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

Mr. Dinesh Patil occupies his only house as his residence. He borrowed to construct it, but construction was completed after six years from the end of the tax year in which the capital was borrowed. Interest payable for the year is Rs. 1,10,000. What is his income or loss from house property?

The loss is Rs. 30,000. A self-occupied house has nil annual value, and because construction was not completed within five years of the borrowing year, the interest deduction is capped at Rs. 30,000 rather than Rs. 2,00,000, even though Rs. 1,10,000 was paid.

  1. ALoss of Rs. 1,10,000
  2. BLoss of Rs. 2,00,000
  3. CLoss of Rs. 30,000Correct
  4. DNil

Explanation

The annual value of a self-occupied house is nil. The Rs. 2,00,000 limit needs completion within five years, which is not met here, so the limit under section 22(2)(b) is Rs. 30,000. The loss is therefore Rs. 30,000, not the Rs. 1,10,000 actually paid.

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