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CA Intermediate · Taxation · Income from House Property

Mr. Arvind Nair owns a shop in Kochi that he let out for the whole of tax year 2026-27. The rent is ₹30,000 per month. Municipal tax of ₹36,000 for the year was paid by Mr. Nair during the tax year. Municipal value is ₹2,80,000 and fair rent is ₹3,00,000. Standard rent under the Rent Control Act is not applicable. Compute the net annual value (NAV) of the property.

The net annual value is ₹3,24,000. Gross annual value is the higher of expected rent (₹3,00,000) and actual rent (₹3,60,000), which is ₹3,60,000. Municipal taxes paid by the owner during the year (₹36,000) are then deducted to arrive at the NAV.

  1. A₹3,24,000Correct
  2. B₹3,60,000
  3. C₹2,88,000
  4. D₹3,00,000

Explanation

Expected rent is the higher of municipal value (2,80,000) and fair rent (3,00,000) = 3,00,000, with no standard rent cap. Actual rent is 3,60,000 (30,000 x 12), which is higher, so gross annual value is 3,60,000. Deducting municipal tax paid by the owner (36,000) gives NAV of 3,24,000. Option 3,60,000 ignores the municipal tax deduction.

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