The Income Tax Act 1961 governs the taxation of various types of income, including income from house property. To assist its members in complying with the provisions and procedures relating to income from house property, the ICAI Direct Taxes Committee has issued a publication titled “Handbook on FAQ’s on House Property under Income-tax Act, 1961.” This handbook provides comprehensive guidance on frequently asked questions about income charged under the heading “Income from House Property.” In this article, we will go over the handbook’s main points and answer some frequently asked questions about it.
Scope of Income charged under “Income from House Property”
According to Section 22 of the Income-tax Act 1961, rental income from property consisting of any buildings or lands appurtenant thereto, of which the assessee is the owner, is chargeable to income tax under the heading “Income from house property.” However, income from portions of the property occupied for the purposes of the assessee’s business or profession, the profits of which are chargeable to income tax, is not taxable under this head. It is important to note that income from house property is the only head under the Income-tax Act 1961 that is charged on a notional basis rather than real income.
Key Provisions relating to computation of Income from House Property
Sections 23 to 27 of the Act govern the provisions relating to the computation of income under the heading “Income from House Property.” These sections cover topics such as determining annual value, standard deduction, interest on borrowed capital, and tax treatment of unrealized rent.
Understanding Self-Occupied Property
A self-occupied property is one that is occupied by the taxpayer for his personal use (rather than for commercial purposes). Previously, if an assessee occupied more than one property, only one could be considered self-occupied, and the rest had to be considered let-out or deemed let-out. However, beginning with Assessment Year 2020-21, a person can claim two properties as self-occupied house properties, subject to certain conditions.
The Income Tax Act 1961 is a complicated law that governs the taxation of income from various sources. Income from house property is a significant component of an individual’s tax liability, and it is critical to understand the key provisions relating to this income source. The “Handbook on FAQ’s on House Property under Income-tax Act, 1961,” published by the ICAI’s Direct Taxes Committee, is a valuable resource for taxpayers and professionals seeking to comply with the provisions and procedures in a more objective manner. Taxpayers can ensure timely and effective compliance with the Income-tax Act, 1961 by understanding the key provisions and definitions related to income from house property.
ICAI’s Handbook on FAQ’s on Income from House Property under Income-tax Act, 1961 (February 2023)