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Urgent query on house property

Gourav Kapoor (CA Final Student) (2977 Points)

29 September 2011

what will be net annual value if let out at 1000p.m. kept vacant for 5 month and frv is 1200 p.m.

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Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 29 September 2011

NAV = 1200*12 = 14,400.

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Gourav Kapoor (CA Final Student) (2977 Points)
Replied 29 September 2011

where is the vacancy point yar...u forget the vacany point....

Parmod Rawat (B.COM,MBA,CWA Inter) (401 Points)
Replied 29 September 2011

NAV SHOULD BE 9400

EXPECTED RENT 1200*12= 14400

LESS VACANCY= 5000

9400

ACTUAL RENT = 12000

LESS VACANCY = 5000

7000

SO YOU NEED TO TAKE THE HIGHER AMOUNT BETWEEN THE ABOVE TWO FIGURE THAT IS EXPECTED RENT OR ACTUAL RENT SO GAV IS 9400 & IF THERE IS ANY MUNICIPAL TAX THEN DEDUCT THAT TAX & YOU WILL GET THE NET ANNUAL VALUE

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Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 29 September 2011

NAV u/s 23 shall be fare value or actual rent received whichever is higher. However if the actual rent received is less than fair value because of vacancy then such actual rent received shall be taken as NAV.

In your query, actual rent received (assuming no vacancy at all) will be1000*12 = 12000 which is still less than fair value which is1200*12 = 14400. So we cant prove that actual rent is less than fair value due to vacancy.

However as per expert advice in case of such vacancy, NAV can be taken as14400 - 5000 = 9400. But under I T Act its14400 only.

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 29 September 2011

from xam point of view----1000X7

but practically---1200X12

Coz section 23(1)(c) states that if coz of vacancy, the actual rent recd is less dan FMV, den actual rent will be considered...........Bt here, rent was already 1000 pm.....

Bt in exam, in case of vacancy, actual rent is to be taken only.......

Plz correct me if m wrng

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Rahul Suneja (CA-Final, CS-Exec) (215 Points)
Replied 29 September 2011

Fair rent= 1200*12 =14400

Rent recived=1000*7(12-5)=7000

If there was no vacancy Rent recieved would be 1000*12 =12000,which is still less than Fair rent

therefore GAV=fair rent=14400

NAV=14400

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Mukesh Kumar Singh (CA-FINAL) (4094 Points)
Replied 29 September 2011

Originally posted by : Rahul Suneja
	Fair rent= 120012 =14400 Rent recived=10007(12-5)=7000 If there was no vacancy Rent recieved would be 1000*12 =12000,which is still less than Fair rent therefore GAV=fair rent=14400 NAV=14400

agreed

Tanash Chakraborty (KPMG) (292 Points)
Replied 29 September 2011

Originally posted by : Parmod Rawat
	NAV SHOULD BE 9400 EXPECTED RENT 1200*12= 14400 LESS VACANCY= 5000 9400 ACTUAL RENT = 12000 LESS VACANCY = 5000 7000 SO YOU NEED TO TAKE THE HIGHER AMOUNT BETWEEN THE ABOVE TWO FIGURE THAT IS EXPECTED RENT OR ACTUAL RENT SO GAV IS 9400 & IF THERE IS ANY MUNICIPAL TAX THEN DEDUCT THAT TAX & YOU WILL GET THE NET ANNUAL VALUE

exactly this is the answer whent the expected rent is lesser than the actaul rent recieved...we consider the reasons for this to happen...here we find that the difefrence is not only because of vacancy but maybe some oter reasons tooo and so we subtract the vacancy period rent from expected rent aND ARRIVE AT THE ANSWER...

* Krishna * (CA Student) (6149 Points)
Replied 29 September 2011

@ Gourav

If owing to the vacancy of property for 5 months, the actual rent received or receivable (1000x7=7000) is less than the expected rent (i.e. FRV=1200x12=14400), then Annual Value of such property is taken as the Actual Rent received or receivable only. This is as per the computation of Annual Value as per Sec. 23(1)(c). Hence, as per this section, Annual Value is Actual rent received or receivable i.e. Rs. 1000 x 7 = Rs. 7000. From this amount, we need to deduct the Municipal Taxes, if any, to arrive at the Net Annual Value.

Mr Pramod please recalculate your answer, check the provision and correct me if i am wrong.

Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 29 September 2011

For everyone, u/s 23, NAV shall be only Rs 14,400 only. However expert advice says we can take Rs 9,400 also.

Its not Rs 7000, please go through the provision once.

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(Guest)

1.Resonable expeted rent(MV or FR which ever is higher but subject to SR)------- 14,400

2.Rent received or receivable after deducting unrealized rent of the current previous year

but before adjusting loss due to vacancy ------- 12,000

3.Higher of the 1 & 2 -------- 14,400

4Less:.Loss due to vacancy ----------- 5.000

5. GAV (3-4) ----------- 9,400

Plz correct if i m wrong

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Gourav Kapoor (CA Final Student) (2977 Points)
Replied 29 September 2011

Sorry to say to them who are deducting vacancy....

i took Girish Ahuja Sir classes but he never told ur to calculate like that....

vacancy less krne vala point to mene aj tk kahin nahi pda....

as section 23 says....if actual rent is lower than expected rent owing to vacancy tehn actual rent wud b regarded as GAV......

this is the main point in this ques...

but wats the othr special thing in this ques is ....in this ques if actual rent is taken as for full year then also it is less than expected rent...my ques is in such case we will consider actual rent as GAV or not...i have never seen such ques...so thats y asking u people to solve this...if anyone has solved such kind of ques..where vacancy is also there in ques and actual rent for full year is also less than expected rent....

Arihanth Jain (Chartered Accountant) (1226 Points)
Replied 29 September 2011

Ms Pooja, your partly correct.9,400 NAV is acceptable but not u/s 23.

U/s 23(1) For the purposes of section 22, 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

          (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 :

Therefore unless we can prove that rent was received less due to vacancy only, no where section provides that vacancy rent part (i.e.5,000 in the query) can be allowed to be deducted from fair rent. Hence NAV becomes14,400.

However I believe there are expert opinions on the same & NAV can be as9400.