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07 January 2023

Mr love and ms affection brother and sister are co owners of a house property with 50% share each in the property .The property was constructed before first April 1999 the property has 7 equal units and is situated in Bangalore during the financial year 20-21 each co owner occupied one unit each and the balance were let out at a rental value of 20000 per unit per month. The municipal valuation was 5 lakh and the municipal taxes for 10% of the municipal value . Interest payable on loan taken for construction was rs 4 lakh. One of the let out unit was vacant for 6 month in the year. compute income from house property for each of co owner for the assessment year 20-21 22.

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3 Replies

veerendar singh (tax consultant) (3301 Points)
Replied 09 January 2023

The hp income will be computed on cosolidated basis and then will be divided among the coowners.
further as per explanation to sec. 26 the property owners can claim a total of 4 units as self occupied.
however they have let out 5 units. hence effectively they can claim only 2 as self occupied.

as per details available there are two possible computations since one unit was vacant for 6 months.

that 6 month vacancy can be treated as self occupied or else simply as vacant.

it should be analysed which course will leat to lesser tax outflow.

it needs to be emphasised that the actual rental is lower than the municipal value. hence the hp income computed in both alternatives might differ.

now lets delve into each alternative

1. self occupied for 6 months
in this case the assessee can claim full amount of municipal tax from the GAV.

the gav will be 5 lacs
nav will be 4.5 lacs
from this take 30% standard deduction
assuming interest of 4 lacs is for the construction of all 7 units, take 1/7th portion of interest cost.

2. vacant for 6 months
in this case the gav will be 1.2 lacs
and the nav will be 0.7 lacs.

in my view the crux of the question was regarding treatment of 6 months of vacancy of one unit and i have explained it above.

with respect to remaining units i think you can solve it by yourself. nevertheless, i shall summarily explain you the computation.

for 2 self occupied units
nav is 0
take interest cost as deduction under sec. 24
and then the loss for those 2 units will be set off against income of 5 units.

for remaining 4 let out units
the gav will be 5 lacs
nav will be 4.5 lacs
take both deductions under sec. 24.

I hope this helps
if you arent clear about anything then kindly ask.

skihorizon (UK) (22 Points)
Replied 10 February 2023

Net income for HP is a company's profit for the reporting period, calculated by taking revenues and profits and subtracting all costs and losses. Money managers and regular investors alike pay close attention to net income.

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