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

Ms. Meera owns two houses in Pune and uses both for her own residence, not letting out either of them. She also owns a third house in Nashik that is kept vacant and has never been let. How is the annual value of the third house treated?

The third house's annual value is its reasonably expected rent. The nil annual value benefit is available only for two houses specified by the assessee. Since the two Pune houses already use that benefit, the vacant Nashik house is valued at the higher of expected and actual rent, which is the expected rent.

  1. ANil, because the house is vacant and not let
  2. BNil, because Ms. Meera can specify only two self-occupied houses
  3. CDetermined as the higher of expected rent and actual rent, so expected rent appliesCorrect
  4. DDetermined at 30% of expected rent

Explanation

The nil annual value for self-occupied or unoccupied houses applies only to two houses specified by the assessee. The two Pune houses are the specified ones, so the third house, even though vacant, is taken at its reasonably expected rent as no actual rent exists. Treating it as nil ignores the two-house limit.

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