation of Total Income & Tax payable 5 Theory 4(b) Set-Off and carry forward of Losses 5 Theory 4(c) Advance Tax, TDS and TCS 4 Theory 4(c) or Provisions for filing of returns and selfassessment 4 Theory

5 Yes Payment of Taxation 8 Practical

6(a) Charge of GST 6 Practical 6(b) Time of supply 4 Practical 7(a) Registration 5 Theory

7(b) Tax Invoice, Debit and Credit Notes 5 Theory 8(a) Charge of GST 5 Theory 8(b) Returns 5 Theory 8(c)(i) Returns 2 Theory 8(c)(ii) Payment of Taxation 3 Theory

Nov. 2020 1 Yes Computation of Total Income & Tax payable 14 Practical 2(a) Provisions for filing of returns and selfassessment 9 Practical

2(b) Advance Tax, TDS and TCS 5 Practical 3(a) Set-Off and carry forward of Losses 8 Practical 3(b) Clubbing of Income 6 Practical

4(a) Residence & Scope of Total Income 5 Practical 4(b) Capital gains 5 Practical 4(c) Advance Tax, TDS and TCS 4 Theory 4(c) or (i) Profits and Gains from Business or Profession 2 Practical

I-10

Year Question No.

4(c) or (ii)

PREVIOUS EXAMS TREND ANALYSIS

Compulsory Chapter Name Marks Category

Capital gains 2 Practical 5 Yes Payment of Taxation 8 Practical

6(a) Value of Supply 6 Practical 6(b)(i) Charge of GST 2 Theory 6(b)(ii) Charge of GST 2 Theory

7(a) Registration 4 Theory

7(b) Tax Invoice, Debit and Credit Notes 3 Theory 7(c) Returns 3 Theory 8(a) ITC 5 Theory 8(b)or Payment of Taxation 5 Theory

8(c) Supply under GST 5 Theory

Jan. 2021 1 Yes Computation of Total Income & Tax payable 14 Practical

2(a) Advance Tax, TDS and TCS 8 Practical 2(b) Profits and gains from Business and Profession 6 Practical

3(a) Computation of Total Income & Tax payable 7 Practical

3(b) Income from other sources 4 Practical 3(c) Residence & Scope of Total Income 3 Theory 4(a) Computation of Total Income & Tax payable 8 Practical 4(b) Income from other sources 6 Practical 5 Yes Payment of Taxation 8 Practical

6(a) Exemptions from GST 6 Practical 6(b) ITC 4 Practical

7(a) Tax Invoice, Debit and credit Notes 4 Theory 7(b) Tax Invoice, Debit and credit Notes 3 Practical 7(c) Returns 3 Theory 8(a) Charge of GST 5 Theory 8(b) or Registration 5 Theory 8(c) Registration 5 Theory

July 2021 1

Computation of Total Income & Tax payable 14 Practical

2(a) Computation of Total Income & Tax payable 6 Practical

2(b) Advance Tax, TDS and TCS 8 Theory 3(a) Computation of Total Income & Tax payable 6 Practical

3(b) Capital gain 4 Practical 3(c) Capital gain 4 Practical

Year Question No.

PREVIOUS EXAMS TREND ANALYSIS

Compulsory Chapter Name Marks Category

4(a) Clubbing of Income 5 Practical 4(b) Set off and carry forward of income 5 Practical 4(c) Provisions for filing of return of income and self-assessment 4 Theory

4(c) or Provisions for filing of return of income and self-assessment 4 Theory

5 Payment of Taxation 8 Practical

6(a) ITC 6 Practical 6(b) Supply 4 Theory

7(a) Registration 4 Practical 7(b) Exemptions from GST 3 Theory

8(a) Returns 5 Theory 8(b) Registration 5 Practical 8(b) or Returns 5 Theory

Dec. 2021 1 Yes Computation of Total Income & Tax payable 14 Practical

2(a) Residence & Scope of Total Income 7 Practical

2(b) Computation of Total Income & Tax payable 7 Practical

3(a) Advance Tax, TDS and TCS 4 Practical 3(b) Advance Tax, TDS and TCS 4 Practical 3(c) Income from house Property 6 Practical

4(a) Capital gains 4 Practical 4(b) Computation of Total Income & Tax payable 6 Practical

4(c) Provisions for filing of return of income and self-assessment 4 Theory

4(c) or Provisions for filing of return of income and self-assessment 4 Theory

5 Yes Payment of Taxation 8 Practical

6(a) Value of Supply 6 Practical

6(b) Registration 4 Practical 7(a) Time of Supply 5 Practical

7(b) Payment of Taxation 5 Practical

8(a) Registration 5 Theory

8(b) Tax Invoice, Debit and Credit Notes 5 Theory 8(b) or Tax Invoice, Debit and Credit Notes 5 Theory

Year Question No.

PREVIOUS EXAMS TREND ANALYSIS

Compulsory Chapter Name Marks Category

May 2022 1 Yes

Computation of Total Income & Tax payable 14 Practical

2(a) Advance Tax, TDS and TCS 6 Practical

2(b) Set-Off and carry forward of Losses 4 Practical Clubbing of Income 4 Practical

3(a) Income from Other Sources 8 Practical

3(b) Residence & Scope of Total Income 4 Practical 3(c) Capital Gain 2 Practical

4(a) Computation of Total Income & Tax payable 6 Practical

4(b) Profits and Gains from Business or Profession 4 Practical

4(c) Provisions for filing of returns and selfassessment 4 Theory

4(c) or Provisions for filing of returns and selfassessment 4 Theory 5 Yes Payment of Taxation 8 Practical

6(a) Value of Supply 6 Practical 6(b) Supply under GST 4 Practical

7(a) Tax Invoice, Debit and credit Notes 4 Practical 7(b) Tax Invoice, Debit and credit Notes 3 Theory

7(c) Returns 3 Theory 8(a) Charge of Tax 5 Theory 8(b) ITC 5 Theory 8(b) or Registration 5 Theory

Nov. 2022 1 Yes Computation of Total Income & Tax payable 14 Practical

2(a) Residence & Scope of Total Income 6 Practical 2(b) Income from Salary 8 Practical

3(a) Advance Tax, TDS and TCS 6 Practical 3(b) Set-Off and carry forward of Losses 4 Practical 3(c) Provisions for filing of returns and selfassessment 4 Practical

4(a)(i) Income from Other Sources 2 Theory 4(a)(ii) Capital gains 2 Theory

4(a)(iii) Incomes which do not form part of Total Income 2 Theory

4(b) Advance Tax, TDS and TCS 4 Practical 4(c) Residence & Scope of Total Income 4 Theory

4(c) OR Clubbing of Income 4 Practical 5 Yes Payment of Taxation 8 Practical

Year Question No.

PREVIOUS EXAMS TREND ANALYSIS

Compulsory Chapter Name Marks Category

6(a) Supply under GST 6 Practical 6(b)(i) Charge of GST 2 Theory

6(b)(ii) Exemptions from GST 2 Theory

7(a) Registration 5 Practical

7(b)(i) Payment of Taxation 3 Theory

7(b)(ii) Tax Invoice, Debit and credit Notes 2 Theory

8(a) ITC 5 Theory

8(b) Tax Invoice, Debit and credit Notes 5 Theory 8(b) or Returns 5 Theory

Chapter-Wise

PART A : INCOME

PART B : INDIRECT

CHAPTER-WISE COMPARISON WITH STUDY MATERIAL

Chapter-wise Marks Distribution I-5

Previous Exams Trend Analysis (May 2018 onwards) (New Syllabus) I-7

Chapter-wise Comparison with Study Material I-15

SECTION A INCOME TAX LAW

Chapter 1

Basic concepts 1.3

Chapter 2

Residence and scope of total income 2.1

Chapter 3

Incomes which do not form part of total income 3.1

Chapter 4

Income from salaries 4.1

Chapter 5

Income from house property 5.1

Chapter 6

Profits and gains from business or profession 6.1

Chapter 7

Capital gains 7.1

Chapter 8

Income from other sources 8.1

Chapter 9

Clubbing of income 9.1

Chapter 10

Set off and carry forward of losses 10.1

Chapter 11

Deductions from gross total income 11.1

Chapter 12 Agricultural income 12.1

Chapter 13

Computation of total income and tax payable 13.1

Chapter 14

Advance tax, TDS and TCS 14.1

Chapter 15

Provisions for filing of return of income and self-assessment 15.1

SECTION B

INDIRECT TAXES

Chapter 16

GST in India 16.3

Chapter 17

Supply under GST 17.1

Chapter 18

Charge of GST 18.1

Chapter 19 Exemptions from GST 19.1

Chapter 20 Time of supply 20.1

Chapter 21 Value of supply 21.1

Chapter 22 Input tax credit 22.1

Chapter 23 Registration 23.1

Chapter 24 Tax invoice, credit and debit notes 24.1

Chapter 25 Payment of tax 25.1

Chapter 26 Returns 26.1

SECTION C

MCQs & INTEGRATED CASE STUDIES (INCOME TAX)

Chapter 27

Multiple Choice Questions (MCQs) 27.3

Chapter 28 Case studies 28.1

SECTION D

MCQs & INTEGRATED CASE STUDIES (GST)

Chapter 29 Multiple Choice Questions (MCQs) 29.3

Chapter 30 Case studies 30.1

5

CHAPTER

INCOME FROM HOUSE PROPERTY

INTRODUCTION

Q1. Explain the concept of Municipal Value, Fair Rent and Standard Rent.

Ans.: Municipal Value

It refers to the value that the Municipal Authorities deem as rental value of the property for the purpose of assessment of property tax.

Fair Rent

It is the rent fetched by a similar property, in same or similar locality, with same facilities.

Standard Rent

It is the maximum rent which a person can legally recover from his tenant under Rent Control Act.

Q2. Is it possible for the net annual value of a house property to be negative? What will be tax treatment if income under the head “Income from house property” is negative? [CMA June 2009, 4 Marks]

Ans.:

Negative NAV In case of Let out House Property

u NAV = GAV - Municipal Taxes paid

u Thus, if the municipal tax paid in the previous year by the landlord is more than the gross annual value, then the NAV can be negative

u It may happen where municipal taxes of earlier years are paid during the current year.

Self-occupied house property

The NAV of self-occupied is always taken as zero. Therefore, in case of selfoccupied, negative NAV is not possible.

SEC. A : INCOME TAX LAW

Tax treatment of loss under the head “Income from house property”

1. Inter-source adjustment (section 70):

u Any loss from house property can be set-off from income of other house property.

u It is also called as intra-head adjustment.

2. Inter head adjustment (section 71):

u The unadjusted loss can be set-off against income under any other head during the current year (no loss can be set-off against winning from lotteries, races, etc.).

u The assessee can set off such loss from house property up to a maximum of ` 2,00,000 only.

3. Carry Forward and Set off (section 71B):

u If it is not possible to set-off the loss (fully or partly), then it can be carried forward to the next year for being set off against the incomes under the head “income from house property”.

u Loss from house property can be carried forward for a maximum period of 8 years for set-off against income from house property.

Q3. Mr. X owns five houses at Cochin. Compute the Gross Annual Value of each house from the information given below:

Particulars

House I House II House III House IV House V

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 received/ receivable 1,80,000 2,10,000 1,20,000 1,08,000 72,000

[May 2012, 5 Marks]

Ans.:

House I House II House III House IV House V

(a) Municipal Valuation 1,20,000 2,40,000 1,10,000 90,000 75,000

(b) Fair Valuation 1,50,000 2,40,000 1,14,000 84,000 80,000

(c) Higher of (a) and (b) 1,50,000 2,40,000 1,14,000 90,000 80,000

(d) Standard Rent 1,08,000 N.A. 1,44,000 N.A. 78,000

(e) Expected Rent [Lower of (c) and (d)] 1,08,000 2,40,000 1,14,000 90,000 78,000

House I House II House III House IV House V

(f) Actual Rent 1,80,000 2,10,000 1,20,000 1,08,000 72,000

(g) Gross Annual value [Higher of (e) and (f)] 1,80,000 2,40,000 1,20,000 1,08,000 78,000

DEDUCTIONS UNDER SECTION 24

Q4. Mr. A owns a commercial building let out @ ` 40,000 per month. During the financial year 2022-23, he wants to claim expenses made towards insurance, water, etc. from the rent received. Comment in the light of section 24(a).

Ans.: The section 24(a) allows deduction to an extent of 30% of Net Annual Value (NAV) as a standard deduction from the house property used as a let out property or deemed let out property. In the given case, Mr. A is entitled to standard deduction but no other expenditure shall be allowed as deduction towards insurance, repair, ground rent, collection charges, water charges, etc.

Q5. Ms. Jyoti purchased a house property costing ` 49 Lakhs on 1st May, 2022. The property is used exclusively for her residential purpose. For this purpose she obtained loan from DHFL of ` 35 lakhs bearing interest @ 14% p.a. on 1st April, 2022. She does not own any other house.

State with brief reasons the deductions that can be claimed by Ms. Jyoti in respect of interest on loan for Assessment Year 2023-24. What would be the change in your answer if the loan has been taken over for repairs. [Nov. 2017 Modified, 5 Marks]

Ans.:

Interest paid on housing loan = 14% of ` 35,00,000 = ` 4,90,000

Status of house property = Self-occupied

(a) Loan taken for construction or acquisition: If the capital is borrowed on or after April 1, 1999 for acquiring or constructing a property which is self-occupied, the interest on such borrowed capital is deductible up to ` 2,00,000.

(b) Loan taken for reconstruction, repairs or renewal: In this case, the maximum amount of deduction on account of interest is ` 30,000.

Q6. Mrs. Vimala commenced construction of house meant for residential purpose on 1-11-2020. She raised a loan of ` 10 lakhs @ 11% per annum from a bank. Finding that there was over run in the cost of construction, she raised a further loan of ` 5 lakhs from her friend at

SEC. A : INCOME TAX LAW

15% rate of interest per annum on 1-10-2022. The construction was completed by February, 2023. Compute the amount of interest allowable under section 24 of the income-tax Act, 1961 in the following cases:

(i) The house was meant for self-occupation from 1-3-2023

(ii) The house was to be let out from 1-3-2023. Is there any deduction available u/s 80C towards principal repayment in respect of above loans? [CMA June 2011, 6 Marks] Ans.:

(i) When the house was meant for self-occupation: Computation of the amount of interest allowable under section 24

(a) Interest for current previous year

` 10,00,000 × 11/100 1,10,000

` 5,00,000 × 15/100 × 6/12 37,500 1,47,500

(b) Interest for Pre Construction period (1-112019 to 31-3-2021)

` 10,00,000 × 11/100 × 17/12 × 1/5 31,167 Total Interest 1,78,667

As per section 24(b), the amount eligible for deduction for interest on borrowed capital (of the current year and pre-construction period) is up to ` 2,00,000. The actual interest (` 1,78,667) is deductible as it is within limit.

(ii) When the house is let out w.e.f. 1-3-2023: If capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property, then no maximum limit has been prescribed, if the house is let-out. Therefore, the whole amount of ` 1,78,667 (calculated in first part) is deductible.

Q7. Sanjay commenced construction of a residential house intended exclusively for his residence, on 1-12-2021. He raised a loan of ` 8,00,000 @ 15% interest for the purpose of construction on 1-112021. Finding that there was an over run in the cost of construction he raised a further loan of ` 9,00,000 at 14% p.a. on 1-9-2022. What is the interest allowable under section 24 in Assessment year 2023-24, assuming that the construction was completed on 31-3-2023?

[May 2000 Modified, 5 Marks]

Ans.:

Computation of the amount of interest allowable exemption under section 24

(a) Interest for current previous year

` 8,00,000 × 15/100 1,20,000

` 9,00,000 × 14/100 × 7/12 73,500 1,93,500

(b) Interest for Pre Construction period (1-11-2021 to 31-3-2022)

` 8,00,000 × 15/100 × 5/12 × 1/5 10,000

Total Interest 2,03,500

As per section 24(b), in case of self-occupied property, the amount eligible for deduction for interest on borrowed capital (of the current year and preconstruction period) is up to ` 2,00,000. Thus, the deduction under section 24 in respect of borrowed capital is ` 2,00,000.

Q8. Give a tabular presentation of computation of income under the head “Income from House Property”.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Amount (`)

Gross Annual Value XXX

Less: Municipal Taxes paid by assessee during the year (XXX)

Net Annual Value (NAV) XXX

Less: Deduction under section 24

(a) Standard deduction @ 30% of NAV [Section 24(a)] (XXX)

(b) Interest on Borrowed Capital [Section 24(b)] (XXX) (XXX)

Taxable Income from House property XXX

DEDUCTION FOR UNREALISED RENT AND SUBSEQUENT RECOVERY [RULE 4 AND

SECTION 25A]

Q9. Explain the treatment of unrealized rent and its recovery in subsequent years under the provisions of Income-tax Act, 1961 [May 2012, 4 Marks]

Ans.:

Meaning of Unrealized Rent

Tax Treatment Of unrealized Rent

SEC. A : INCOME TAX LAW

It refers to the amount of rent payable but not paid by the tenant and not realized by the owner from the tenant.

The unrealized rent is deducted from the actual rent receivable from the property before computing income from that property, subject to fulfilment of following conditions prescribed under Rule 4 of the Income-tax Rules, 1962:

u The tenancy is bona fide

u The defaulting tenant has vacated or the assessee has taken steps to compel the defaulting tenant to vacate the property.

u The defaulting tenant is not in occupation of any other property owned by the assessee.

u The assessee has taken all reasonable steps for recovery of unrealized rent or satisfies the assessing officer that such steps would be useless.

Subsequent Recovery

The section 25A provides the following as regards recovery of unrealized rent:

u It is chargeable under the head “Income from House Property”.

u It is taxable in the year of actual receipt

u It will be taxable in the hands of assessee, even if he does not own the property to which such rent pertains.

u The standard deduction under section 24(a) is allowed @ 30% of such receipt.

Q10. Mr. X owns a house property which is let out. During the previous year ending on 31-3-2023, he receives the following: (i) Arrears of Rent ` 30,000 (ii) Unrealized Rent ` 20,000 You are requested to (a) State, how they should be dealt with as per the provisions of the Act. (b) Compute the income chargeable under the head “Income from House Property”. [May 2002, 4 Marks]

Ans.: (a) State, how they should be dealt with as per the provisions of the Act.

CH. 5 : INCOME FROM HOUSE PROPERTY 5.7

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. The taxability exists irrespective of the fact whether assessee remains the owner of the property in the year of receipt or not.

(b) Computation of Income from House Property (Assessment Year 2023-24)

Arrear of Rent received 30,000

Amount (`)

Less: Deduction @ 30% u/s 25A (9,000) 21,000

Unrealized Rent received 20,000

Less: Deduction @ 30% u/s 25A (6,000) 14,000

Taxable Income from House property 35,000

LET OUT PROPERTY THROUGHOUT THE YEAR [WITHOUT VACANCY]

Q11. [Elementary] Amalesh owns a house property which is let-out for ` 6,500 per month. The fair rent of the property is ` 90,000. Municipal taxes paid during the year for each half year is ` 3,200. The tenant has spent ` 10,000 towards repairs of the property during the year. Compute the income from house property for the assessment year 2023-24.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Amount (` )

Gross Annual Value (Note 1) 90,000

Less: Municipal Taxes paid (Note 2) 6,400

Net Annual Value (NAV) 83,600

Less: Deduction under section 24

Standard (30% of ` 83,600) (25,080)

Taxable Income from House property 58,520

Working Notes:

1. The GAV of the house property is determined as under: Step 1: Computation of Expected Rent

(a) Municipal Valuation : NA

(b) Fair Valuation : ` 90,000

5.8

(

SEC. A : INCOME TAX LAW

c) Higher of (a) and (b) : ` 90,000

(d) Standard Rent : NA

Expected Rent = Lower of (c) and (d) = ` 90,000

Step 2: Computation of Gross Annual value

(i) Expected Rent (As per step 1) : ` 90,000

(ii) Actual Rent Received (6,500 × 12) : ` 78,000

Gross Annual Value: The expected rent is higher than the rent received. Thus, the expected rent i.e. ` 90,000 shall be GAV.

2. The Municipal Taxes paid during the year for each half year is ` 3,200 i.e. ` 6,400 annual.

Q12. Mr. Lal is the owner of a commercial property let out at ` 60,000 per month. The Corporation tax on the property is ` 30,000 annually, 60% of which is payable by the tenant. This tax was actually paid on 15-4-2023. He had borrowed a sum of ` 40 lakhs from his cousin, resident in Singapore (in dollars) for the construction of the property on which interest at 8% is payable. He has also received arrears of rent of ` 80,000 during the year, which was not charged to tax in the earlier years. What is the property income of Mr. Lal for the assessment year 2023-24?

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Amount (`)

Gross Annual Value (` 60,000 × 12) 7,20,000

Less: Municipal Taxes (Note 1) Nil

Net Annual Value (NAV) 7,20,000

Less: Deduction under section 24

Standard (30% of ` 7,20,000) (2,16,000)

Interest on Borrowed Capital (40,00,000 × 8%) (Note 2) (3,20,000) (5,36,000)

Income from House property (Let out portion) 1,84,000

Arrears of rent received

Arrear of Rent received 80,000

Less: Deduction under section 25A

Standard (30% of ` 80,000) (Note 3) (24,000)

Income from arrears of rent 56,200

Taxable Income from House property 2,40,000

Working Notes:

1. Municipal taxes paid by tenant (60%) are not deductible. The balance 40%, although paid by assessee, is not deducted because it was paid in FY 2023-24 and not in 2022-23.

2. It is presumed that the tax has been deducted at source on the amount of interest payable outside India.

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.

Q13. Tarun, employed in a private company, commenced construction of a commercial complex in July, 2021. He borrowed ` 50 lakhs from a bank @ 9% per annum. Interest up to 31-3-2022 was ` 2,20,000 and for the period from 1-4-2022 to 31-12-2022 ` 2,30,000; ` 1,40,000 towards interest for the balance three months remained unpaid. The construction of the building was completed on 31st December, 2022. The building was let out w.e.f. 1-1-2023 for a monthly rent ` 90,000. Municipal tax of ` 1,20,000 was paid by cash on 10-1-2023. He repaid ` 1,90,000 towards principal during the previous year 202223, of which he paid ` 1,20,000 up to 31-12-2022. The municipal value of the property is ` 9,00,000.

Compute the income from house property of Tarun for the assessment year 2023-24.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

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 ` 1,50,000) (45,000) Interest on Borrowed Capital

Current Year (3,70,000)

Pre-construction Period (2,20,000 × 1/5) (44,000) (4,59,000)

Taxable Income from House property (3,09,000)

SEC. A : INCOME TAX LAW

Q14. Mr. Ganesh owns a commercial building whose construction got completed in June 2021. He took a loan of ` 15 lakhs from his friend on 1-8-2020 and had been paying interest calculated at 15% per annum. He is eligible for pre-construction interest as deduction as per the provisions of the Income-tax Act.

Mr. Ganesh has let out the commercial building at a monthly rent of ` 40,000 during the financial year 2022-23. He paid municipal tax of ` 18,000 each for the financial years 2021-22 and 2022-23 on 1-5-2022 and 5-4-2023 respectively.

Compute income under the head ‘House Property’ of Mr. Ganesh for the Assessment Year 2023-24. [May 2017, 4 Marks]

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Amount (`)

Gross Annual Value (Actual Rent: ` 40,000 × 12) 4,80,000

Less: Municipal Taxes paid (Note 1) (18,000)

Net Annual Value (NAV) 4,62,000

Less: Deduction under section 24

Standard (30% of ` 4,62,000) (1,38,600)

Interest on Loan for current Previous year (` 15,00,000 × 15%) (2,25,000)

Interest on Loan for pre-construction period (Note 2) (30,000) (3,93,600)

Taxable Income from House property 68,400

Working Notes:

1. Municipal taxes paid on 5-4-2023 are not considered because these are not paid in financial year 2022-23.

2. The interest for pre-construction period deductible in previous year is determined as under:

(a) Pre-construction period (PCP) : 1-8-2020 to 31-3-2021 i.e. 8 Months

(b) Loan amount : ` 15,00,000

(c) Rate of Interest : 15%

(d) Total Pre-construction Interest : 15,00,000 × 15% × 8/12 = ` 1,50,000

(e) PCP Interest deductible in current Pr. Yr. : ` 1,50,000 × 1/5 = ` 30,000

Q15. Mr. Ashok owns two buildings which are let out during the financial year 2022-23. The relevant details are as under:

Particulars House 1 Residential (`)

House 2 Commercial (` )

Municipal Value 1,80,000 3,60,000 Standard Rent 1,50,000 3,00,000

Actual Rent 2,40,000 6,00,000

Municipal Tax paid 20,000 30,000

Municipal Tax unpaid 10,000 15,000

Interest on money borrowed paid 60,000 20,000

Interest on money borrowed outstanding 1,00,000 1,60,000

Housing loan principal repaid to bank 50,000 30,000

You are requested to compute income of Mr. Ashok under the head income from house property for the assessment year 2023-24.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

House 1 House 2 Residential Commercial

Gross Annual Value (Note 1) 2,40,000 6,00,000

Less: Municipal Taxes paid (20,000) (30,000)

Net Annual Value (NAV) 2,20,000 5,70,000

Less: Deduction under section 24

Standard (30% of NAV) (66,000) (1,71,000) Interest on Loan (1,60,000) (1,80,000)

Taxable Income from House property (6,000) 2,19,000

Note: Repayment of principal amount of housing loan to bank is deductible from Gross Total Income under section 80C.

Working Notes:

1. The GAV of both the houses are determined as under:

House 1 House 2

(a) Municipal Valuation : ` 1,80,000 ` 3,60,000

(b) Fair Valuation : NA NA

(c) Higher of (a) and (b) : ` 1,80,000 ` 3,60,000

(d) Standard Rent : ` 1,50,000 ` 3,00,000

SEC. A : INCOME TAX LAW

House 1 House 2

(e) Expected Rent Lower of (c) and (d) : ` 1,50,000 ` 3,00,000

(f) Actual Rent : ` 2,40,000 ` 6,00,000

(g) Gross Annual value Higher of (e) and (f) : ` 2,40,000 ` 6,00,000

SELF-OCCUPIED PROPERTY THROUGHOUT THE YEAR [ONE SELFOCCUPIED HOUSE]

Q16. Mr. Chaturvedi, Delhi has 3 house properties in various parts of India. The details are given below:

Location of Property Delhi Chandigarh Kolkata Usage SelfOccupied Let out Let Out Amount (`) Amount (`) Amount (`)

Rent Received NIL 360,000 1,80,000 Fair Rent 2,40,000 30,000 1,50,000 Municipal Value 2,10,000 240,000 1,20,000 Standard Rent 1,80,000 210,000 90,000 Municipal Tax Due 20,000 40,000 30,000 Municipal Tax paid by the assessee NIL NIL 20,000 Interest on money borrowed 2,80,000 1,40,000 1,50,000

Note: All the properties were acquired/constructed after 01-04-2014. You are required to compute the income of Mr. Chaturvedi chargeable under the head Income from house property for the assessment year 2023-24.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Delhi Chandigarh Kolkata SelfOccupied Let out Let Out

Gross Annual Value (Notes 1 and 2) NA 3,60,000 1,80,000

Less: Municipal Taxes paid NA Nil (20,000) Net Annual Value (NAV) Nil 3,60,000 1,60,000

Less: Deduction under section 24

Standard (30% of NAV) Nil (1,08,000) (48,000) Interest on Loan (2,00,000) (1,40,000) (1,50,000)

Taxable Income from House property (2,00,000) 1,12,000 (38,000)

Total taxable Income from House Property = (2,00,000) + 1,12,000 + (38,000) = - 1,26,000

Working Notes:

1. The NAV of self-occupied property (Delhi) is always taken as nil.

2. The GAV of both the houses are determined as under:

Chandigarh Kolkata

(a) Municipal Valuation : ` 2,40,000 ` 1,20,000

(b) Fair Valuation : ` 3,00,000 ` 1,50,000

(c) Higher of (a) and (b) : ` 3,00,000 ` 1,50,000

(d) Standard Rent : ` 2,10,000 ` 90,000

(e) Expected Rent Lower of (c) and (d) : ` 2,10,000 ` 90,000

(f) Actual Rent : ` 3,60,000 ` 1,80,000

(g) Gross Annual value Higher of (a) and (b) : ` 3,60,000 ` 1,80,000

Q17. Raja is the owner of a residential house property having two independent floors of equal size in Chennai. The ground floor of the property has been let out to a tenant at rent of ` 16,000 per month from 1st June, 2022. The first floor of the property is occupied by Raja for his residential purpose.

Other particulars relating to the property are as follows:

Fair Rental Value 3,70,000 Municipal Value 3,80,000 Standard Rent 3,20,000

Annual Municipal Tax (50% paid) 57,000

Interest on loan taken for construction of property for the year 2020-21 30,000

Annual insurance premium 5,000

Compute income from house property of Raja for the Assessment Year 2023-24.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

I Ground Floor (Let out)(1/2 portion of house)

Gross Annual Value (Actual Rent) 1,60,000

Less: Municipal Taxes paid (28,500 × 1/2) (14,250) Net Annual Value (NAV) 1,45,750

Amount (`)

SEC. A : INCOME TAX LAW

Less: Deduction under section 24

Standard (30% of ` 1,45,750) (43,725)

Interest on Borrowed Capital (Pre-construction Period)

(30,000 × ½ × 1/5) (3,000)

Amount (`)

Income from House property (Let out) 99,025 II First Floor (Self-occupied))(1/2 portion of house)

Net Annual Value (Note 1) Nil

Less: Deduction under section 24

Interest on Borrowed Capital (Pre-construction Period)

(30,000 × ½ × 1/5) (3,000)

Income from House property (Self-occupied) (3,000) Taxable Income from House property (after intra head adjustment-Note 2) (96,025)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.

2. As per section 70, the loss from one house property can be set-off against income from another property.

3. The GAV of both the houses are determined as under:

Whole Property Ground Floor

(a) Municipal Valuation : ` 3,80,000 ` 1,90,000

(b) Fair Valuation : ` 3,70,000 ` 1,85,000

(c) Higher of (a) and (b) : ` 3,80,000 ` 1,90,000

(d) Standard Rent : ` 3,20,000 ` 1,60,000

(e) Expected Rent Lower of (c) and (d) : ` 3,20,000 ` 1,60,000

(f) Actual Rent : ` 1,60,000

(g) Gross Annual value Higher of ( e) and (f) : ` 1,60,000

Gross Annual value: The Actual rent received and Expected rent both are equal. Thus, ` 1,60,000 shall be GAV.

4. Section 23 of the Income-tax Act, 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

CH. 5 : INCOME FROM HOUSE PROPERTY 5.15

(b) where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or

(c) where the property or any part of 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 by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable.

Explanation— For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules as may be made in this behalf, the amount of rent which the owner cannot realize.

Q18. Mr. Raphael constructed a shopping complex. He had taken a loan of ` 25 Lakhs for construction of the said property on 1-8-2020 from SBI @ 10% for 5 years. The construction was completed on 30-6-2021. Rental income received from shopping complex ` 30,000 per month being let out for the whole year. Municipal Taxes paid for shopping complex ` 8,000. Arrears of rent received from shopping complex ` 1,20,000.

Interest paid on loan taken from SBI for purchase of house for use as own residence for the period 2022-23 is ` 3 lakhs. You are required to compute Income from House property of Mr. Raphael for A.Y. 2023-24 as per Income-tax Act, 1961. [Nov. 2015, 8 Marks]

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

I Self-occupied residential house

Net Annual Value (Note 1) Nil

Less: Deduction under section 24

Interest on Borrowed Capital (Subject to max. limit: Note 2) (2,00,000)

Amount (`)

Income from House property (self-occupied) (2,00,000)

II Shopping Complex (Let out)

Gross Annual Value (Actual Rent: ` 30,000 × 12) 3,60,000

SEC. A : INCOME TAX LAW

Less: Municipal Taxes paid (8,000) Net Annual Value (NAV) 3,52,000

Less: Deduction under section 24 Standard (30% of ` 3,52,000) (1,05,600) Interest on Loan for current Previous year (` 25,00,000 × 10%) (2,50,000)

Interest on Loan for pre-construction period (Note 3) (33,333)

Income from let out shopping complex (36,933)

Arrears of rent received from shopping complex

Arrear of Rent received 1,20,000

Amount (`)

Less: Deduction under section 25A Standard (30% of ` 1,20,000) (Note 4) (36,000) Income from arrears of rent 84,000 Total Income from Shopping Complex 47,067 Taxable Income from House property (after inter source adjustment-Note 5) (1,52,933)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.

2. The maximum allowable amount for interest on loan for construction on self-occupied is ` 2,00,000.

3. The interest for pre-construction period deductible in previous year is determined as under:

(a) Pre-construction period (PCP) : 1-8-2020 to 31-3-2021 i.e. 8 Months

(b) Loan amount : ` 25,00,000

(c) Rate of Interest : 10%

(d) Total Pre-construction Interest : 25,00,000 × 10% × 8/12 = ` 1,66,666.67

(e) PCP Interest deductible in current Yr. : ` 1,66,666.67 × 1/5 = ` 33,333

4. 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.

5. As per section 70, the loss from one house property can be set-off against income from another property.

SELF-OCCUPIED PROPERTY THROUGHOUT THE YEAR [TWO SELFOCCUPIED HOUSES]

Q19. Mr. Nitin owns two houses, both of which are occupied by him for residential purpose. The details are given below:

House-I House-II

Fair rent 7,20,000 6,30,000

Municipal value 5,00,000 5,00,000 Standard rent 6,00,000 6,00,000

Date of completion 1-1-2005 1-7-2011

Municipal tax paid 10% 12% Date of loan 1-7-2001 1-5-2008

Interest on loan for the financial year 2022-23 1,10,000 1,70,000

Compute his income from house property.

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Self-occupied House-I House-II

Net Annual Value (Note 1) Nil Nil

Less: Deduction under section 24 Standard (Not Available in case of self-occupied)

Interest on loan X (1,10,000) (1,70,000)

Taxable Income from House property (1,10,000) (1,70,000) The total comes to (2,80,000), but in case of self-occupied, the total interest on borrowed capital is deductible up to ` 2,00,000 only. Hence, total taxable income from house property = - (2,00,000)

Working Notes: 1. The NAV of self-occupied property is always taken as nil.

Q20. Nisha has two houses, both of which are self-occupied. The particulars of these are given below:

Particulars

(Value in ` )

House-I House-II

Municipal Valuation per annum 1,20,000 1,15,000

Fair Rent per annum 1,50,000 1,75,000

Particulars

(Value in ` )

House-I House-II

Standard rent per annum 1,00,000 1,65,000

Date of completion 31-3-2001 31-3-2003

Municipal taxes payable during the year (paid for House II only) 12% 8%

Interest on money borrowed for repair of property during current year 55,000

Compute Nisha’s income from the House Property for the Assessment Year 2023-24 and suggest which house should be opted by Nisha to be assessed as self-occupied so that her tax liability is minimum. [May 2014, 8 Marks]

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Self-occupied House-I HouseII

Net Annual Value (Note 1) Nil Nil

Less: Deduction under section 24

Standard Deduction (Not Available in case of selfoccupied)

Interest on loan for Repair (Note 2) Nil (30,000)

Taxable Income from House property Nil (30,000)

Total taxable income = (30,000)

Working Notes:

1. The NAV of self-occupied property is always taken as nil.

2. The maximum allowable amount for interest on loan for repair on self-occupied is ` 30,000

Q21. Mr. Kamal Hasan has two independent residential flats in an apartment, both of them being of identical size. First flat is self-occupied and the second flat is occupied by his daughter, from whom he does not receive any rent.

For each flat the relevant annual rent details are as under:

Fair Rental Value 5,70,000 Municipal Value 6,00,000 Standard Rent 5,16,000 Annual Municipal Tax fully paid 11% of municipal valuation

Pre-construction period interest third year 1,50,000

Interest on housing loan for current year (25% unpaid) 1,65,000

Fire Insurance Premium 2,500 Ceiling amount 2,00,000

Compute income of Mr. Kamal Hasan under the head income from house property for assessment year 2023-24.

[CMA June 2016, 8 Marks]

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Self-occupied (Actual) (Deemed) Flat-I Flat-II

Net Annual Value (Note 1) Nil Nil

Less: Deduction under section 24

Standard deduction (Not Available in case of selfoccupied)

Interest on loan Current Year (1,65,000) (1,65,000)

Pre-construction Period (For each flat: 1,50,000 × 1/5) (30,000) (30,000)

Taxable Income from House property (1,95,000) (1,95,000)

The total comes to (3,90,000), but in case of self-occupied, the total interest on borrowed capital is deductible up to ` 2,00,000 only. Hence, total taxable income from house property = (2,00,000)

Working Note:

1. The NAV of self-occupied property is always taken as nil.

Q22. Surbhi has two houses, both of which are self-occupied. You are required to compute Surbhi’s income form house property for the Assessment Year 2023-24.

The Particulars of these are given below:

Particulars House 1 House 2 (`) (`)

Municipal Value per annum 1,30,000 1,15,000

Fair Rent per annum 1,10,000 1,70,000

Standard Rent per annum 1,00,000 1,65,000 Date of Completion 31-3-2002 31-3-2004

Municipal Tax payable during the year (paid for house 2nd only) 12% 8%

Interest on money borrowed for repair of property during current year 55,000

Ans.: Computation of Income from House Property (Assessment Year 2023-24)

Self-occupied House-I HouseII

Net Annual Value (Note 1) Nil Nil

Less: Deduction under section 24

Standard Deduction (Not Available in case of selfoccupied)

Interest on loan for repair (Note 2) Nil (30,000)

Taxable Income from House property Nil (30,000) Total taxable income = Nil + (30,000) = - 30,000

Working Notes:

1. The NAV of self-occupied property is always taken as nil.

2. The maximum deduction allowable on loan taken for repairs is ` 30,000.

LET OUT PROPERTY THROUGHOUT THE YEAR [KEPT VACANT FOR PART OF THE YEAR]

Q23. Mr. Nitin completed construction of a residential house on 1-4-2022.

Interest paid on loans borrowed for the purpose of construction during the 30 months prior to completion was ` 60,000.