Income from House Property

Hi Guys,

I have one query in respect of Sec. 23 of I. Tax Act “Income from House Property”. Please consider following example (figures are for example only) –

Assessee has let out one house whose Municipal Value is 2,00,000 and fair rent is 2,50,000. But standard rent is 2,25,000. Hence annual value shall be restricted to 2,25,000.

Now lets move to actual rent since actual rent or 2,25,000 shall be taken as final annual value. Now if assessee takes huge interest free deposit from tenant, earns interest of 1,00,000 and reduced this amount indirectly from actual rent and thus suppress actual rent. Then annual value shall be 2,25,000 only.

Various high courts have held that such notional interest shall not be added to actual rent received. In this case even though AO has a right to revise fair rent but again it shall be subject to limit of standard rent.

Thus can we say that assessee has successfully escaped tax?

Originally posted by : Yogesh Shah
	Hi Guys, I have one query in respect of Sec. 23 of I. Tax Act “Income from House Property”. Please consider following example (figures are for example only) – Assessee has let out one house whose Municipal Value is 2,00,000 and fair rent is 2,50,000. But standard rent is 2,25,000. Hence annual value shall be restricted to 2,25,000. Now lets move to actual rent since actual rent or 2,25,000 shall be taken as final annual value. Now if assessee takes huge interest free deposit from tenant, earns interest of 1,00,000 and reduced this amount indirectly from actual rent and thus suppress actual rent. Then annual value shall be 2,25,000 only. Various high courts have held that such notional interest shall not be added to actual rent received. In this case even though AO has a right to revise fair rent but again it shall be subject to limit of standard rent. Thus can we say that assessee has successfully escaped tax?