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CMA Intermediate · Direct and Indirect Taxation · Income from House Property

Mr. Desai owns a house which is vacant because he lives in a rented flat elsewhere, and he cannot occupy it due to his employment in another city. Its expected rent is Rs. 6,00,000. The house was never let. He has a loan on this house with interest payable of Rs. 2,70,000 for the year, taken to acquire it; the acquisition was completed within five years of borrowing and the interest certificate is available. He has no other house, and specifies this house as one of his two. What is his income from house property?

Mr. Desai has a loss of Rs. 2,00,000. The house is one he cannot occupy for any reason, so its annual value is nil when specified. The interest of Rs. 2,70,000 is restricted to the Rs. 2,00,000 limit since the acquisition conditions and certificate are satisfied.

  1. ALoss of Rs. 2,00,000Correct
  2. BLoss of Rs. 2,70,000
  3. CIncome of Rs. 1,50,000
  4. DLoss of Rs. 30,000

Explanation

A house the owner cannot occupy due to any reason has nil annual value when specified. No 30% deduction applies on nil value. Interest deduction is capped at Rs. 2,00,000 since the acquisition conditions and certificate are met. Income is therefore a loss of Rs. 2,00,000. A loss of Rs. 2,70,000 ignores the cap.

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