100 interview questions with answers based on the ICAI material on “Income from House Property"

 Here are 50 interview questions with answers based on the ICAI material on “Income from House Property” from the uploaded PDF:

Basic Conceptual Questions

  1. Q: What is chargeable under the head "Income from House Property"?
    A: The annual value of a property comprising buildings or lands appurtenant thereto, of which the assessee is the owner, is chargeable under this head [Section 22].
  2. Q: Is income from vacant land taxable under house property?
    A: No, it is taxable under “Income from Other Sources” or “Profits and Gains of Business or Profession”.
  3. Q: Who is deemed to be the owner for taxation purposes?
    A: A person who is entitled to receive income from the property in his own right, including deemed owners under Section 27.
  4. Q: What is meant by "composite rent"?
    A: Rent received for the building plus charges for services/furniture is called composite rent.
  5. Q: How is composite rent taxed?
    A: It is split—building rent under house property and other services under business income or other sources.
  6. Q: How is income from property situated outside India taxed?
    A: It is taxable for residents (ROR) whether received in India or abroad.
  7. Q: What is the "Annual Value"?
    A: The value the property is reasonably expected to fetch if let out from year to year.
  8. Q: How is Gross Annual Value (GAV) calculated for a let-out property?
    A: GAV = Higher of Expected Rent or Actual Rent received or receivable.
  9. Q: What is Expected Rent?
    A: Higher of Municipal Value and Fair Rent, restricted to Standard Rent if applicable.
  10. Q: What deduction is allowed for Municipal Taxes?
    A: Municipal taxes paid by the owner during the previous year are deductible from GAV.

Deductions and Computation

  1. Q: What are the two deductions under Section 24?
    A: 30% of NAV and interest on borrowed capital.
  2. Q: Is deduction of municipal taxes allowed for self-occupied property?
    A: No, as its annual value is Nil.
  3. Q: What is the deduction limit for interest on loan for a self-occupied property?
    A: Maximum ₹2,00,000 if certain conditions are met.
  4. Q: Can pre-construction interest be claimed?
    A: Yes, in 5 equal installments starting from the year of acquisition/completion.
  5. Q: Is deduction of 30% allowed for unrealized rent received later?
    A: Yes, under Section 25A.
  6. Q: How is income from a co-owned property taxed?
    A: Based on each co-owner’s share if shares are definite and ascertainable.
  7. Q: Are deemed owners liable to tax under this head?
    A: Yes, under Section 27.
  8. Q: When is a property considered "deemed to be let out"?
    A: When more than two properties are self-occupied; the rest are deemed to be let out.
  9. Q: How is a property let out for part of the year and self-occupied for the rest computed?
    A: Compare ER for full year and actual rent received for let-out period; GAV is the higher.
  10. Q: What is the deduction if a property is held as stock-in-trade and not let out?
    A: Annual value is Nil for 2 years from end of financial year of completion certificate.

Situational Questions

  1. Q: A property has MV ₹80,000, FR ₹90,000, SR ₹78,000, and rent ₹72,000. What is GAV?
    A: ER = ₹78,000 (lower of higher of MV/FR and SR); GAV = higher of ER and actual rent = ₹78,000.
  2. Q: If actual rent is lower than ER due to vacancy, which value is GAV?
    A: Actual rent is GAV.
  3. Q: Can a builder claim Nil annual value on unsold flats?
    A: Yes, for 2 years from end of FY of completion certificate under Section 23(5).
  4. Q: How is rent received in arrears taxed?
    A: Fully taxable in year of receipt under Section 25A with 30% deduction.
  5. Q: Is ownership during assessment year required for taxing rent?
    A: No, ownership in previous year is sufficient.

Illustration-Based Questions

  1. Q: Rajesh, a ROR, earns £10,000/month rent in London. Municipal taxes paid £8,000. Exchange rate is ₹95. What is NAV?
    A: GAV = ₹11,40,000; Municipal taxes = ₹7,60,000; NAV = ₹10,64,000.
  2. Q: Poorna pays ₹1,80,000 interest and has pre-construction interest of ₹3,60,000. Deduction under Section 24(b)?
    A: ₹2,00,000 (max allowable for self-occupied property).
  3. Q: What if unrealized rent of ₹11,000 meets Rule 4?
    A: Deduct from actual rent for GAV computation.
  4. Q: A property let out at ₹20,000/month, vacant for 2 months, with ER ₹2,10,000. What is GAV?
    A: Actual rent = ₹1,80,000 < ER due to vacancy     ⇒ GAV = ₹1,80,000.
  5. Q: Prem’s house: 2/3 self-occupied, 1/3 let out @₹8,000/month. Total interest ₹1,20,000. What is his income (optional regime)?
    A: Loss of ₹57,000 after computing both portions.

Application-Oriented Questions

  1. Q: Can an assessee change the option of self-occupied house year-to-year?
    A: Yes, in a manner beneficial to the assessee.
  2. Q: Is interest on unpaid interest deductible?
    A: No, only interest on borrowed capital is deductible.
  3. Q: Can rent control law restrict expected rent?
    A: Yes, expected rent cannot exceed standard rent.
  4. Q: How is notional rent computed for deemed let out?
    A: GAV = Expected Rent.
  5. Q: What is the effect of Section 115BAC on deductions?
    A: Deductions under Section 24(b) not allowed for self-occupied property under default regime.

Technical Clarifications

  1. Q: Under what condition is Section 26 applicable?
    A: When property is co-owned with definite and ascertainable shares.
  2. Q: What happens if property is transferred to a spouse without adequate consideration?
    A: Transferor is deemed owner (Section 27).
  3. Q: Are clubbing provisions and deemed ownership the same?
    A: No. Deemed ownership affects computation; clubbing affects total income.
  4. Q: What is the limit of interest deduction for repairs of self-occupied property?
    A: ₹30,000.
  5. Q: Is interest deduction available on accrual basis or payment basis?
    A: On accrual basis.

Advanced Questions

  1. Q: What is Rule 4 under Section 23?
    A: It specifies conditions for allowing unrealised rent as deduction.
  2. Q: How is loss from house property set off?
    A: Under normal provisions, up to ₹2,00,000 can be set off against other heads of income.
  3. Q: What if a property is leased for 12+ years?
    A: Lessee is deemed owner under Section 27(iiib).
  4. Q: What if rent includes lift charges and security charges?
    A: Separate them; services are taxed under other heads.
  5. Q: Are housing co-op members deemed owners?
    A: Yes, as per Section 27(iii).
  6. Q: Is a person with possession under Sec 53A of TPA deemed owner?
    A: Yes, even without registered title.
  7. Q: What is the effect of default in TDS on foreign interest payment?
    A: Deduction is not allowed under Section 25.
  8. Q: How is income taxed if property is owned by HUF but used by karta?
    A: Taxed in hands of HUF if ownership lies with it.
  9. Q: Can unrealized rent be deducted if tenant is still in occupation?
    A: No, per Rule 4 conditions.
  10. Q: Is pre-construction interest allowed for repairs?
    A: No, only for acquisition/construction.

51–70: Computation-Oriented and Scenario-Based

  1. Q: What is the treatment of municipal taxes paid by tenant?
    A: Not allowed as deduction since they are not borne by the owner.
  2. Q: In case of self-occupied property, can deduction for property taxes be claimed?
    A: No, because annual value is Nil.
  3. Q: What is the GAV if Expected Rent is ₹1,20,000 and Actual Rent is ₹1,10,000?
    A: GAV is ₹1,20,000 unless the shortfall is due to vacancy.
  4. Q: Can actual rent exceed expected rent?
    A: Yes, in such cases actual rent is taken as GAV.
  5. Q: If property is let out for 10 months and vacant for 2 months, is vacancy allowance available?
    A: Yes, if actual rent is less than ER due to vacancy.
  6. Q: Are pre-construction interest deductions available in default tax regime?
    A: No, only available under optional tax regime.
  7. Q: What is the meaning of “Standard Rent”?
    A: Rent fixed by Rent Control legislation, acts as a cap for expected rent.
  8. Q: Is loss from house property allowed under Section 115BAC default regime?
    A: No, set-off is not allowed under default regime.
  9. Q: What are the conditions to claim interest deduction of ₹2,00,000?
    A: Loan for acquisition/construction post 1.4.1999 and construction completed within 5 years.
  10. Q: What is the treatment if rent is received in cash for unregistered lease?
    A: Still taxable as house property income if it meets conditions of Section 22.
  11. Q: Is income from subletting taxed under house property?
    A: No, it is taxed under “Income from Other Sources”.
  12. Q: Can deemed ownership arise from oral gift to spouse?
    A: Yes, if property is transferred without adequate consideration.
  13. Q: Can a member of society claim to be an owner under Section 27?
    A: Yes, even if legal ownership lies with society.
  14. Q: Does fair rent always apply in GAV computation?
    A: Yes, as part of expected rent unless standard rent caps it.
  15. Q: What is the result if actual rent is less than expected rent without vacancy?
    A: Expected rent is taken as GAV.
  16. Q: If property is sold in January and arrears are received in March, is it taxable?
    A: Yes, under Section 25A even if the assessee is no longer the owner.
  17. Q: Can loss from self-occupied house be carried forward?
    A: Yes, up to 8 years under normal regime.
  18. Q: Can interest on loan for renovation be claimed if the property is unoccupied?
    A: Yes, if under optional tax regime and within limits.
  19. Q: Is notional rent taxable for more than 2 self-occupied houses?
    A: Yes, the rest are deemed to be let out.
  20. Q: What is allowed if property is used partly for business and partly let out?
    A: Let-out portion is taxed under house property, business use portion under PGBP.

71–90: Advanced Scenarios and Numerical Concepts

  1. Q: Is unrealized rent deduction available every year?
    A: Only in the year it is first not realized, and Rule 4 conditions must be met.
  2. Q: If rent is revised retrospectively, how are arrears taxed?
    A: In the year of receipt under Section 25A with 30% deduction.
  3. Q: How is deemed let out income computed when no actual rent is received?
    A: Use Expected Rent as GAV.
  4. Q: Are properties under construction liable to house property tax?
    A: No, only after completion or possession.
  5. Q: How is co-owned property’s income divided?
    A: As per definite and ascertainable shares.
  6. Q: What is the effect of borrowing money from a friend for house repair?
    A: Interest is allowed if genuine and documented.
  7. Q: What is the treatment of security deposit from tenant?
    A: Not taxable unless adjusted towards rent.
  8. Q: Can GAV be negative?
    A: No, it can be Nil but not negative.
  9. Q: What is the interest deduction for let out property?
    A: Fully allowed, no upper limit under both tax regimes.
  10. Q: If rent is unrealized due to tenant absconding, can it be excluded?
    A: Yes, if Rule 4 conditions are satisfied.
  11. Q: What happens if GAV is wrongly computed as actual rent in place of expected rent?
    A: Reassessment may be done; correct computation is based on Section 23.
  12. Q: Can deemed ownership be rebutted?
    A: Only by proving absence of elements under Section 27.
  13. Q: Is municipal tax deduction allowed if paid after year end?
    A: Yes, in the year of actual payment only.
  14. Q: What happens when GAV is equal to actual rent and both are lower than ER?
    A: GAV is the actual rent only if vacancy is the reason.
  15. Q: Is standard deduction of 30% available on self-occupied property?
    A: No, because NAV is Nil.
  16. Q: Can a Hindu Undivided Family claim self-occupation benefit?
    A: Yes, but only for up to 2 properties.
  17. Q: Is deemed rent applicable for under-construction property not yet let out?
    A: No, not till completion certificate is obtained.
  18. Q: What is the status of loss from house property in ITR under Section 115BAC?
    A: Cannot be set off against other heads; carried forward only.
  19. Q: If ownership is disputed in court, who is taxed?
    A: The person receiving income is taxed until decision is finalized.
  20. Q: Can rent received from hostel rooms in residential property be taxed under house property?
    A: No, if it constitutes commercial activity, it’s taxed under PGBP.

91–100: True/False Type Conceptual Clarifications

  1. Q: T/F – Deduction for interest is available only if loan is from a bank.
    A: False – Loan can be from any lender, even friends or relatives.
  2. Q: T/F – Property taxes are always allowed as deduction.
    A: False – Only if paid during the previous year by the owner.
  3. Q: T/F – Rent of agricultural land is taxed under house property.
    A: False – It is exempt or taxed under other sources/business income.
  4. Q: T/F – Interest on loan for purchase of plot of land is deductible.
    A: False – Only if a building is constructed thereafter.
  5. Q: T/F – Rent from sub-tenant is house property income.
    A: False – It is income from other sources.
  6. Q: T/F – No rent agreement is needed to tax rental income.
    A: True – Rent receipt or actual receipt suffices.
  7. Q: T/F – A property with ER of ₹1,00,000 and actual rent ₹1,20,000 has GAV ₹1,00,000.
    A: False – GAV is ₹1,20,000.
  8. Q: T/F – Interest on loan for plot purchase (no construction) is deductible.
    A: False – Not deductible under Section 24.
  9. Q: T/F – Let-out properties enjoy higher deductions than self-occupied properties.
    A: True – Interest is fully deductible.
  10. Q: T/F – Income from house property is computed on net basis.
    A: True – GAV less municipal taxes and deductions.

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