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CS Executive · Tax Laws and Practice · Income under the Head House Property

Meera owns a flat in Chennai let to a tenant. The reasonably expected rent is Rs. 3,00,000 a year, but the flat was vacant for part of the year, so the rent received or receivable was only Rs. 2,20,000. She paid municipal taxes of Rs. 20,000 during the year. What is the annual value after considering municipal taxes under the Income-tax Act, 2025?

The annual value is Rs. 2,00,000. Because vacancy reduced the rent received to Rs. 2,20,000, below the expected Rs. 3,00,000, the lower actual amount becomes the annual value. The municipal taxes actually paid of Rs. 20,000 are then deducted, leaving Rs. 2,00,000.

  1. ARs. 2,80,000
  2. BRs. 2,00,000Correct
  3. CRs. 2,20,000
  4. DRs. 1,40,000

Explanation

The property is let and vacant, and the actual rent of Rs. 2,20,000 is lower than the expected rent of Rs. 3,00,000 owing to the vacancy. So the annual value is Rs. 2,20,000 under section 21(2). Municipal taxes actually paid of Rs. 20,000 are then deducted under section 21(3), giving Rs. 2,00,000. Rs. 2,80,000 ignores the vacancy rule and Rs. 2,20,000 ignores the tax deduction.

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