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Welcome to presentation on Taxability of House Property

Welcome to presentation on Taxability of House Property. Income from House Property. What consist of House Property?. Property must be consist of any building or land appurtenant thereto. Conditions for Taxability. Property must be in the ownership of the Assessee

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Welcome to presentation on Taxability of House Property

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  1. Welcome to presentation on Taxability of House Property Prepared by: CA. V.K. SAINI (9999772095)

  2. Prepared by: CA. V.K. SAINI (9999772095)

  3. Prepared by: CA. V.K. SAINI (9999772095)

  4. Income from House Property Prepared by: CA. V.K. SAINI (9999772095)

  5. What consist of House Property? Property must be consist of any building or land appurtenant thereto. Prepared by: CA. V.K. SAINI (9999772095)

  6. Conditions for Taxability Property must be in the ownership of the Assessee Property should not be use in the business of Assessee Prepared by: CA. V.K. SAINI (9999772095)

  7. Is location of property relevant? No, it does not matter that Property is situated in India or outside India. In both of the cases Property shall be taxable in the head of “Income from House Property.” Prepared by: CA. V.K. SAINI (9999772095)

  8. Transfer to spouse or to a minor child who is not a married daughter Holder of impartible estate Member of co-operative society Deemed Owner Prepared by: CA. V.K. SAINI (9999772095)

  9. Deemed Owner Person in possession of property. (Sec 53A) In case of HUF which have not been partitioned to members, the Karta of HUF Person having right in a property for a period not less than 12 years. Prepared by: CA. V.K. SAINI (9999772095)

  10. Computation of Taxable Income from House Property Gross Annual Value xxxxx Less: Municipal Tax xxxxx Net Annual Value xxxxx Less: Deduction u/s 24 (i) S.D. of 30% of Annual Value xxxxx (ii) Interest on Loan xxxxx Taxable Income from H.P. xxxxx Prepared by: CA. V.K. SAINI (9999772095)

  11. What is Gross Annual Value? Sec 23(1)(a) Sum for which Property might reasonably be expected to be let from year to year. It is something like notional rent which could have been derived, had the property been let. Prepared by: CA. V.K. SAINI (9999772095)

  12. Prepared by: CA. V.K. SAINI (9999772095)

  13. Prepared by: CA. V.K. SAINI (9999772095)

  14. Where Rent Control Act Apply Step-A Higher of the Fair Value and Municipal Value In any case above amount can not exceed the Standard Rent Step-B Higher of the actual rent received or receivable and Annual value calculated in step-A Where Rent Control Act does not apply Step-A Higher of the Fair Value and Municipal Value Step-B Higher of the actual rent received or receivable and Annual value calculated in step-A Let out House Property Prepared by: CA. V.K. SAINI (9999772095)

  15. If assessee have a single house then Annual value of such house shall be NIL If assessee have more than one house then valuation of one of them shall be at NIL and valuation of other houses shall be as they are let out. Self occupied House Property Prepared by: CA. V.K. SAINI (9999772095)

  16. Partly let out House Property Valuation of self occupied portion shall be at NIL. Valuation of let out portion as fully let out But if assessee let out the property for some period in the year and occupied for the remaining period then there is no deduction for the occupied period. Prepared by: CA. V.K. SAINI (9999772095)

  17. If owner of Property cannot realize the rent from the tenant then such rent received rent shall be deemed the GAV. But after fulfilling some conditions. Tenancy is bona fide Tenant has vacated, or steps have been taken to compel him Tenant is not occupation of any other property of the assessee All reasonable steps have been taken to institute legal proceedings for the recovery of the unpaid rent Rules for the unrealized rent Prepared by: CA. V.K. SAINI (9999772095)

  18. Subsequent recovery of unrealized rent Such recovery shall be taxable in the previous year of receipt of unrealized rent irrespective of the ownership if: a deduction has been claimed and allowed in respect of such unrealized rent and no deduction u/s 24 shall be given on this recovery Prepared by: CA. V.K. SAINI (9999772095)

  19. Special provisions for arrears of rent received Where the assessee is the owner of House Property and received arrears of rent from such property, not charged to income tax in any previous year then such amount, after deducting 30% of such amount, shall be deemed to be income from House Property irrespective of the ownership of the House Property Prepared by: CA. V.K. SAINI (9999772095)

  20. Deductions from Net Annual Value Prepared by: CA. V.K. SAINI (9999772095)

  21. In case of let out House Property 30% of the NAV This deduction is notional deduction irrespective of actual expenditure for realization of rent In case of self occupied House Property There will no deduction as NAV is NIL Standard deduction u/s 24(i) Prepared by: CA. V.K. SAINI (9999772095)

  22. In case of let out House Property All the interest paid or due In case of self occupied House Property Deduction is limited to Rs.30,000/- for each co-owner separately Deduction of interest on loan Prepared by: CA. V.K. SAINI (9999772095)

  23. Maximum Deduction of interest In case of self occupied House Property Maximum amount of deduction of interest is Rs. 1,50,000/- if the following conditions are satisfied: 1. Loan is taken on or after 01.04.1999 2. House Property was acquired/constructed within three years from the end of Financial Year in which loan was taken Prepared by: CA. V.K. SAINI (9999772095)

  24. Interest attributable to prior construction/acquisition period Interest from the date of borrowing – Till the end of the previous year prior to the previous year in which the house is completed Interest of the previous year in which construction was completed will be deducted as normal interest Prepared by: CA. V.K. SAINI (9999772095)

  25. Interest on loan taken for repayment of loan Such interest shall be allowed as deduction But interest on interest shall not be allowed Prepared by: CA. V.K. SAINI (9999772095)

  26. Income from the head Capital Gain Prepared by: CA. V.K. SAINI (9999772095)

  27. Capital Asset House Property is a Capital Asset if it is Owned by the assessee If holding period of house property is more than 36 months then it is Long Term Capital Asset otherwise Short Term Capital Asset Prepared by: CA. V.K. SAINI (9999772095)

  28. Chargeability of capital gain On the transfer of Capital asset in the previous year being house property owned by the assessee If the sale consideration is more than the acquisition value of the house property Prepared by: CA. V.K. SAINI (9999772095)

  29. What is transfer? Transfer includes- Sale, exchange or relinquishment The extinguishment of any right in the asset Compulsory acquisition thereof under any law Conversion into stock in trade Prepared by: CA. V.K. SAINI (9999772095)

  30. Computation of Capital Gain Sale proceeds xxxxx Less: transfer expenses xxxxx Less: indexed cost of acquisition xxxxx Less: indexed cost of improvement xxxxx Capital Gain/Loss xxxxx Prepared by: CA. V.K. SAINI (9999772095)

  31. Special provision for full value of Consideration Sec. 50 C Where consideration received as a result of the Transfer of a land or building or both, -is less than the value adopted by “stamp valuation authority “ of State Government -for the purpose of payment of stamp duty -then such value adopted shall be deemed to be full value of the consideration received. Prepared by: CA. V.K. SAINI (9999772095)

  32. Special provision for full value of Consideration Sec. 50 C Assessee may claim before any Assessing Officer that such value adopted exceeds the fair market value of the property on the date of transfer. The Assessing Officer may refer the valuation of property to valuation officer and if such value is less than value adopted by the A.O. then such value shall be taken for the computation of Capital Gain Prepared by: CA. V.K. SAINI (9999772095)

  33. Prepared by: CA. V.K. SAINI (9999772095)

  34. Section 54 Exemption of capital gain on transfer of residential house property Conditions for avail exemption- 1. Owner must be an individual or HUF 2. There should be transfer of a House Property which is Long Term Capital Asset 3. Income from such house should be taxable in the head “Income from house property” Prepared by: CA. V.K. SAINI (9999772095)

  35. Section 54 4. Assessee has purchase another residential House Property one year before or two years after the date on which transfer took place 5. Or has within three years after that date constructed Prepared by: CA. V.K. SAINI (9999772095)

  36. What will be the amount of exemption? Exemption will be provide to the maximum amount invested into another house property Prepared by: CA. V.K. SAINI (9999772095)

  37. If assessee fails to invest the amount If assessee fails to invest the amount of capital gain into another residential house property before the due date of filling the return of income Then he may deposit the amount into Capital Gain account scheme 1988 The amount deposited shall be deemed to be cost of another house property Prepared by: CA. V.K. SAINI (9999772095)

  38. Withdrawal of exemption Exemption granted on the capital gain shall be withdrawn if- the new house property purchased/constructed is transferred within three years of purchase/construction Amount deposited in the capital gain scheme 1988 is not utilized for purchase/construction in the stipulated time period Prepared by: CA. V.K. SAINI (9999772095)

  39. Can amount deposited be used for any purpose No, the amount deposited can’t be used other than for purchase/construction of house property If amount is used for any other purpose then such amount shall be treated Short Term Capital Gain for that previous year and liable to tax Prepared by: CA. V.K. SAINI (9999772095)

  40. Section 54F Exemption of capital gain on transfer of capital asset other than house property If an assess transfer a Long Term Capital asset other than house property and purchase house property then he can avail exemption of this section Prepared by: CA. V.K. SAINI (9999772095)

  41. Conditions for availing exemption Assessee must be an individual or HUF Transferred capital asset is not a residential house property Capital asset is a Long Term Capital Asset On the date of transfer assessee has not more than one house Assessee has purchase another House Property one year before or two years after the date on which transfer took place Prepared by: CA. V.K. SAINI (9999772095)

  42. Amount of exemption Exemption from Capital Gain shall be avail in the proportion of amount of sale consideration invested in the new House Property In other words amount of exemption shall be Capital gain* amount invested sale consideration Prepared by: CA. V.K. SAINI (9999772095)

  43. Other conditions are same All other conditions of section 54 are applied to this section as they applied in section 54 Prepared by: CA. V.K. SAINI (9999772095)

  44. Some cases related to House Property • Incase of sale of land and building, capital gain is bifurcated between long term capital gain and short term capital gain • Construction of new floor in the same building shall be entitled to exemption under section 54 • Release of share by one co-owner in the favor of another co-owner shall be deemed purchase by another co-owner • Amount of capital gain partly invested in purchase of new house property and partly amount used in construction of new floor is allowed Prepared by: CA. V.K. SAINI (9999772095)

  45. Wealth Tax Act,1957 Prepared by: CA. V.K. SAINI (9999772095)

  46. Charge of Wealth Tax (Sec.3) Wealth Tax shall be charged on the net wealth on the corresponding valuation date of every Individual, HUF and company at the rate of 1% of the amount by which net wealth exceeds Rs.15 lakhs Prepared by: CA. V.K. SAINI (9999772095)

  47. What is Asset? Section 2(ea)(i) Asset means- Any building or land appurtenant thereto, whether used for - residential purpose or - commercial purpose (if it is vacant or let out) or - for the purpose of maintaining of guest house Prepared by: CA. V.K. SAINI (9999772095)

  48. Not to be included A House meant exclusive for residential purpose A house which is allotted by a company to an employee or officer or whole time director, having a gross salary of less than Rs.5 lakhs Any house for residential or commercial purpose which form part of stock in trade Prepared by: CA. V.K. SAINI (9999772095)

  49. Not to be included Any house used for the purpose of any business or profession carried on by him Any residential property that has been let out for a minimum period of 300 days in the previous years Any property in the nature of commercial establishment or complexes Prepared by: CA. V.K. SAINI (9999772095)

  50. Taxability of farm house Farm house shall be included in Asset if it is situated within 25 km from the local limit of any municipality or a cantonment board Prepared by: CA. V.K. SAINI (9999772095)

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