Income From Housing Property

Income form House Property which is exempt ie Though there is income from house property, such income will not be taxable under the Indian Income Tax Law. The following are such situations:-

1. Income from a farmhouse used for agricultural purposes.
2. Income from property earned by trade union or association of trade union.
3. Property income earned by a local authority.
4. Income from house property earned by a political party.
5. Income from property held for charitable purposes.
6. Property used for own business or profession. If such property yields any income, such income will be treated as business income and not house property income.
7. One property which is used by an individual assessee or an HUF assessee for purpose of self occupation only and not for renting out to any person will be treated as exempt property and income from that property will not be treated as taxable income.

For the purposes of understanding the provisions of this chapter, let us divide the house properties into different categories:-

• Self Occupied Properties (SOP).
• Let Out Properties.

If an individual or HUF assessee has only one property, that property will be treated as self occupied. Accordingly, there will not be any taxable income in respect of such property. However, if the assessee owns more than one property all of which are not rented out but are self occupied, then the assessee, at his option, may choose any one property as self occupied by him and the remaining properties though not actually let out, will be deemed to be let out ie they will be assumed to have been let out and a notional rental value will be treated as taxable income in the hands of the owner of such property. Such properties are known as properties deemed to have been let out. In respect of properties deemed to have been let out, a notional rental value will be treated as taxable income even if no rent has actually been received by the assessee. In order to determine the notional rental value, the highest of the following will be treated as taxable income:-

• Municipal Rental Value.
• Fair Rental Value of a similar property in a similar locality.

However if the higher of the above two exceeds the standard rent of the property determined in accordance with the Rent Control Act applicable at the concerned locality, then the standard rent will be treated as taxable rental value of such property.

Therefore in respect of self-occupied property, one property will be treated as an exempt property and in respect of other properties, a notional rental value will be treated as taxable income in the hands of the owner of the property.