Apr 062015

Practical case study on computation of income from House Property

After discussion basic factors that are necessary for computation of income from house property, now here we can analyse the practical case study on computation of income from house property:


Mrs. A owns a house property: comprising eight let out residential unit at Bombay with following specifications:

Rental details Local taxation detail
– Fair rent of the property in Rs 61, 000,- Standard rent is Rs 60,500.

– Annual rent of Rs. 62,000

– Rateable value according to municipal records is Rs.50,000

– General tax: 25.5%- Water tax: 9%

– Sewage (halalkhore) tax: 5%

– Education cess: 5%

– Water Benefit tax 6%

– Sewerage benefit tax 4%

– State education tax 6%

Expenditure Incurred by Tenants Expenditure by Mrs A
– Repairs expenditure paid by tenants 6,000 – Insurance premium due but outstanding Rs 2,000- Annual charge created by Mrs A: Rs. 2,000
Interest details
– interest on borrowed capital for construction (inclusive of brokerage of Rs.1,000 for arranging loan) Rs 17,000- Date of commencement of construction: June 1994

– Date of completion of construction: January 15,1998

Rental Recovery Expenses Unrealized Rent
– Legal charges for notice sent to three tenants for arrears of rent: Rs 4,00;- Collection charges payable Rs 219 – Unrealised rent of Rs 2001-02 (defaulting tenants has vacant the property) Rs. 3,000,- Unrealised rent of 2013-14 : Rs 1,590;

– Deduction allowed earlier: Rs 17860 and recovers Rs 2,100 after incurring expenditure of Rs 700

Occupancy status
One flat (rent Rs.600 per month) remained vacant for four months

 Following are the notable points in the above case:

  • For computing income Gross Municipal value is taken, i.e., Annual rent + Repair charges (1/9th of Rs 50,000) + water tax (Rs 4500) + Sewage (halalkhore) tax (Rs 2500) = Rs 62556
  • Municipal taxes = General tax + Water tax + Sewage (halalkhore) tax + Education cess = Rs 22.250
  • No treatment of repair done by tenants or Mrs A.
  • All other expenses by Mrs A are irrelevant for calculation.

 Now calculation of property income for Mrs A shall be given below:-

Income from a let out house property is determined as under:-
1. Calculation of Gross Annual Value
1. Gind out reasonable expected rent of proprty 60,500
Gross municipal valuation of property 62,556
fair rent of property 61,000
standared rent (As per rent control act) 60,500
2. Find out rent actually received or receivable 60,410
Rent of PY (or that part of PY) property is available for letting out 62,000
Less: after excluding unrealized rent 1,590
3. Loss due to vacancy 2,400
Period for which property is available 96 12 X 8
Period for which property remain vacant 4 @ 600 PM
Gross annual value 58,100
Less: Municipal taxes 22,250
Net annual value        35,850
Less:Deduction under section 24
-Standared Deduction 10,755
-Interest on borrowed capital 16,000          26,755
Income from HP          9,095