The basis of Taxation in respect of House Property
The owner of house property, legal or beneficial is liable to pay tax. In this regard, income must come from the house property and its adjacent premises which are not used for the purpose of business or profession or for personal purpose. From ITO 1984, we can learn that:
- The owner must pay tax on any income gained from house property,
- In case of multiple owners, each has to pay for the income from the specified portion of the property;
If any advance from a tenant is received which is not adjustable against the rent payable, it shall be deemed to be the income of the income year it is received and be classified under the head “income from house property”. For assessment purpose, the assessee has the option to allocate an equal portion to the year of receipt and following four years. Moreover, in a subsequent income year, any refunded amount by the assessor shall be deducted in computing the income of that year.
Determination of annual value of house property:
The annual value of a house property refers to the gross rental income from a house property in a particular income year. For assessment purpose, annual value is the higher of actual rental value and the municipal value (specified by the municipal authority) of the house property.