1. Facts of the Case
Mr. A, an individual assessee, has earned a sum of ₹3,00,000 as the Annual Value from a house property for the relevant financial year.
- The property is let-out or deemed to be let-out (since annual value is being computed).
- The income is chargeable under the head “Income from House Property” as per Section 22 of the Income Tax Act, 1961.
- Mr. A seeks to know what deductions are available from this income while computing taxable income under this head.
2. Issues in the Case
- What are the standard and specific deductions permitted under the Income Tax Act, 1961, from income earned under the head “Income from House Property”?
- Is the deduction for municipal taxes, interest on housing loan, or repairs allowed in this case?
- What will be the net taxable income from the house property for Mr. A after allowable deductions?
3. Legal Principles and Relevant Provisions
A. Chargeability – Section 22
As per Section 22 of the Income Tax Act, the Annual Value of a building or land appurtenant thereto, of which the assessee is the owner, is chargeable to tax under the head “Income from House Property”.
B. Computation of Income – Section 23
- Annual Value is determined as the higher of:
- Municipal value
- Fair rent
- Rent received or receivable
- Subject to standard adjustments
In this case, the Annual Value is given as ₹3,00,000.
C. Deductions under Section 24
The two major deductions allowed from the Gross Annual Value (GAV) are:
- Section 24(a) – Standard Deduction @ 30% of GAV
- Irrespective of actual expenditure or repairs
- ₹3,00,000 × 30% = ₹90,000
- Section 24(b) – Interest on Borrowed Capital
- Deduction is available if the property is purchased, constructed, repaired, renewed, or reconstructed using borrowed capital.
- Limit:
- ₹2,00,000 per annum for self-occupied property (conditions apply)
- Full amount of interest is allowed for let-out/deemed let-out properties with no cap.
⚠️ Note: In this case, no information is provided about loan interest. So, unless specified, only the standard deduction of 30% is allowed.
D. Judicial Precedents (Supporting the Interpretation)
- Shambhu Investment Pvt. Ltd. v. CIT (2003) 263 ITR 143 (SC)
The Supreme Court clarified that rental income from property is taxable under “Income from House Property” and not as business income, even if services are rendered. - Balbir Singh v. CIT (1992) 198 ITR 1 (P&H HC)
Reaffirmed that standard deduction under Section 24(a) is statutory and does not require proof of actual expenditure.
4. Possible Judgement / Computation
Since Mr. A has earned ₹3,00,000 as Annual Value and assuming there is no claim for interest on borrowed capital, the computation is as follows:
| Particulars | Amount (₹) |
|---|---|
| Gross Annual Value (GAV) | 3,00,000 |
| Less: Standard Deduction @ 30% (Sec 24(a)) | 90,000 |
| Less: Interest on Borrowed Capital (Sec 24b) | NIL |
| Net Taxable Income from House Property | ₹2,10,000 |
Final Advice
Mr. A is eligible for:
- A statutory deduction of ₹90,000 under Section 24(a) (Standard Deduction).
- If he has taken a housing loan, he may also claim a deduction under Section 24(b) for interest on borrowed capital, subject to limits.
Hence, the net taxable income under the head “Income from House Property” is ₹2,10,000 (subject to change if interest on loan is claimed).
