The following further conditions also need to be fulfilled:

The property is not actually let for the whole or any part of the year; and

No benefit is derived therefrom by the owner.

If, however, the assessee is the owner of more than one property, any one of the properties at the option of the assessee, can be treated as self-occupied. The other house properties, though not actually let, will be deemed to have been let and the income will be chargeable accordingly.

Income is chargeable under the head `house property' on the following basis:

Annual value — XXX

Less: 30 per cent of annual value — XXX

Interest on capital borrowed for purchase, construction, repairs, renewal or reconstruction — XXX

Sub-total — XXX

Total — XXX

The annual value of a property is computed as shown in the Table. In the cases shown in the Table, if the property is let and if any part of the rent cannot be realised by the owner from the tenant, in determining the rent received or receivable, the unrealisable rent should be reduced in arriving at the annual value subject to the rules made in this behalf (Rule 4 of the Income-Tax Rules, 1962).

Self-occupied property: As already stated, if a property is self-occupied and treated so under the I-T Act, the annual value of the property is to be taken as nil. This would obviously mean that no deduction would be available in respect of item one shown in the computation.

The only deduction permissible will be in respect of interest on capital borrowed for purchase, construction, repairs, renewal or reconstruction of the property. The allowability of this will be subject to the following limits: If the property is purchased or constructed with capital borrowed on or after April 1, 1999, and if the purchase or construction is completed within three years from the end of the year in which the capital is borrowed — up to Rs 1,50,000

In every other case — up to Rs 30,000

If the property has been acquired or constructed with borrowed capital, the interest on such borrowed capital payable up to the previous year immediately preceding the previous year in which the property was acquired or constructed can be claimed in five equal annual instalments commencing from the previous year in which the property is acquired or constructed subject to the ceiling limits. This benefit will be available to let out properties as well, but without being subject to this ceiling.

Let out property: If a property is let out either for the whole or a part of the year and is vacant for a part of the year, or if it is fully vacant, or if the property is deemed to have been let out, the annual value is to be determined in the aforesaid manner.

Thereafter, 30 per cent of the annual value would be allowed as a deduction and a further deduction would be allowed in respect of interest on capital borrowed for purchase, construction, repairs, renewal or reconstruction of the property without any limit.

If the property has been acquired or constructed with borrowed capital, the interest on such borrowed capital payable up to the previous year immediately preceding the previous year in which the property was acquired or constructed can be claimed in five equal annual instalments commencing from the previous year in which the property is acquired or constructed.

Property owned by co-owners: If two or more persons own a property and if their shares are definite and ascertainable, each such person's share in the property shall be computed as though he were the independent owner of a house property. This would mean that the person's share in deductions available in respect of municipal taxes and all other deductions shall be prorated on the basis of their share in the property.

If such a property is self-occupied, each co-owner can treat the same as self-occupied and claim that the annual value of such property should be taken as nil, subject however to the fact that only one property at the option of the assessee can be treated as self-occupied.

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