What Constitutes Income From House Property?

If you thought your mathematical genius has already been invoked and used during your house purchase and you might take it easy from here on, it is not the case. The tag of a property owner comes with responsibilities. The calculations you did to make the transaction possible — from arranging the down-payment to applying for the home loan, and from calculating the stamp duty charges to the registration fee — was just the beginning of a process that is going to stay with you for your lifetime. Homeowners who are busy filing their tax returns will tell you that.

The tax liability

Like most of your assets, your property is taxed under various Sections of the Income Tax (I-T) Act. Homeowners who have a self-occupied property or have rented the same, are taxed under the provisions of "income from house property".

What is house property?

It is imperative for a taxpayer to understand the definition of house property and its tax implications. According to the I-T laws, properties including flats, shops, office space, factory sheds, agricultural land and farm houses are house property and their annual worth is taxed under "income from house property". A house property not only includes the building but also the land appurtenant. This means your courtyard and lawns form part of your house property, and your property annual valuation will be done keeping that into account.  However, an open plot of land is not taxed under "income from other sources" or "business income".

It is worth mentioning here that if you are using your premises to carry out any business activities, you will have to pay taxes under the provisions of "business income" on your property.

Who is liable to pay the tax?

The legal owner of the property pays taxes on the income from house property. The law also defines owner "a person entitled to receive income from a property in his own right is to be treated as its owner, even if no registered document is executed in his name". Also, the tax liability is applicable on freehold as well as lease-hold properties.