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Computation of income from house property

8.1 Income from a house property, which is not occupied for the purpose of any business or profession by its owner, will be taxed under the head "Income from house property".

8.2 With a view to simplifying the determination of the taxable income and eliminating any scope for litigation, the Code will have a new scheme for computation of income from house property. The salient features of the new scheme will be as follows :—

(a) Income from house property shall be the gross rent less specified deductions.

(b) Gross rent will be the higher of (i) the amount of contractual rent for the financial year ; and (ii) the presumptive rent calculated at six per cent per annum of the ratable value fixed by the local authority. However, in a case where no ratable value has been fixed, six per cent shall be calculated with reference to the cost of construction or acquisition of the property. If the property is acquired during the financial year, the presumptive rent shall be calculated for the proportionate period of that financial year.

(c) The advance rent will be taxed only in the financial year to which it relates.

(d) The gross rent of one self-occupied property will be deemed to be nil, as at present. In addition, the gross rent of any one palace in the occupation of a ruler will also be deemed to be nil, as at present.

(e) The following deductions will be admissible against the gross rent :—

(i) Amount of taxes levied by a local authority and tax on services, if actually paid.

(ii) Twenty per cent. of the gross rent towards repairs and maintenance.

(iii) Amount of any interest payable on capital borrowed for the purposes of acquiring, constructing, repairing, renewing or reconstructing the property.

(f) In the case of a self-occupied property where the gross rent is deemed to be nil, no deduction for taxes or interest will be allowed.

(g) The income from property shall include income from the letting of any buildings along with any machinery, plant, furniture or any other facility if the letting of such building is inseparable from the letting of the machinery, plant, furniture or facility.