Computation of Income from Deemed Let Out House Property

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By Hiral Vakil on March 19, 2020

As per the income tax act, if you own more than one property, then the second and subsequent properties are considered as deemed let out. Further, rent is calculated based on fair market value and tax is levied on the same. Deemed Let Out Property is also known as Vacant Property.

Up to FY 2018-19, a taxpayer was allowed to claim only 1 property as Self Occupied and the rest were considered as Deemed Let Out. However, from FY 2019-20, a taxpayer can claim 2 properties as Self Occupied. This will help those taxpayers who own more than 1 property.

The calculation of income from Deemed let out house property is similar to Let Out House. However, deduction u/s 24(b) is allowed up to 2 lakhs rupees i.e, same as Self Occupied House.

Guide: Income from House Property and Taxes

How to Determine Taxable Income from Deemed Let Out House Property?

Income from Deemed Let Out Property is calculated as per the following steps:

  1. Calculate Gross Annual Value (GAV)
  2. Deduct Municipal Taxes
  3. Calculate Net Annual Value (NAV)
  4. Deduct Standard Deduction of 30%
  5. Deduct Interest paid on Home Loan u/s 24(b)

Step 1: Calculate Gross Annual Value (GAV)

GAV of Deemed let out property is least of the following:

  • Fair Rent Value (FRV) (Determined using Annual Rent Value of similar properties in your area)
  • Assessed Value (Determined as per Municipal Tax Value of the property)
  • Standard Rent (Determined as per Rent Act)

Step 2: Deduct Municipal Taxes Paid

Municipal tax is nothing but a property tax paid by a taxpayer. The deduction of the full amount of Municipal Taxed paid is allowed. It reduces the Net Annual Value of the property. This deduction is not allowed if not paid by the owner.

Step 3: Calculate Net Annual Value (NAV)

NAV is nothing but GAV reduced by Municipal Taxes Paid.

Calculate Let Out House Property Income