[Income From House Property, Basis of Charge, Taxability of House Property Income, Income Tax Act, 1961]
Explain the Basis of Charge of Income under the head Income from House Property.
Basis of charge of tax on income generated under the “income from house property”
Under section 22
of the income tax act, The annual
value of a property, consisting of any buildings or lands appurtenant thereto, of which the assessee is the owner, is chargeable
to tax under the head ‘Income from house property’. However, if a house
property, or any portion thereof, is occupied by the assessee, for any business
or profession, carried on by him, the profits of which are chargeable to
income-tax, the value of such property is not chargeable to tax under this
head.
Thus, three conditions are to be satisfied for property income to be taxable under this head
1) The property should consist of buildings or lands appurtenant thereto:
The scope of this head of income is limited to
the income from building or land appurtenant thereto. Land which is not
appurtenant to any buildings does not come within the scope of this section.
2) The assessee should be the owner of the property:
It
is only the owner of the house property who can be tax under this head of
income. The tax under this section is in respect of the legal or beneficial
owner and not the occupation or possession of house property.
Again, the assessee
who is deemed to be the owner of the
house property is also is also chargeable to tax under this
head. Under Section 27 of
the Income Tax Act, the assessee in the following cases is deemed to be the
owner of the house property, though not owner of the house
property:-
(a) If
an individual transfers a house property to his or her spouse (except in
connection with an agreement to live apart) or to a minor child (except a
married daughter) without adequate consideration, he is deemed as the owner of
the property for tax purposes.
(b) The
holder of an impartible estate is deemed to be the owner of all the properties
comprised in the estate.
(c) A
member of a co-operative society, company or association of persons, to whom
property or a part thereof is allotted or leased under a house building scheme
of the society, company or association, is deemed to be the owner of such
property.
(d) A
person who has acquired a right in a building by way of a lease for a term of
not less than 12 years, is the deemed owner of the property. This provision
does not cover any right by way of a lease renewable from month to month or for
a period not exceeding one year.
3) The Property must not be used own business or profession
The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to income-tax. But where the profits of such business or profession are not chargeable to tax, the annual value of the house property is chargeable under this head.