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INTRODUCTION

Income from house property is one of the heads under which the income earned from a property owned by the assessee is computed. Before understanding what all is included in this head, it is essential to learn more about what house property means and what house property damage means.

House property consists of any building or land attached to the building of which the assessee is the owner. In general, it includes all types of house properties such as residential houses, flats, shops, godowns, hotel building, office spaces etc.

There are three conditions which must be satisfied before the income of the property can be taxed under the head “Income from House Property”:

• The property must consist of buildings and lands attached to them
• The assessee must be the owner of such house property
• The property may be used for any purpose, but it should not be used by the owner for the purpose of any business or profession carried on by him, the profit of which is chargeable to tax. If the property is used for own business or profession, it shall not be chargeable to tax under this section.

For income to be included under this head the above conditions should be satisfied. If you have some concerns about property management, contact US Florida Property Management for the solutions with the best possible return on your investment.

Example: If A has given his shop to B on rent, then rental income from the shop will be taxed to A under the head income from house property.

Considering the above example if B who had the shop on rent further rents it to C then the rental income earned by B from sub-letting the shop will not be taxed under income from house property as here B is not the owner of the shop. Such income is taxable under the head Income from other sources or profits and gains from business or profession, as the case may be.

Deemed owner

As we know that rental income from property is charged to tax under the head Income from house property in the hands of the owner of the property. Sometimes in order to save tax people transfer their properties to their relatives. In the following cases, a person may not be the registered owner of the property, but he will be treated as the owner (i.e., deemed owner) of the property and rental income from the property will be charged to tax in his hands:

• Transfer of property by an individual to his/her spouse (not being a transfer in connection with an agreement to live apart) or to his/her minor child (not being married daughter) without adequate consideration. In this case, the transferor will be the deemed owner and any income earned from that property will be taxed in his/her hands.
• The holder of the impartible estate is deemed as the owner of the property comprised of the estate.
• A member of co-operative society, company or other association of persons to whom a building (or part of it) is allotted or leased under the house building scheme of the society, company or association, as the case may be, is treated as deemed owner of the property.
• A person acquiring property by satisfying the conditions of section 53A of the Transfer of Property Act will be treated as deemed owner (although he may not be the registered owner). Section 53A of said Act prescribes following conditions:
  • There must be an agreement in writing.
  • The purchase consideration is paid or the purchaser is willing to pay it.
  • Purchaser has taken the possession of the property in pursuance of the agreement.
• In case of a lease of a property for a period not less than 12 years (whether originally fixed or provision for extension exists), the lessee is deemed to be the owner of the property. However, any right by way of a lease from month-to-month or for a period not exceeding one year is not covered by this provision.

Set off and carry forward of losses of house property

Under the head income from house property, it is not essential that there will be profits only, losses may also incur under this head. There are provisions to set off or carry forward the losses of this head. Following are the provisions related to set-off or carry forward the losses of house property:

1. Intra head adjustment: Loss from house property can be set off from income of any other house property.

E.g. Mr A has three houses; there is a loss of Rs. 86,000 from one house, an income of Rs. 52,000 and Rs. 40000 from the other two houses, in this case, the loss of one house can be set off by the incomes of the other two houses.

2. Inter-head adjustment: if the income from the same head is not sufficient to set off the losses then loss from house property can be set off by incomes of the other heads but not from casual income.
3. Carry forward of loss from house property: If the income from house property and incomes from the other heads is not sufficient to cover the losses of house property then such loss can be carried forward to the subsequent years but for a maximum period of 8 years starting from the subsequent to the year in which the loss was incurred and in the subsequent years, loss can be set off only from income under the head house property.

E.g. Mr. X has incurred a loss under the head house property in the previous year 2012-13. It could not be set off in the same year, it can be carried forward up to the previous year 2020-21.

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