Introduction

Income from House Property

“House Property” refers to a building or land that is used for residential or commercial purposes. This can include single-family homes, apartments, condos, townhouses, office buildings, stores, and even vacant land. In Simple words house property means

• any land surrounded by wall having roof or not; and
• any land appurtenant to a building

“Income from house property” refers to the rental income earned by an individual or an entity from letting out a residential or commercial property they own. House property is of two types

• Self Occupied Property: The property which is owned by the person and in which they reside
• Let Out Property: Property which is let out to some tenant from which the owner earns rental income

Basis of Charge [Section 22]:

• The process of computation of income under the head “Income from house property” starts with the determination of annual value of the property.
• The annual value of any property comprising of buildings or lands appurtenant thereto of which the assessee is the owner is chargeable to tax under the head “Income from house property”.

Condition for Chargeability

1. Property should consist of any building or land appurtenant thereto:

1. Buildings include not only residential buildings, but also factory buildings, offices, shops, god owns and other commercial premises.
2. Land appurtenant means land connected with the building like garden, garage etc.

Income from letting out of vacant land is, however, taxable under the head “Income from other sources” or “Profits and gains from business or profession”, as the case may be.

2. Assessee must be the owner of the property:

1. Owner is the person who is entitled to receive income from the property in his own right.
2. Ownership includes deemed ownership
3. The assessee must be the owner of the house property during the previous year. It is not material whether he is the owner in the assessment year.
4. The person who owns the building need not also be the owner of the land upon which it stands.

3. Use of property:

1. The property may be used for any purpose i.e., commercial or residential purpose, but it should not be used by the owner for the purpose of any business or profession carried on by him, the profit of which is chargeable to tax.
2. The income earned by an assessee engaged in the business of letting out of properties on rent would be taxable as business income.

Method of computation of Income from House Property:

Points to remember:

• IFHP is the second head of the Income Tax Act, 1961
• Section 22 to 27 of Income Tax Act 1961 deals with Income from House      Property.
• The following income will be taxable under the head ‘Income from house property’ of the Income tax act, 1961.

1. Rental Income on a let out property
2. Annual Value of a property which is ‘deemed’ to be let out for income tax purposes when House Property which is Let and was Vacant during the Whole or Part of the Previous Year
3. Annual Value of the property which is self-occupied, which is Nil.

Income From House Property Situated Outside India

1. In case of a resident in India (resident and ordinarily resident in case of individuals and HUF), income from house property situated outside India is taxable, whether such income is brought into India or not.
2. In case of a non-resident or resident but not ordinarily resident in India, income from a property situated outside India is taxable only if it is received in India.