40 interview questions with concise answers on Income from House Property

Here are 40 interview questions with concise answers on Income from House Property under the Indian Income Tax Act:

Basic Concepts

Q: What is "Income from House Property"?
A: It refers to income earned from buildings or lands appurtenant thereto owned by the assessee, charged under Section 22.
Q: What conditions must be satisfied for taxing income under this head?
A: (i) Property consists of buildings or lands appurtenant thereto,
(ii) Assessee is the owner,
(iii) Property is not used for business/profession.
Q: Is land alone taxable under this head?
A: No. Only buildings and land appurtenant thereto are covered.
Q: What if the property is used for own business?
A: Then income is not taxable under this head; no notional rent is considered.
Q: What is meant by 'Deemed Owner'?
A: Certain persons are treated as owners even if they are not legal owners (e.g., holders of impartible estate, leaseholders for >12 years, etc.)

Annual Value and Computation

Q: What is Annual Value?
A: It is the notional value determined as per Section 23, and is the basis of taxation under this head.
Q: How is Annual Value computed for a let-out property?
A: Annual Value = Higher of Expected Rent or Actual Rent Received, reduced by unrealised rent (if any).
Q: What is Expected Rent?
A: Higher of Municipal Value and Fair Rent, subject to Standard Rent if Rent Control Act applies.
Q: What is Standard Rent?
A: It is the maximum rent a landlord can legally charge under the Rent Control Act.
Q: What if the house is vacant for part of the year?
A: Actual rent received is considered if it is less than expected rent due to vacancy.

Self-Occupied and Deemed to be Let Out

Q: How is income from self-occupied house treated?
A: Annual value is Nil, and interest on borrowed capital is allowed as deduction.
Q: What is Deemed to be Let Out property?
A: If a person owns more than two houses and they are not let out, only two are treated as self-occupied, rest are deemed let out.
Q: How many houses can be considered self-occupied?
A: Two houses (as per amendment from AY 2020-21 onwards).
Q: What is the treatment if the house is under construction?
A: No income is computed till completion. Interest prior to construction is deductible in 5 equal installments post-completion.
Q: What is the treatment of vacant house property?
A: If genuinely vacant and intended to let out, it may be treated accordingly; else deemed let out rules apply.

Deductions and Taxable Income

Q: What deduction is available under Section 24(a)?
A: Standard deduction @ 30% of Net Annual Value (NAV).
Q: What is Net Annual Value (NAV)?
A: NAV = Gross Annual Value – Municipal Taxes (if paid by owner).
Q: What is deduction under Section 24(b)?
A: Interest on borrowed capital:

Q: Can municipal taxes be deducted?
A: Yes, if paid by the owner during the year, before computing NAV.
Q: Can principal repayment of housing loan be claimed?
A: Yes, under Section 80C (up to ₹1.5 lakh), subject to conditions.

Interest Deduction

Q: Is there any limit on interest deduction for self-occupied house?
A: Yes, up to ₹2,00,000 if construction is completed within 5 years.
Q: What if construction is delayed beyond 5 years?
A: Deduction is restricted to ₹30,000.
Q: What is pre-construction interest?
A: Interest paid before completion of construction; deductible in 5 equal annual installments from the year of completion.
Q: Can interest on loan from relatives be claimed?
A: Yes, if the loan is for construction/purchase; but no Section 80C benefit.
Q: Is interest on second house loan also deductible?
A: Yes, but subject to the overall limit (₹2 lakh if self-occupied, full if let out).

Special Situations

Q: What is tax treatment of co-ownership?
A: Each co-owner is taxed in proportion to their share.
Q: Can unrealised rent be deducted?
A: Yes, if certain conditions are met (legal action taken, tenant defaulted, etc.).
Q: Is notional rent on vacant house taxable?
A: Yes, for deemed let-out properties.
Q: Is house property income taxable in case of inherited property?
A: Yes, if the person inherits and owns it, income is taxable in their hands.
Q: What is the tax treatment of arrears of rent?
A: Taxable in the year of receipt under Section 25A, after 30% deduction.

Exemptions and Deductions

Q: Is property used for charitable purpose taxable under this head?
A: No, if income is used for charitable purposes and exemption under Section 11 is claimed.
Q: Can unoccupied property under construction be treated as self-occupied?
A: No, unless construction is complete and used for own residence.
Q: Are composite rents taxed under this head?
A: No, if rent includes services (e.g., lift, furniture), it is taxed under "Other Sources" or "Business Income".
Q: What is composite rent?
A: Rent received for letting out property along with furniture, fixtures, or services.
Q: Is rental income from commercial property taxed under this head?
A: Yes, if it is in the nature of letting out property and not business.

Advanced/Application Based

Q: Can a builder claim interest deduction on unsold flats?
A: No, they are considered stock-in-trade; income is taxable as business income.
Q: What is Section 23(5)?
A: Provides relief from notional rent for unsold inventory held as stock-in-trade for up to 2 years from completion.
Q: Can a house in a foreign country be taxed under this head?
A: Yes, if the assessee is a resident in India.
Q: How is deemed ownership determined for a buyer under power of attorney?
A: Income is taxed in hands of beneficial owner even if legal title is not transferred.
Q: What if an employee receives rent-free accommodation and owns the house?
A: If notional rent arises from own property, it may be deemed to be let out if not self-occupied.

INCOME TAX BASICS