Module-wise Marks Distribution I-3
Previous Exams Trend Analysis (Syllabus 2022) I-5
Module-wise Comparison with Study Material I-13
SECTION A DIRECT TAXATION
MODULE 1 BASICS OF INCOME-TAX ACT
CHAPTER 1.1
MODULE 2 HEADS OF INCOME
CHAPTER
CHAPTER
MODULE 3 TOTAL INCOME AND TAX LIABILITY OF INDIVIDUALS AND HUF
CHAPTER
CHAPTER 6.3
CHAPTER 6.4 COMPUTATION OF
AND DUTIES
Module-wise Solved Paper: June 2026 (Suggested Answers) P.1
Computation of income from salaries of Mr. Suresh for Assessment year 2026 – 2027
16 (ia) Standard Deduction (75,000)
16 (iii) Professional tax (deduction not allowed under Default tax regime) Nil
FROM HOUSE PROPERTY
A QUICK REVIEW
SECTION 22: CHARGING SECTION:
Charge on Annual Value
Property consisting of Building and Land opportunent thereto
Not used for own business profits of which are taxable Owner (including deemed owner)
SECTION 23 CALCULATION OF ANNUAL VALUE:
(1)Let out property:
Fair Rent or Municipal Value (WEH) compared with Standard Rent (WEL)
ER (Expected Rent)
If Actual Rent > Expected Rent, Gross Annual Value = Actual Rent
If Actual Rent < Expected Rent Owing to vacancy Yes: Gross Annual Value = Actual Rent
NO: Gross Annual Value = Expected Rent
SECTION A : DIRECT TAXATION
Net Annual Value = Gross Annual Value (-) municipal tax paid and borne by Assessee in Previous Year (Not Advance municipal tax)
(2) Two Self-occupied or whole year vacant property: Annual Value = NIL (Only Individual/HUF)
(3) Property let out for a part of the year and self-occupied for part of the year: Whole year ER will be compared with Actual Rent of the let out period and municipal taxes for whole year can be claimed as deduction.
(4) Deemed let out: Gross Annual Value = Expected Rent
(5) For property held as stock in trade: If whole or any part of the property may not be let out during whole or part of the year, then annual value of such property or part shall be taken as NIL. But this benefit is available only for a period of two years from the end of the financial year in which certificate of completion is received from competent authority.
SECTION 24: DEDUCTIONS:
(
a) Standard deduction: 30% of Annual Value
(
b) Interest on Loan for HP:
Let out/Deemed let out: NO LIMIT
Self-occupied:
Loan for repair: Max. 30,000
Loan for Purchase: If after 01/04/99; Max. 2,00,000, otherwise: Max. 30,000.
Loan for Construction: If after 01/04/99 and construction completed in 5 years from the end of FY in which loan taken: Max. 2,00,000, otherwise: Max. 30,000.
Note: No deduction for interest on loan for self-occupied property under default tax regime
Interest for pre-construction period: Interest from date of loan or Start of Construction (whichever is later) upto 31st March preceding date of completion of construction
Deduction: In 5 equal installments from year of completion.
SECTION 25:
Interest payable outside India and Tax not Deducted at Source or not remitted then No deduction allowed
SECTION 25A:
Deduction of 30% from both Arrears of rent and unrealized rent
SECTION 26:
Co-ownership: respective shares taxable individually
SECTION 27:
Deemed ownership:
Holder of Impartiable estate
Member of Co-operative housing society/company/AOP/BOI to whom house is allotted
Person satisfying conditions of Section 53A of Transfer of Property Act, 1882 Right in a property u/s 269UA(f) (Lease of 12 or more years)
Transferor of property to spouse/minor child without adequate consideration: Except:
Minor married daughter
Agreement to Live apart from spouse Exemptions from House Property Income:
(
(
i) Income from property held under trust for charitable or religious purposes [Section 11].
ii) Income from house property belonging to a Registered Trade Union [Section 10(24)].
(iii) Income of an authority constituted under any law for the time being in force for the marketing of commodities; any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities [Section 10(29)].
(iv) The annual value of any one palace in the occupation of an ex-ruler [Section 10(19A)].
(
v) Income from house property belonging to a local authority [Section 10(20)].
(vi) Income from property of an authority constituted for the purpose of planning, development, or improvement of cities, towns and villages [Section 10(20A)].
(vii) Income from property of the approved scientific research association subject to fulfillment of certain conditions [Section 10(21)].
(viii) Income from property of a games association [Section 10(23)].
(ix) Income from property in the case of a person resident of Ladakh. [Section 10(26A)].
(x) Income from property of a political party [Section 13A].
PAST EXAMINATION QUESTIONS
OBJECTIVE QUESTIONS
Q.1 Where any unrealized rent, earlier allowed as deduction is realized subsequently, the deduction available thereof is ___________.
[June 2014, 1 Mark]
Ans. 30%
Q.2 Mr. Laxman occupied his apartment till December 2025 and thereafter occupied the quarters provided by the employer. The apartment of Mr. Laxman was let out at ` 20,000 per month from 1st January, 2026. The annual value of the property would be
2.54
(a) ` 60,000
(b) ` 2,40,000
(c) ` 1,80,000
(d) NIL
SECTION A : DIRECT TAXATION
(c) Co-owner of a Property
(d) None of the above [June 2018, 1 Mark]
Ans. (c) Co-owner of a Property
[June 2016, 1 Mark, Modified]
Ans. (a) ` 60,000
Q.3 Deduction available under section 24(a) is __________________ of NAV.
(a) 30%
(b) 50%
(c) 15%
(d) 70% [June 2017, 1 Mark]
Ans. (a) 30%
Q.4 Generally, income is taxable under the head, house property only when the assesse is the ___________ of such house property. [June 2017, 1 Mark]
Ans. Owner
Q.5 When unrealized rent is received based on court decree but at the time of receipt the property was not owned by the assesse, it is taxable under the head ___________.
[Dec. 2017, 1 Mark]
Ans. Income from house property
Q.6 When unrealized rent of ` 50,000 in respect of a let-out property is realized subsequently, the amount liable to tax would be ` _______________.
[Dec. 2017, 1 Mark]
Ans. ` 35,000
Working Note:
Taxable amount = Unrealized rent – Standard Deduction
= 50,000 – (50,000 × 30%) = ` 35,000
Q.7 Which of the following is not a case of deemed ownership of house property?
(a) Transfer to spouse for inadequate consideration
(b) Transfer to minor child for inadequate consideration
Q.8 Income from sub-letting of a house property by a salaried employee is taxable under the head ________.
[June 2018, 1 Mark]
Ans. Income from Other Sources
Q.9 Ram commenced construction of residential building on 01.04.2020. Interest on housing loan up to 31.03.2025 was ` 4,40,000. Interest for the period from 01.04.2025 to 30.09.2025 (being the date of completion of construction of the residential house) was ` 60,000. Interest for the period from 01.10.2025 to 31.03.2026 amounts to ` 50,000. How much is the interest eligible for deduction under section 24 for the assessment year 2026-27 for this let out property?
(a) ` 1,50,000
(b) ` 1,98,000
(c) ` 5,00,000
(d) ` 1,00,000
[Dec. 2021, Modified, 1 Mark]
Ans. (b) ` 1,98,000
Working Note:
Pre-Construction Interest = 4,40,000/5 = ` 88,000
Current Year = 60,000 + 50,000 = ` 1,10,000
Total Interest allowed = ` 1,98,000
Q.10 When the actual rent is (per annum) ` 72,000, fair rent is ` 96,000 and standard rent is ` 84,000 and no property tax has been paid, the chargeable income from house property is ` _______
Ans. 58,800
[Dec. 2021, 1 Mark]
Working Note:
Expected Rent = ` 84,000
Actual Rent = ` 72,000
Gross Annual Value = ` 84,000
Net annual Value = 84,000 – 0 = ` 84,000
Taxable Income from House Property = 84,000 – (30% × 84,000) = ` 58,800
Q.11 Mr. A let out a property for a monthly rent of ` 30,000 during the whole of the financial year 2025-26. He paid municipal tax of ` 60,000 in December, 2025 for financial years 2023-24, 2024-25 and 2025-26 being ` 20,000 per annum. How much is the income under the head ‘house property taxable in the hands of Mr. A?
(a) ` 3,40,000
(b) ` 3,00,000
(c) ` 2,10,000
(d) ` 1,92,000
[Dec. 2022, Modified, 1 Mark]
Ans. (c) ` 2,10,000
Working Note:
Gross Annual value =
30,000 × 12 = ` 3,60,000
Less: Municipal Tax paid ` (60,000)
Net Annual Value ` 3,00,000
Less: Standard Deduction 30% ` (90,000)
Taxable House Property income ` 2,10,000
Q.12 What is the maximum limit for deduction in respect of interest on money borrowed in the case of self-occupied property?
(a) ` 1,00,000
(b) ` 2,00,000
(c) ` 3,00,000
(d) ` 1,50,000
Ans. (b) ` 2,00,000
[June 2023, 1 Mark]
Q.13 The maximum of interest on loan borrowed for the purpose of repair of self-occupied building deductible under section 24 is _________.
[June 2023, Modified, 1 Mark]
Ans. ` 30,000
Q.14 Chitra (age 33 years) received ` 5,00,000 by way of arrear rent from a nationalized bank in April, 2025. The arrear rent relates to assessment year 2024-25 and 2025-26. How much of arrear rent is chargeable to tax for the assessment year 2026-27?
(a) NIL
(b) ` 1,75,000
(c) ` 3,50,000
(d) ` 5,00,000
[Dec. 2023, Modified, 1 Mark]
Ans. (c) ` 3,50,000
Q.15 Sunil, employed in a bank, availed housing loan in the financial year 202223. The interest on money borrowed for construction of residential house (self-occupied by him) for the previous year 2025-26 was ` 2,20,000. He has opted for section 115 BAC. How much of interest on housing loan is deductible?
(a) NIL
(b) ` 30,000
(c) ` 2,00,000
(d) ` 2,20,000
[Dec. 2023, Modified, 1 Mark]
Ans. (a) NIL
Q.16 Pre-construction interest on housing loan is eligible for__________ annual instalments.
[Dec. 2023, 1 Mark]
Ans. 5 (five)
THEORY QUESTIONS
Q.1 How is the unrealized rent dealt with in annual value determination of a house property under the Income-tax Act, 1961? What are the conditions to be satisfied in this regard? [June 2015, 3 Marks]
Ans. The amount of unrealized rent is not to be includible while determining the annual value of a property.
However, the following conditions are to be satisfied for excluding the unrealized rent:
(
(
i) The tenancy must be bona fide.
ii) The defaulting tenant has vacated or steps have been taken to compel him to vacate the property.
(iii) The defaulting tenant is not in the occupation of any other property of the assessee; and
(iv) The assessee has taken all steps to institute legal proceedings for the recovery of unpaid rent or satisfies the Assessing Officer that the legal proceedings would be useless.
Q.2 Write short note on Difference between unrealized rent and arrears of rent, realized in a subsequent year. [Dec. 2021, 3 Marks]
Ans.
Difference between Subsequent collection of unrealized rent and arrears of rent
Unrealised RentArrears of rent
Rent which could not be realized from the tenant, if subsequently realized, gets taxed in the PY of receipt.
However, deduction shall be allowed @ 30% of such unrealized rent.
If the assesses has increased the rent payable by the tenant retrospectively & there is dispute over such increase and later on, the assesses receives the increased rent as arrears, is called arrears of rent.
It is taxable in the PY of Receipt
Deduction of 30% is allowed on such arrears.
Taxable @ 70% of amount receivedTaxable @ 70% of amount received
Q.3 Write a short note on Deemed owner under House Property. [Dec. 2022, 5 Marks]
Ans.
1. Transfer to a spouse: If an Individual transfers any house property to his/ her spouse for Inadequate consideration, such transferor is deemed to be the owner of the transferred House property.
2. Transfer to Minor Child: If an Individual transfers any house property to minor child for inadequate consideration, transferor is deemed to be the owner of transferred house property.
3. Holder of an Impartible estate: Holder of an Impartible estate (Impartible estate is a property which is not legally divisible) shall be deemed to be owner of all properties comprised in the estate.
4. Member of a Co-operative Society, etc.: Member of a co-operative society, company or other AOPs to whom a building or part thereof is allotted or leased under a House Building Scheme of a society/company/association, shall be deemed to be owner of that building or part thereof allotted to him although the co-operative society/company/association is the legal owner of that building.
5. Person in possession of a property: A person who is allowed to take possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act shall be deemed owner of that house property.
6. Person having right in a property by way of lease for 12 years or more: A person who acquires any building by way of lease for a period of 12 years or more shall be deemed to be the owner of that building or part thereof.
NUMERICAL QUESTIONS
Q.1 Mr. Lal is the owner of a commercial property let out at ` 60,000 per month. The Corporation tax on the property is ` 30,000 annually, 60% of which is payable by the tenant. This tax was actually paid on 15.04.2026. He had borrowed a sum of ` 40.00 lakhs from his cousin, resident in Singapore (in dollars) for the construction of the property on which interest at 8% is payable. He has also received arrears of rent of ` 80,000 during the year, which was not charged to tax in the earlier years. What is the property income of Mr. Lal for the assessment year 2026-27? Assuming he has opted out of default tax regime under section 115BAC. [Dec. 2013, Modified, 5 Marks] Ans.
Computation of Income from House Property of Mr. Lal for AY 2026-27
Particulars ` `
Gross Annual Value (60,000 × 12)7,20,000
Less: Municipal Tax paid during the yearNIL
New Annual Value7,20,000
Less: Deduction u/s:
24(a) Standard Deduction (7,20,000 × 30%) 2,16,000
24(b) Interest on Housing Loan (40,00,000 × 8%)3,20,000(5,36,000)
Income from House Property before Arrears or Rent1,84,000
Arrears of Rent received80,000
Deduction u/s 25A: 30% of Arrears of Rent(24,000)56,000
Total Income from House Property2,40,000
Note: It is presumed that the tax has been deducted at source on the amount of interest payable outside India.
Q.2 Ram and Shyam are joint owners (50% each) of a two storied house property (of equal area), the details of which are as follows:
(
i) Ground Floor—let out at a monthly rent of ` 20,000/-.
(ii) First Floor—used for partnership business of Ram and Shyam.
(iii) Ram and Shyam received the following amounts in respect of another property which they had sold it on 31.03.2025:
* Unrealised Rent pertaining to FY 2024-25— ` 50,000/-
* Arrears of rent pertaining to FY 2024-25— ` 1,00,000/-
(
iv) Municipal taxes paid for the entire house property—` 15,000/- p.a.
(v) Interest on borrowings for the entire house property (Joint loan taken from HDFC)— ` 3,00,000/-
Compute the income from house property and also explain how such income will be assessed in the hands of R and S. Assuming they have opted out of default tax regime under section 115BAC. [June 2014, Modified, 6 Marks]
Ans.
Computation of Income form House Property
ParticularsAmount (`)Amount (`)
Gross Annual Value:
Annual rent received- Ground Floor (20,000 × 12)2,40,000
Less: Municipal Taxes (15,000 × ½)(7,500)
Net Annual Value2,32,500
Less: Deductions:
24(a) Standard Deduction 30%69,750
24(b) Interest (3,00,000 × ½)1,50,000(2,19,750)
Income from House Property before Arrears or Rent 12,750
Unrealized rent received50,000 Arrears of Rent received1,00,000 1,50,000
Deduction u/s 25A: 30% (45,000)1,05,000
Total Income from House Property1,17,750
The income from House Property will be included in the hands of the individual members as per Section 26 Hence, Ram and Shyam would show ` 58,875/- each in their individual total income as income from house property.
Notes:
(a) The balance 50% municipal taxes and interest on borrowed capital is allowed as a business expenditure in their business income.
(b) Both unrealized rent and arrears of rent received during the year would be taxable in the hands of the assessee whether or not the assessee is the owner of the property (Section 25A)
