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CA Intermediate · Taxation · Income from House Property

Ms Tanvi Joshi took a loan on 1 April 2023 to construct a house. Construction was completed on 31 October 2025. Interest of Rs 3,00,000 relates to the period up to 31 March 2025 and has not been claimed. The house is let out for all of tax year 2026-27 at an annual rent of Rs 6,00,000, which is also its expected rent. No municipal taxes are payable. Interest for tax year 2026-27 is Rs 2,00,000. What is her income from house property for tax year 2026-27?

Income is Rs 1,60,000. Pre-construction interest of Rs 3,00,000 is claimed in five equal instalments of Rs 60,000 from the year of completion, and 2026-27 falls within that period. NAV of Rs 6,00,000 less the 30% deduction of Rs 1,80,000 and total interest of Rs 2,60,000 leaves Rs 1,60,000.

  1. ARs 1,60,000Correct
  2. BRs 2,20,000
  3. CRs 1,00,000
  4. DLoss of Rs 80,000

Explanation

Pre-construction interest is deductible in five equal annual instalments starting from the year of completion. Completion was in 2025-26, so the instalment for 2026-27 is the second one, at Rs 60,000. NAV is Rs 6,00,000 and the 30% deduction is Rs 1,80,000. Total interest deduction is Rs 2,60,000, so income is Rs 6,00,000 - Rs 1,80,000 - Rs 2,60,000 = Rs 1,60,000. Rs 2,20,000 ignores the pre-construction instalment.

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