Please can someone help me with this question from hose property income

Ganesh · 11 Jan 2025

Certainly, let's break down the house property question you've presented. Understanding the Scenario Prem owns a house in Haridwar. During the previous year (2024-25), 2/3rd of the house was self-occupied, and 1/3rd was let out for residential purposes at a rent of ₹8,000 per month. The municipal value of the property is ₹3,00,000 per annum, the fair rent is ₹2,70,000 per annum, and the standard rent is ₹3,30,000 per annum. Prem paid municipal taxes at 10% of the municipal value during the year. He had taken a loan of ₹25,00,000 in 2019 for acquiring the property, and the interest paid on the loan during the previous year was ₹1,20,000. The Question The question asks us to compute Prem's income from house property for the assessment year 2025-26 under two scenarios: * Optional Tax Regime: Assuming Prem has exercised the option of shifting out of the default tax regime provided under section 115BAC(1A). * Default Tax Regime: Calculating Income from House Property Let's calculate Prem's income from house property under both regimes: 1. Optional Tax Regime Under the optional tax regime, the income from house property is calculated as follows: Gross Rent: * Rent received from the let-out portion: ₹8,000 per month * 12 months = ₹96,000 Less: Municipal Taxes: * Municipal taxes paid: 10% of ₹3,00,000 = ₹30,000 Net Rent: * ₹96,000 - ₹30,000 = ₹66,000 Interest on Loan: * ₹1,20,000 Standard Rent: * ₹3,30,000 Loss from House Property: * ₹66,000 - ₹1,20,000 - ₹3,30,000 = -₹2,84,000 Loss from Self-Occupied Portion: * Since Prem has opted for the optional tax regime, he cannot claim a loss from the self-occupied portion. Total Income from House Property: * -₹2,84,000 (Loss) 2. Default Tax Regime Under the default tax regime, the income from house property is calculated as follows: Gross Rent: * Rent received from the let-out portion: ₹96,000 Less: Municipal Taxes: * ₹30,000 Net Rent: * ₹66,000 Less: Interest on Loan: * ₹1,20,000 Net Annual Value (NAV): * Higher of the following: * Net Rent: ₹66,000 * Fair Rent: ₹2,70,000 * Municipal Value: ₹3,00,000 * NAV = ₹3,00,000 Less: 30% of NAV for standard deduction: * ₹3,00,000 * 30% = ₹90,000 Income from House Property: * ₹3,00,000 - ₹90,000 = ₹2,10,000 Loss from Self-Occupied Portion: * Since Prem has opted for the default tax regime, he can claim a loss from the self-occupied portion. * Loss from self-occupied portion = 1/3rd of NAV = ₹3,00,000 * 1/3 = ₹1,00,000 Total Income from House Property: * ₹2,10,000 - ₹1,00,000 = ₹1,10,000 Therefore, Prem's income from house property for the assessment year 2025-26 would be: * -₹2,84,000 under the Optional Tax Regime. * ₹1,10,000 under the Default Tax Regime. Please note: This calculation assumes that Prem meets all the eligibility criteria for claiming the losses and deductions. Let me know if you have any further questions or need clarification on any aspect of the calculation!