First, let us understand what is meant by property for the captioned matter. The income tax statute defines property to be building or any land attached to such a building. The reader shall understand that any portion of such building or land attached herewith used for business and profession shall not be considered for purposes of income from house property.
The annual value earned on such property, of which the person is the owner or deemed owner, shall be taxed under the head INCOME FROM HOUSE PROPERTY.
Gross Annual Value (“GAV”) of the property is a reasonable value that the property might fetch if it was let out. In simple words, it is the notional rent that the owner might fetch in case the property had been let out. The taxpayer will have to compare the actual rent received / receivable viz a viz the fair value to arrive at GAV.
There are certain deductions available under section 24 of Income-tax Act, namely, standard deduction of 30%, the deduction for municipal taxes and deduction for interest paid on home loan taken for said property, if any.
After reducing the available deductions from GAV, the taxpayer will arrive at the income earned under INCOME FROM HOUSE PROPERTY.
Following aspects to be kept in mind while computing income from house property:
Whether the property is self-occupied?
Whether the property has been let out?
If let out, then whether let out for the whole of part of the year?
Is the property partly self-occupied and partly let out?
Considering the ambiguity of calculating the rental income in such the above cases, the assessee may be careful and consider all provisions to avoid any incorrect income/disclosures. You may consult a professional for proper advice and guidance.