Income under the House Properties

Basis of Charge [Section 22]:

Income from house property shall be taxable under this head if following conditions are satisfied:

a) The house property should consist of any building or land appurtenant thereto;

b) The taxpayer should be the owner of the property;

c) The house property should not be used for the purpose of business or profession carried on by the taxpayer.

Computation of income from house property:

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Income from a house property shall be determined in the following manner:

Particulars	Amount
Gross Annual Value	-
Less: Municipal Taxes	-
Net Annual Value	****
Less: Standard deduction at 30% [Section 24(a)]	-
Less: Interest on borrowed capital [Section 24(b)]	-
Income from house property	****

Gross Annual value [Sec. 23(1)]

The Gross Annual Value of the house property shall be higher of following:

a) Expected rent, i.e., the sum for which the property might reasonably be expected to be let out from year to year. Expected rent shall be higher of municipal valuation or fair rent of the property, subject to maximum of standard rent;

b) Rent actually received or receivable after excluding unrealized rent but before deducting loss due to vacancy

Out of sum computed above, any loss incurred due to vacancy in the house property shall be deducted and the remaining sum so computed shall be deemed to the gross annual value.

Deductions:

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Description	Nature of Deductions
Municipal Taxes	Municipal taxes including service-taxes levied by any local authority in respect of house property is allowed as deduction, if: a) Taxes are borne by the owner; and b) Taxes are actually paid by him during the year.
Standard Deduction[Section 24(a)]	30% of net annual value of the house property is allowed as deduction if property is let-out during the previous year.
Interest on Borrowed Capital * [Section 24(b)]	a) In respect of let-out property, actual interest incurred on capital borrowed for the purpose of acquisition, construction, repairing, re-construction shall be allowed as deduction
	b) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of acquisition or construction of house property shall be allowed as deduction up to Rs. 2 lakhs. The deduction shall be allowed if capital is borrowed on or after 01-04-1999 and acquisition or construction of house property is completed within 5 years.
	c) In respect of self-occupied residential house property, interest incurred on capital borrowed for the purpose of reconstruction, repairs or renewals of a house property shall be allowed as deduction up to Rs. 30,000.

Note: With effect from Assessment Year 2020-21, deduction for interest paid or payable on borrowed capital shall be allowed in respect of two self-occupied house properties. However, the aggregate amount of deduction under this provision shall remain same i.e., Rs. 30,000 or Rs. 2,00,000, as the case may be.

* Any interest pertaining to the period prior to the year of acquisition/ construction of the house property shall be allowed as deduction in five equal installments, beginning with the year in which the property was acquired/ constructed.

* Deduction for interest on borrowed capital shall be limited to Rs. 30,000 in following circumstances:

a) If capital is borrowed before 01-04-1999 for the purpose of purchase or construction of a house property;

b) If capital is borrowed on or after 01-04-1999 for the purpose of re-construction, repairs or renewals of a house property;

c) If capital is borrowed on or after 01-04-1999 but construction of house property is not completed within five years from end of the previous year in which capital was borrowed.

Deduction for interest on housing loan [Section 80EE]

Deduction of up to Rs 50,000 shall be allowed to an Individual for interest payable on loan taken for the purpose of acquisition of a house property subject to following conditions:

 a)  Loan has been sanctioned by Financial institution during the financial year 2016-17;

 b)  The amount of loan sanctioned does not exceed Rs 35,00,000;

 c)  The value of residential property does not exceed Rs 50,00,000;

 d)  The assessee does not own any residential house property on the date of sanction of loan;

 e)  Where deduction has been allowed under this section, no deduction shall be allowed in respect of such interest under any other provision.

Computation of Income from House Property
S. No.	Property Type	Gross Annual Value of the property	Deduction for municipal taxes	Net Annual Value of the property	Standard Deduction	Interest on borrowed capital
1.	Two self-occupied house property	Nil	Nil	Nil	Nil	Deduction for interest on borrowed capital is allowed up to Rs. 30,000 or Rs. 2,00,000, as the case may be.
2.	House property could not be occupied by the owner due to employment or business carried on at any other place	Nil	Nil	Nil	Nil	Deduction for interest on borrowed capital is allowed up to Rs. 30,000 or Rs. 2,00,000, as the case may be.
3.	Let out property	To be computed as per provisions of Section 23(1)	Allowed on actual payment basis	Gross annual value less Municipal taxes	30% of Net Annual Value	Entire amount of interest paid or payable on borrowed capital shall be allowed as deduction. Pre-construction interest shall be allowed as deduction in 5 annual equal installments (Subject to certain conditions).
4.	More than two-self occupied properties	Only two properties selected by the taxpayer will be considered as self-occupied house properties and all other properties shall be deemed to be let-out for the purpose of computation of income under the head house property.
5.	A self-occupied property let-out for the part of the year	The house will be taken as let-out property and no concession shall be available for the duration during which the property was self-occupied.
6.	One part of the property is let-out and other part is used for self-occupied purposes	Each part of the property shall be considered as separate property and income will be computed accordingly

Composite Rent

If letting out of building along with movable assets i.e., machinery, plan, furniture or fixtures, etc. forms part of a single transaction and are inseparable, the composite rent shall be taxable under the head “Profits and gains from business or profession” or “Income from other sources”, as the case may be. On the other hand, if the letting out of building is separable from letting of other assets, then income from letting out of building shall be taxable under the head “Income from house property” and income from letting out of other assets shall be taxable under the head “Profits and gains from business or profession” or “Income from other sources”, as the case may be.

Treatment of unrealized rent and arrears of rent [Explanation to section 23(1)]

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Deduction for unrealized rent:

Unrealized rent is that portion of rental income which the owner could not realize from the tenant. Unrealized rent is allowed to be deducted from actual rent received or receivable only if the following conditions are satisfied:

a) The tenancy is bona fide;

b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;

c) The defaulting tenant is not in occupation of any other property of the assessee;

d) The taxpayer has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless.

Arrears of rent or recovery of unrealized rent [Section 25A]

Amount received in respect of arrears of rent or any subsequent recovery of unrealized rent shall be deemed to be the income of taxpayer under the head "Income from house property" in the year in which such rent is realized or received (whether or not the assessee is the owner of that property in that year).

Further, 30% of such rent shall be allowed as deduction.

Co-owner and Deemed Owner

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Property owned by co-owners [Section 26]:

If house property is owned by co-owners and their share in house property is definite and ascertainable than the income of such house property will be assessed in the hands of each co-owner separately. For the purpose of computing income from house property, the annual value of the property will be taken in proportion to their share in the property. In such a case, each co-owner shall be entitled to claim benefit of self-occupied house property in respect of their share in the property (subject to prescribed conditions). However, where the shares of co-owners are not definite, the income of the property shall be assessed as that of an Association of persons.

Deemed owner [Section 27]:

Income from house property is taxable in the hands of its owner. However, in the following cases, legal owner is not considered as the real owner of the property and someone else is considered as the deemed owner of the property to pay tax on income earned from such house property:

1. The holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate;

2. A member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme shall be deemed to be the owner of that building or part thereof;

3. A person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 shall be deemed to be the owner of that building or part thereof;

4. A person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in section 269UA(f), shall be deemed to be the owner of that building or part thereof.

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CBDT extends Tax ITR filing deadline to October 31

The Central Board of Direct Taxes (CBDT) has decided to extend the deadline for filing of ITRs and Tax Audits Reports by a month.  Given the relentless demands by Chartered Accountants (CAs) and tax consultants, the CBDT has given a breather till October 31. It will also provide some respite to smaller companies too, who are struggling with GST filings.

Last night, the CBDT tweeted: “On consideration of representations recd from across the country, CBDT has decided to extend the due date for filing of ITRs & Tax Audit Reports from 30th Sep, 2019 to 31st of Oct, 2019 in respect of persons whose accounts are required to be audited.formal Notification will follow.

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brief introduction to domestic company under income tax act

Meaning​

As per Section 2(22A)​, "domestic company" means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income

Tax Rates

A. Income-tax

·         In the case of a domestic company 30 % of the total income;

·         but in case total turnover or the gross receipt in the previous year 2017-18 does not exceed Rs. 400 crore than the rate of tax will be 25% In the case of a domestic company

The amount of income-tax computed shall, be increased by a surcharge,-

Surcharge rate :

Particulars	Tax Rate
If total income exceeds Rs. 1 crore but not Rs. 10 Crore	7% of tax calculated on domestic company/ 2 % of tax calculated on foreign company as per above rates
If total income exceeds Rs. 10 crore	12% of tax calculated on domestic company/ 5 % of tax calculated on foreign company as per above rates

Provided that in the case of every company having a total income exceeding one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees :

Provided further that in the case of every company having a total income exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.

Health and Education Cess

The amount of income-tax as increased by the applicable surcharge, shall be further increased by "Health and Education Cess on income-tax", calculated at the rate of four per cent of such income-tax and surcharge

B. Minimum Alternate Tax

A company shall be liable to pay MAT @ 18.5% of book profit (plus surchage and health and Education Cess as applicable) where the normal tax liability of the company is less than 18.5% of book profit.

Dividend Distribution Tax (DDT)

Companies are required to pay tax on the dividend distributed to the shareholders in a particular year. This dividend is exempted in the hands of shareholders upto an amount of Rs. 10 lakh but the companies have to pay tax @ 20.56 %.

New Updates

The Centre slashed effective corporate tax to 25.17 per cent, inclusive of all cess and surcharges, for domestic companies. Making the announcement, Finance Minister  said the new tax rate will be applicable from the current fiscal which began on April 1.

·         New provision inserted in the income tax act with effect from fiscal year 2019-20, that allows any domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions.

·         Manufacturing companies set up after October 1 to get option to pay 15% tax. Effective tax rate for new manufacturing firms to be 17.01% inclusive of surcharge & tax.

·         Listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged

·         Higher surcharge will also not apply on capital gains on sale of security including derivatives held by FPIs

·         Enhanced surcharge will not apply to capital gains arising on equity sale or equity-oriented funds liable to STT stabilise flow of funds into capital markets

·         To provide relief to companies availing of concessions and benefits, a MAT relief by reducing it from 18% to 15%

·         CSR 2% spending to include government, PSU incubators and public funded education entities, IITs

New domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without any incentives. Meaning, effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess.

TDS Rates Under DTAA

Withholding tax rates

Country	Dividend (not being covered under Section 115-O)	Interest	Royalty	Fee for Technical Services
Albania	10%	10%[Note1]	10%	10%
Armenia	10%	10% [Note1]	10%	10%
Australia	15%	15%	10%/15% [Note 2]	10%/15% [Note 2]
Austria	10%	10% [Note1]	10%	10%
Bangladesh	a) 10% (if at least 10% of the capital of the company paying the dividend is held by the recipient company); b) 15% in all other cases	10% [Note1]	10%	No separate provision
Belarus	a) 10%, if paid to a company holding 25% shares; b) 15%, in all other cases	10% [Note1]	15%	15%
Belgium	15%	15% (10% if loan is granted by a bank)	10%	10%
Bhutan	10%	10% [Note 1]	10%	10%
Botswana	a) 7.5%, if shareholder is a company and holds at least 25% shares in the investee-company; b) 10%, in all other cases	10% [Note1]	10%	10%
Brazil	15%	15% [Note1]	a) 25% for use of trademark; b) 15% for others	No separate provision
Bulgaria	15%	15% [Note1]	a) 15% of royalty relating to literary, artistic, scientific works other than films or tapes used for radio or television broadcasting; b) 20%, in other cases	20%
Canada	a) 15%, if at least 10% of the voting powers in the company, paying the dividends, is controlled by the recipient company; b) 25%, in other cases	15% [Note1]	15%-20%	15%-20%
China	10%	10% [Note1]	10%	10%
Columbia	5%	10% [Note1]	10%	10%
Croatia	a) 5% (if at least 10% of the capital of the company paying the dividend is held by the recipient company); b) 15% in all other cases	10% [Note1]	10%	10%
Cyprus	10%	10% [Note1]	10%	10%
Czech Republic [Note5]	10%	10% [Note1]	10%	10%
Denmark	a) 15%, if at least 25% of the shares of the company paying the dividend is held by the recipient company; b) 25%, in other cases	a) 10% if loan is granted by bank; b) 15% for others [Note1]	20%	20%
Estonia	10%	10% [Note1]	10%	10%
Ethiopia	7.5%	10% [Note1]	10%	10%
Finland	10%	10% [Note1]	10%	10%
Fiji	5%	10% [Note 1]	10%	10%
France	10%	10% [Note1]	10%	10%
Georgia	10%	10% [Note1]	10%	10%
Germany	10%	10% [Note1]	10%	10%
Hongkong	5%	10% [Note1]	10%	10%
Hungary	10%	10% [Note1]	10%	10%
Indonesia	10%	10% [Note1]	10%	10%
Iceland	10%	10% [Note1]	10%	10%
Ireland	10%	10% [Note1]	10%	10%
Israel	10%	10% [Note1]	10%	10%
Italy	a) 15% if at least 10% of the shares of the company paying dividend is beneficially owned by the recipient company; b) 25% in other cases	15% [Note1]	20%	20%
Japan	10%	10% [Note1]	10%	10%
Jordan	10%	10% [Note1]	20%	20%
Kazakhstan	10%	10% [Note1]	10%	10%
Kenya	10%	10%	10%	10%
Korea	15%	10%	10%	10%
Kuwait	10% [Note 1]	10%	10%	10%
Kyrgyz Republic	10%	10% [Note1]	15%	15%
Latvia	10%	10% [Note1]	10%	10%
Lithuania	5%*, 15%	10% [Note1]	10%	10%
Luxembourg	10%	10% [Note1]	10%	10%
Malaysia	5%	10% [Note1]	10%	10%
Malta	10%	10% [Note1]	10%	10%
Mongolia	15%	15% [Note1]	15%	15%
Mauritius	a) 5%, if at least 10% of the capital of the company paying the dividend is held by the recipient company; b) 15%, in other cases	7.5	15%	10%
Montenegro	5% (in some cases 15%)	10% [Note1]	10%	10%
Myanmar	5%	10% [Note1]	10%	No separate provision
Morocco	10%	10% [Note1]	10%	10%
Mozambique	7.5%	10% [Note1]	10%	No separate provision
Macedonia	10%	10% [Note 1]	10%	10%
Namibia	10%	10% [Note1]	10%	10%
Nepal	5%**, 10%	10% [Note1]	15%	No separate provision
Netherlands	10%	10% [Note1]	10%	10%
New Zealand	15%	10% [Note1]	10%	10%
Norway	10%	10% [Note1]	10%	10%
Oman	a) 10%, if at least 10% of shares are held by the recipient company; b) 12.5%, in other cases	10% [Note1]	15%	15%
Philippines	a) 15%, if at least 10% of the shares of the company paying the dividend is held by the recipient company; b) 20%, in other cases	a) 10%, if interest is received by a financial institution or insurance company; b) 15% in other cases [Note1]	15% if it is payable in pursuance of any collaboration agreement approved by the Government of India	No separate provision
Poland	10%	10% [Note1]	15%	15%
Portuguese Republic	10%***/15%	10%	10%	10%
Qatar	a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company; b) 10%, in other cases	10% [Note1]	10%	10%
Romania	10%	10% [Note1]	10%	10%
Russian Federation	10%	10% [Note1]	10%	10%
Saudi Arabia	5%	10% [Note1]	10%	No separate provision
Serbia	a) 5%, if recipient is company and holds 25% shares; b) 15%, in any other case	10% [Note1]	10%	10%
Singapore	a) 10%, if at least 25% of the shares of the company paying the dividend is held by the recipient company; b) 15%, in other cases	a) 10%, if loan is granted by a bank or similar institute including an insurance company; b) 15%, in all other cases	10%	10%
Slovenia	a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company; b) 15%, in other cases	10%	10%	10%
South Africa	10%	10% [Note1]	10%	10%
Spain	15%	15% [Note1]	10%/20% [Note 3]	20% [Note 3]
Sri Lanka	7.5%	10% [Note1]	10%	10%
Sudan	10%	10%[Note1]	10%	10%
Sweden	10%	10% [Note1]	10%	10%
Swiss Confederation	10%	10%[Note1]	10%	10%
Syrian Arab Republic	a) 5%, if at least 10% of the shares of the company paying the dividend is held by the recipient company; b) 10%, in other cases	10%[Note1]	10%	No separate provision
Tajikistan	a) 5%, if at least 25% of the shares of the company paying the dividend is held by the recipient company; b) 10%, in other cases	10%[Note1]	10%	No separate provision
Tanzania	5%****, 10%	10%	10%	No separate provision
Thailand	10%	10% [Note1]	10%	No separate provision
Trinidad and Tobago	10%	10% [Note1]	10%	10%
Turkey	15%	a) 10% if loan is granted by a bank, etc.; b) 15% in other cases [Note1]	15%	15%
Turkmenistan	10%	10% [Note1]	10%	10%
Uganda	10%	10%[Note1]	10%	10%
Ukraine	a) 10%, if at least 25% of the shares of the company paying the dividend is held by the recipient company; b) 15%, in other cases	10% [Note1]	10%	10%
United Arab Emirates	10%	a) 5% if loan is granted by a bank/similar financial institute; b) 12.5%, in other cases	10%	No separate provision
United Mexican States	10%	10% [Note1]	10%	10%
United Kingdom	15%/10% (Note 4)	a) 10%, if interest is paid to a bank; b) 15%, in other cases [Note1]	10%/15%[Note 2]	10%/15%[Note 2]
United States	a) 15%, if at least 10% of the voting stock of the company paying the dividend is held by the recipient company; b) 25% in other cases	a) 10% if loan is granted by a bank/similar institute including insurance company; b) 15% for others	10%/15%[Note 2]	10%/15%[Note 2]
Uruguay	5%	10% [Note1]	10%	10%
Uzbekistan	10%	10% [Note1]	10%	10%
Vietnam	10%	10% [Note1]	10%	10%
Zambia	a) 5%, if at least 25% of the shares of the company paying the dividend is held by a recipient company for a period of at least 6 months prior to the date of payment of the dividend; b) 15% in other cases	10% [Note1]	10%	10%

*If the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends.

**5% if beneficial owner of shares is a company and it holds at least 10% of shares of the company paying the dividends.

*** if the beneficial owner is a company that, for an uninterrupted period of two fiscal years prior to the payment of the dividend, owns directly at least 25 per cent of the capital stock of the company paying the dividends.

****5% if recipient company owns at least 25% share in the company paying the dividend.

 1. Dividend/interest earned by the Government and certain specified institutions, inter-alia, Reserve Bank of India is exempt from taxation in the country of source (subject to certain condition).

 2. Royalties and fees for technical services would be taxable in the country of source at the rates prescribed for different categories of royalties and fees for technical services. These rates shall be subject to various conditions and nature of services/royalty for which payment is made. For detailed conditions refer to relevant Double Taxation Avoidance Agreements.

 3. Royalties and fees for technical services would be taxable in the country of source at the following rates:

a. 10 per cent in case of royalties relating to the payments for the use of, or the right to use, industrial, commercial or scientific equipment;

b. 20 per cent in case of fees for technical services and other royalties.

4. (a)15 per cent of the gross amount of the dividends where those dividends are paid out of income (including gains) derived directly or indirectly from immovable property within the meaning of Article 6 by an investment vehicle which distributes most of this income annually and whose income from such immovable property is exempted from tax;

(b) 10 per cent of the gross amount of the dividends, in all other cases

5. The CBDT has clarified that DTAA signed with Government of the Czech Republic on the 27th January 1986 continues to be applicable to the residents of the Slovak Republic. [Notification No. 25, dated 23-03-2015]

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