Mr. Kamal, a resident but not ordinarily resident in India during the Assessment Year 2024-25. He owns two houses, one in Dubai and the other in…
CA Intermediate · Taxation · MTP · September 2024
Mr. Kamal, a resident but not ordinarily resident in India during the Assessment Year 2024-25. He owns two houses, one in Dubai and the other in Mumbai. The house in Dubai is let out there at a rent of DHS 20,000 p.m. (1DHS=INR 22). The entire rent is received in India. He paid property tax of DHS 2,500 and Sewerage Tax DHS 1,500 there, for the Financial Year 2023-24. The house in Mumbai is self-occupied. He had taken a loan of 10,00,000 to construct the house on 1st June, 2020 @12%. The construction was completed on 31st May, 2022 and he occupied the house on 1st June, 2022. The entire loan is outstanding as on 31st March, 2024. Property tax paid in respect of the second house is 2,400 for the Financial Year 2023-24. Compute the income chargeable under the head "Income from House property" in the hands of Mr. Kamal for the Assessment Year 2024-25 under regular provisions of the Act.
Suggested Answer and Working Notes:
Computation of income from house property of Mr. Kamal for A.Y. 2024-25 Particulars ₹ 1. Income from let-out property in Dubai [See Note 1 below] Gross Annual Value (DHS 20,000 p.m. x 12 months x 22) 52,80,000 Less: Municipal taxes paid during the year [DHS 4,000 (DHS 2,500 + DHS 1,500) x 22] 3 88,000 Net Annual Value (NAV) 51,92,000 Less: Deductions under section 24 (a) 30% of NAV 15,57,600 (b) Interest on housing loan - 36,34,400 2. Income from self-occupied property in Mumbai 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] 1,64,000 (1,64,000) Income from house property [36,34,400 - 1,64,000] 34,70,400 Notes: (1) Since Mr. Kamal 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. Accordingly, rent received from house property in Dubai would be taxable in India since such income is received by him in India. Income from property in Mumbai would accrue or arise in India and consequently, interest deduction in respect of such property would be allowable while computing Mr. Kamal's income from house property because of self-occupied property. (2) Interest on housing loan for construction of self-occupied property allowable as deduction under section 24 Interest for the current year (₹ 10,00,000 x 12%) = 1,20,000 Pre-construction interest For the period 01.06.2020 to 31.03.2022 (₹ 10,00,000 x 12% x 22/12) = 2,20,000 2,20,000 allowed in 5 equal installments (₹ 2,20,000/5) = 44,000 Total Interest = 1,20,000 +44,000 = 1,64,000 2 In the absence of information related to municipal value, fair rent and standard rent, the rent receivable has been taken as the GAV 3 Both property tax and sewerage tax qualify for deduction from gross annual value
Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax
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