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CA Intermediate · Taxation · Income from House Property

Rohit owns a flat in Pune which he let out for the whole of the tax year 2026-27 at Rs 20,000 per month. Municipal tax of Rs 18,000 for the year was borne and paid by Rohit during the year. He paid no other outgoing. Ignoring any other facts, what is the net annual value (NAV) of the flat, assuming the municipal value and fair rent are lower than the actual rent and there is no vacancy?

The net annual value is Rs 2,22,000. Gross annual value is the actual rent of Rs 2,40,000 for twelve months, and municipal tax of Rs 18,000 paid by the owner during the year is deducted to reach the net annual value.

  1. ARs 2,22,000Correct
  2. BRs 2,40,000
  3. CRs 2,58,000
  4. DRs 1,68,000

Explanation

Gross annual value is the actual rent of 20,000 x 12 = Rs 2,40,000 as it exceeds the expected rent. Municipal taxes paid by the owner during the year are deducted: 2,40,000 - 18,000 = Rs 2,22,000. Rs 2,40,000 ignores the deduction of municipal tax. Adding the tax gives Rs 2,58,000, which is the wrong sign.

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