Mr. Verma is a manager in ABC (P) Limited. He owns two house properties during the previous year 2024-25. In addition to these properties, he…

CA Intermediate · Taxation · MTP · September 2025
Mr. Verma is a manager in ABC (P) Limited. He owns two house properties during the previous year 2024-25. In addition to these properties, he possesses two cars, one of which he uses exclusively for personal purposes, while the other is let out to a friend on rent for 20,000 per month. The following details (annual) are furnished in respect of two-house properties for the previous year 2024-25. House 1 House 2 Fair rent 1,25,000 3,95,000 Actual rent 1,20,000 2,85,000 Municipal Valuation 1,24,000 3,90,000 Municipal taxes paid 18,000 70,000 Repairs 15,000 35,000 Insurance premium on building 12,000 17,000 Ground rent 7,000 9,000 Additional information: Mr. Verma has paid - 57,000 as interest on a loan that was secured by mortgaging House 1 in order to fund the construction of House 2. Additionally, in the previous year 2024-25, Mr. Verma acquired a rural agricultural land for 2,50,000, whereas the stamp duty value of the property was - 3,00,000. Determine the taxable income of Mr. Verma for the A.Y. 2025-26 assuming he does not opt out of the default tax regime. (5 Marks)

Suggested Answer and Working Notes:

Computation of taxable income of Mr. Verma for A.Y. 2025-26 under default tax regime Particulars ₹ ₹ ₹ Income from house property House 1 House 2 Municipal value (A) 1,24,000 3,90,000 Fair rent (B) 1,25,000 3,95,000 Higher of (A) and (B) = (C) 1,25,000 3,95,000 Actual rent received 1,20,000 2,85,000 Gross Annual Value [Higher of (C) and Actual rent] 1,25,000 3,95,000 Less: Municipal tax paid 18,000 70,000 Net Annual Value (NAV) 1,07,000 3,25,000 Less: Deductions u/s 24 30% of NAV 32,100 97,500 Interest on loan Nil 57,000 74,900 1,70,500 Income from house property [₹ 74,900 +1,70,500] 2,45,400 Income from Other Sources Rental income from Car [₹ 20,000 x 12] 2,40,000 Purchase of rural agricultural land for inadequate consideration a consideration less than stamp duty value [Not taxable under section 56(2)(x), since rural agricultural land is not a capital asset] Nil 2,40,000 Taxable Income 4,85,400 Note - Expenditure on repairs, insurance premium on building and ground rent are not allowable under the head “Income from house property.”

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

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