• Computation of net value of let out property:- For let out properties, the gross annual value will be the greater of the following three amounts.
  
  
• Municipal value of the property


• Actual rent received during the year;
• Fair rent i.e. rent of similar properties in the same or similar locality.

Out of the gross annual value, municipal taxes actually paid during the year have to be deducted to arrive at the net annual value. The municipal taxes are to be deducted in the following cases:-

• The property is let out during the whole or any part of the previous year (There is no such deduction in respect of one self-occupied house property for which 'nil' annual value is adopted).


• The Municipal taxes must be borne by the landlord (If the Municipal taxes or any part thereof are borne by the tenant, it will not be allowed).


• The Municipal taxes must be paid during the year (Where the municipal taxes become due but have not been actually paid, it will not be allowed. Similarly, the year to which the taxes relate to, is also immaterial).

Under section 24 the following expenses will be allowed as deductions from the net annual value arrived at after deducting municipal taxes from the gross annual value:-

• Repairs & Collection Charges: 30% of the Annual Value. It is a statutory deduction not dependent on the actual expenditure incurred on repairs or collection by the owner.


• Interest: When money is borrowed on interest and the property in question is either acquired or constructed or repaired or reconstructed with such borrowed funds, interest payable thereon is deducted from the annual value. The amount of interest payable for the relevant year should be calculated and claimed as deduction. It is immaterial whether the interest has actually been paid during the year or not.
  
  
• Entitled deductions for let out property:- The deductions available for computing House Property Income are the following.
  
  
  • 30% of the net annual value for repair and maintenance and rent collection expenses for the property
  • Interest on money borrowed to build, buy or repair the property;
    

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