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CA Intermediate · Taxation · Income from House Property

Mr. Arvind Nair owns a house in Kochi which he lets out for the whole of tax year 2026-27. Municipal value is Rs 3,60,000, fair rent is Rs 4,20,000, standard rent under the Rent Control law is Rs 3,90,000 and actual rent received is Rs 4,50,000. Municipal taxes of Rs 30,000 were paid by him during the year. What is the Gross Annual Value (GAV) of the property?

The Gross Annual Value is Rs 4,50,000. Expected rent works out to Rs 3,90,000 (higher of municipal and fair rent, restricted to standard rent), and since actual rent received of Rs 4,50,000 is higher than expected rent, the actual rent becomes the GAV.

  1. ARs 3,90,000
  2. BRs 4,20,000
  3. CRs 4,50,000Correct
  4. DRs 3,60,000

Explanation

Expected rent = higher of municipal value (3,60,000) and fair rent (4,20,000) = 4,20,000, but capped at standard rent 3,90,000, so expected rent = 3,90,000. Actual rent received is 4,50,000, which exceeds expected rent, so GAV = 4,50,000. Choosing 3,90,000 ignores the rule that GAV is the higher of expected rent and actual rent.

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