What is house property?
House property as per the Income-tax Act, 1961 means any building (or land adjacent to such building) owned by the assessee himself. House property includes flats, shops, office space, factory sheds, commercial buildings, agricultural land and farmhouses etc.
When is house property income taxable?
House property income (rental income) is taxable. Even if house property is not registered in the name of taxpayer, rental income shall be treated as his income because he is enjoying the ownership right viz. possession of such house property.
What are the categories of house properties?
There are 3 categories of the house property:
- Self-occupied house property
- Let out property
- Deemed to be let out property
- Self-occupied house property: This means property that is used by the assessee or his family for their own residence. As per the Income-tax Act, if the assessee owns more than one occupied property, only two of them can be claimed as self-occupied property. The taxpayer can choose any beneficial property as his self occupied property. As the owner himself is residing in it, a question about rent receivable does not arise. Hence there is no income from self-occupied house property, however, interest paid on housing loan can be claimed as a deduction.
- Let out property: This means the property which has been let out by an assessee for monetary consideration i.e. rent. The rent received shall be treated as ‘Income from house property’.
- Deemed to be let out property: All vacant properties are treated as ‘Deemed to be let out’. Also if the taxpayer is having more than one self-occupied house property then any two properties can be claimed as self-occupied house property and all other self-occupied house properties will be treated as “Deemed to be let out”. The fair rent receivable from such property shall be treated as ‘Income from house property’. Fair rent can be computed on the basis of rental income for similar house property located in the same area.
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