Costing and Taxation · Ch 6 — Income from House Property
Computation of Income from a Let-Out House Property
Computation of Income from a Let-Out House Property
Once the Gross Annual Value of a let-out property is fixed under Section 23(1) (Section 6.i above), computing the actual taxable Income from House Property follows one fixed sequence of deductions, laid down in Sections 23(1) and 24.
The computation, stage by stage
| Stage | How it is arrived at |
|---|---|
| Gross Annual Value (GAV) | Per Section 23(1) — see Section 6.i |
| Less: Municipal Taxes | Municipal/local taxes actually PAID BY THE OWNER during the previous year (whether they relate to this year or an earlier one), provided the property is let out. Taxes merely due but not yet paid are not deducted; taxes paid by the tenant are not the owner's deduction to claim. |
| = Net Annual Value (NAV) | GAV − Municipal Taxes paid by the owner |
| Less: Standard Deduction — Section 24(a) | A flat 30% of Net Annual Value, allowed automatically regardless of the owner's actual expenditure on repairs, insurance, collection charges, or anything else — no bills or proof of actual spending are needed or relevant |
| Less: Interest on Borrowed Capital — Section 24(b) | The actual interest paid/payable during the year on capital borrowed for the purpose of purchase, construction, repair, renewal, or reconstruction of the property — for a LET-OUT property, this is deducted in full, with no monetary ceiling |
| = Income from House Property (let-out) | NAV − Standard Deduction − Interest |
Pre-construction interest is outside this unit's scope
Interest relating to the period BEFORE construction is completed ("pre-construction interest") has its own separate rule under the Act — it is not deducted in the year it is paid, but accumulated and written off in five equal instalments starting from the year construction is completed. This syllabus explicitly restricts Section 24(b) here to interest for the year itself, EXCLUDING any pre-construction-period interest and its five-instalment amortisation — every numerical in this course only ever gives interest for the year in question, already excluding any pre-construction component.
Unlike the Standard Deduction, the Section 24(b) interest deduction for a LET-OUT property carries no monetary ceiling — the entire interest actually paid/payable is deductible, even where doing so turns the final figure negative (a loss from house property, which the assessee is fully entitled to compute exactly as shown).
Two computation patterns worth noticing
- If the property was let out for the entire year with no vacancy, GAV is simply the higher of Expected Rent and Actual Rent Received (Section 23(1)(a)/(b)) — vacancy never enters the picture. …
Gross Annual Value less municipal/local taxes actually paid by the owner during the …
A flat 30% of Net Annual Value, allowed automatically regardless of actual expenditure — applies only where NAV is a positive figure (i.e., not to a self-occupied hou …
The full actual interest paid/payable during the year on a loan for purchase/construction/repair/renewal/reconstruction of a LET-OUT property is deductible with no monetary ceiling, excluding pre-construction-period …