Urgent query-income u/h house property

Tax queries 627 views 7 replies

Manvi Malhotra

CA Final CS Final

62 Points Joined December 2012

Hi,

I have a query regarding income under head house property. There is a house property co-owned by a husband and wife (50:50). They obtained the possession of the property in September 2013 and in the same month it was let out at a rent of 14000 p.m. They have taken a joint loan in order to purchase the property. The loan was taken in 2010-11. Pre-construction period is 3 years. Pre-construction period interest totals 352009. Pre-construction period principal component of the loan totals 137131. Current year ie. F.Y. 2013-14 interest and principal paid are Rs.182133 and 79337 respectively.

I have the following questions:

1) Since possession is obtained in september 2013, how will the gross annual value be calculated? Will it be taken from apr 13- mar 14 or from sep 13-mar 14?

2) Treatment of pre-construction principal component.

3) Final solution for income under head house property and its distribution amongst the husband and wife with respect to ITR.

Thankyou

Replies (7)

CA Deepesh Ruhela

Keen to Learn

3271 Points Joined August 2010

1. Sept. 13 to March 2014

2. Pre-construction principal amount, it is not eligible for tax deduction.

CA Deepesh Ruhela

Keen to Learn

3271 Points Joined August 2010

Gross Annual Value As per Sec.23(1)(b) Actual Rent Recd. 14000*12	168000
Less: Municipal Tax paid during the FY	Nil (assume)
Net Annual Value	168000
Less: deduction u/s 24(1)(a)/(b) 30% of NAV Intt. On borrowed money Pre construction 352009/5 =70401 After construction = 182133	50400 252534
Loss under the head House property	-134934

Loss distributed between Husband and wife in their respective share i.e. 50% each

Guest

Hi,

As per the income tax act, the pre-construction interest is the interest incurred on the borrowed capital from the beginning of loan till the end of previous financial year in which the house is completed. Since the house is completed in September 2013, the interest paid from the beginning till March 2013 has to be computed as Pre-construction interest, which has to be deducted in 5 equal instalments.

Please note that the pre-EMI as per the banks and the Pre-construction interest has different meaning.

There is no provision for claiming the pre-construction principal, as ideally the EMI payment covering the principal and interest starts after the completion of house property and till the date the borrower pays pre-EMI interest. However many banks allow the early EMI before construction, which is not eligible for deduction.

The calculation has to be done and equally divided at 50:50 in the respective assessees' ITR.

Manvi Malhotra

CA Final CS Final

62 Points Joined December 2012

Thank you so much for the help. But u have mentioned in the first comment that gross annual value will be taken from sep13-mar 14. That makes it 7 months so accordingly won't the gav be 14000*7=98000? Also we'll consider municipal taxes paid by tenant or owner?

Manvi Malhotra

CA Final CS Final

62 Points Joined December 2012

Also I read somewhere that the 30% standard deduction is admissible only when rental income is taken fr the whole year? Please clarify

CA Deepesh Ruhela

Keen to Learn

3271 Points Joined August 2010

Sorry, i had taken Gross Annual value for whole year by mistake. Gross annual value should be taken for 7 months & Calculate the income accordingly. Thanks to correct me.

Consider the Municipal Tax paid by owner.

Originally posted by : Manvi Malhotra
	Also I read somewhere that the 30% standard deduction is admissible only when rental income is taken fr the whole year? Please clarify