How to calculate ‘Income from House Property’ for Income Tax Purposes

Income from House Property covers the rent earned from the House property which is chargeable to tax. Sometimes, the owner may have to pay tax on ‘deemed rent’ in case the property is not let out or vacant. The income from house property would be taxable if it satisfies the following three essential conditions:

The assessee is the owner of that property
The property must consist of house, buildings and/or land.
The property may be used for any purpose except used by the owner for the purpose of running his business or profession.

Steps involved in the Computation of Income from House Property

(1)Computation of Gross Annual Value
(2)Computation of Net annual Value
(3)Computation of Deduction available U/s 24

Basis of computing of Income from House Property:

Income from House property is computed as under :

Gross Annual value **********
Less : Munispal Taxes
(It is deductible when it is born by the owner and actually paid by him during the year. ) (*********)
Net Annual value **********
Less : Deduction U/s 24
(i)Standard Deduction @ 30% ( Section 24(a) (*********)
(ii)Interest on borrowed Capital (Section 24(b) (*********)
Income from House Property **********
Gross Annual Value (GAV)
Why ‘GrossAnnual Value’ is calculated to compute income from house property?
The answer to this is that tax on house property is not on actual rent but on inherent capacity of building to generate income. In other words, how much rent the property can fetch. Through Gross Annual Value, taxable income from house property is calculated.
Gross Annual Value

Gross Annual Value is determined as under:

Step I Find out reasonable expected rent of the property
Step II Find out Actual rent received or receivable ( Note 1 )
Step III Higher of the I or II above
Step IV Find out Loss due to vacancy
Step V Step III minus step IV is the Gross Annual Value

Note 1: Unrealized rent if any has to be deducted from rent received or receivable
If certain conditions are fulfilled.

Net Annual Value

Gross Annual Value minus Municipal taxes like property tax, paid by the owner.

Deductions from House Property

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Formation of Trust : How to form a Trust in India?

A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers a property upon the second party for the benefit of the third party, the beneficiary. A Trust is the obligation or responsibility placed on one in whom confidence or authority is place; it is a confidence reposed in a person by conveying to him the legal title to property which he is to hold for the benefit of others. Therefore, the “Trustee” responsibility includes protection of rightful ownership in the Trust property, the preservation of the Trust property and channelising the income from the Trust property in accordance with the intentions of the creator of the Trust. In this article, we look at the procedure for forming a Charitable Trust in India.

The following elements are essential for the formation of a Charitable Trust:

1. An Author or Settlor of the Trust
2. The Trustee
3. The Beneficiary
4. The Trust Property or the Subject Matter of the Trust
5. The objects of the Trust

Reasons for forming a Charitable Trust

Charitable Trusts are formed in India for one or more of the following reasons:

1. Discharge of the Charitable an/or religious sentiments of the Author, in a way that ensures public benefit.
2. For claiming exemption from Income Tax, as the case may be, in respect of incomes applied to charitable or religious purposes.
3. For the welfare of the members of the family and/or other relatives, who are dependent on the settlor of the Trust
4. For the proper management and preservation of property.
5. For regulating the affairs of a provident fund, superannuation fund or gratuity fund or any other fund constituted by a person for the welfare of its employees.