Mr. Kushal is a resident but not ordinarily resident in India during the Assessment Year 2024-25. He furnishes the following information regarding…

CA Intermediate · Taxation · MTP · May 2024
Mr. Kushal is a resident but not ordinarily resident in India during the Assessment Year 2024-25. He furnishes the following information regarding his income/expenditure pertaining to his house properties for the previous year 2023-24: He owns two houses, one in New York and the other in Ahmedabad.The house in New York is let out there at a rent of $ 5,000 p.m. The entire rent is received in India. He paid Property tax of $ 1,250 and Sewerage Tax $ 750 there. ($ 1 = INR 81)The house in Ahmedabad is self-occupied. He had taken a loan of 30,00,000 to construct the house on 1st September, 2018 @10%. The construction was completed on 31st May, 2020 and he occupied the house on 1st June, 2020. The entire loan is outstanding as on 31st March, 2024. Property tax paid in respect of the second house is 2,800. Compute the income chargeable under the head "Income from House property" in the hands of Mr. Kushal for the Assessment Year 2024-25 if he has opted out of the default tax regime under section 115BAC.

Suggested Answer and Working Notes:

Computation of income from house property of Mr. Kushal for A.Y. 2024-25 Particulars Particulars ₹ 1. Income from let-out property in New York [See Note 1 below] Gross Annual Value ($ 5,000 p.m. x 12 months x 81) 48,60,000 Less: Municipal taxes paid during the year [$ 2,000 ($ 1,250 + $ 750) x 81] 1,62,000 Net Annual Value (NAV) 46,98,000 Less: Deductions under section 24 (a) 30% of NAV 14,09,400 (b) Interest on housing loan 14,09,400 32,88,600 2. Income from self-occupied property in Ahmedabad Annual Value [Nil, since the property is self-occupied] NIL [No deduction is allowable in respect of municipal taxes paid in respect of self-occupied property] Less: Deduction in respect of interest on housing loan [See Note 2 below] 2,00,000 (2,00,000) Income from house property [32,88,600 - 2,00,000] 30,88,600 Notes: (1) Since Mr. Kushal is a resident but not ordinarily resident in India for A.Y. 2024-25, income which is, inter alia , received in India shall be taxable in India, even if such income has accrued or arisen outside India by virtue of the provisions of section 5(1). Accordingly, rent received from house property in New York would be taxable in India since such income is received by him in India. (2) Interest on housing loan for construction of self-occupied property allowable as deduction under section 24 Interest for the current year (₹ 30,00,000 x 10%) ₹ 3,00,000 Pre-construction interest For the period 01.09.2018 to 31.03.2020 (₹ 30,00,000 x 10% x 19/12) = 4,75,000 4,75,000 allowed in 5 equal installments (₹ 4,75,000/5) ₹ 95,000 3,95,000 In case of self-occupied property, interest deduction to be restricted to 2,00,000

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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