Income from let-out property

This query is : Resolved

Rashmi (Querist)
Follow

23 December 2013 Please help me with the following scenario

If a person has taken loan for construction of house property. Till 31st March 2013 - Interest Paid for borrowed capital was Rs. 12Lacs.

Construction Completed on 30th Nov 2013 with total interest from 1st April 2013 - 30th Nov 2013 was Rs. 2Lacs.

He puts his house on rent till March 2014 from Dec 2013 where he is expected to receive Rent of Rs. 12K per month (total Rs. 36K till March 2014 i.e. 3 months rent). Post construction Interest on borrowed capital will be Rs. 1Lac.

How to calculate Income from house property for this case for the Fy 2013-14.

Many thanks in advance.

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
Follow

23 December 2013 According to the section 24(b) of the income tax act,1961, Pre-construction interest shall eligible for deduction in 5 equal installments from the financial year in which year the construction completed. Pre-construction interest means the interest accrued or paid upto the ending of the last financial year which is preceding to the construction completed financial year, Means in your case interest upto 31-3-2013 shall be pre-construction interest and such amount is Rs.12 Lacs(as indicated by you) this amount shall be deducted in 5 equal installments from F.Y 2013-14 from the income from house property. And interest from 1-4-2013 to 31-3-2014(Rs.3 Lacs in your case as indicated by you) shall be deducted from the financial year 2013-14 income from house property. Thus income from house property for F.Y.2013-14 is

Annual rent Rs. 36,000
Less: Pre-construction interest Rs.2,40,000
Less: Interest for F.Y 2013-14 Rs.3,00,000

Thus Loss from House property is Rs.5,04,000 for f.y. 2013-14.

OM SAI SRI SAI JAI JAI SAI

Message likes : 1 times

Rashmi

Rashmi (Querist)
Follow

23 December 2013 Thank you very much Dintakurthi. I still have a small query. I heard that if house property is let out for few months and vacant for view months (means only a part of entire year is let out) then full year rent receivable i.e. 12k*12 = Rs. 1,44,000 will be taken as rental income for calculation purpose. Is it so?

Upgrade to CAclubindia Pro. Subscribe Now!

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
Follow

23 December 2013 You are correct, but not full, Your annual lettable value is Rs. 1,44,000 from this unrealised rent or rent for the vacant period shall be deduct such your house is kept vacant for 9 months so technically only 3 months rent shall be taxable for tax purpose thus only Rs.36,000 shall be rent value for the year 2013-14.

For the above said reply computation of income from house property you shall deduct 30% on ALV as standard deduction thus your loss from house property shall be Rs.5,14,800.

Note: The above computation shall be made with assumption of the whole property is let out or kept for let out(means no any self occupied portion).

OM SAI SRI SAI JAI JAI SAI

Message likes : 1 times

Rashmi

Rashmi (Querist)
Follow

24 December 2013 Sir, but why there is a notional rent concept. If a house property is vacant but the annual value will be based on deemed to be let out. Then self-occupied NIL and deemed to be let-out will also be NIL annual value.