Mr. Aditya owns a residential house property whose Municipal Value, Fair Rent and Standard Rent are - 1,60,000,1,70,000 and - 1,90,000,…

CA Intermediate · Taxation · MTP · May 2026
Mr. Aditya owns a residential house property whose Municipal Value, Fair Rent and Standard Rent are - 1,60,000,1,70,000 and - 1,90,000, respectively. The house has two independent units. Unit I (25% of floor area) is utilized for the purpose of his profession and Unit II (75% of floor area) is let out for residential purposes at a monthly rent of 8,500. Municipal taxes @8% of the Municipal Value were paid during the year by Mr. Aditya. He made the following payments in respect of the house property during the previous year 2025-26: Particulars ₹ Light and Water charges 2,000 Repairs 1,45,000 Interest on loan taken for the repair of property 36,000 Mr. Aditya has taken a loan of 5,00,000 in July, 2020 for the construction of the above house property. Construction was completed on 30th June, 2023. He paid interest on loan @12% per annum. No repayment of loan has been made so far. Income of Mr. Aditya from his profession amounted to 8,00,000 during the year (without debiting house rent and other incidental expenditure including admissible depreciation of 8,000 on the portion of house used for profession). Determine the Gross total income of Mr. Aditya for the A.Y. 2026-27 ignoring the provisions of section 115BAC.

Suggested Answer and Working Notes:

(a) Computation of Gross total income of Mr. Aditya for the A.Y. 2026-27 Particulars Particulars ₹ I Income from House Property Unit-II (75% of floor area) Gross Annual Value (a) Actual rent received (₹ 8,500 x 12) 1,02,000 (b) Expected rent [Higher of municipal value (i.e.1,60,000) and fair rent (i.e.1,70,000) but restricted to standard rent (i.e.1,90,000) ₹ 1,70,000 x 75%] 1,27,500 Higher of (a) or (b) is GAV 1,27,500 Less: Municipal taxes (₹ 1,60,000 x 8% x 75%) 9,600 NAV 1,17,900 Less: Deductions u/s 24 (a) 30% of NAV 35,370 (b) Interest on loan (See note) 96,750 1,32,120 (14,220) II Profits & Gains of business & profession Income from Profession 8,00,000 Less: Light & Water Charges (25% of 2,000) 500 Municipal taxes (25% of 12,800) 3,200 Repairs (25% of 1,45,000) 36,250 Interest on loan taken for repair (25% of 36,000) 9,000 Interest on loan taken for construction of house property (25% of 60,000) 15,000 Depreciation 8,000 71,950 7,28,050 Gross Total Income 7,13,830 Note: Computation of Interest on loan Particulars ₹ Interest for the year (₹ 5,00,000 x 12%) 60,000 Pre-construction period Interest - 12% of 5,00,000 for 33 months = 1,65,000 To be allowed in 5 equal instalments from the year of completion (₹ 1,65,000 x 1/5) 33,000 Interest on loan taken for repair (no restriction for let out property) 36,000 Total Interest deduction u/s 24(b) 1,29,000 Total Interest deduction u/s 24 (b) for let out property (75% x 1,29,000) 96,750

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

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