Annual Value Section 23

Case 1: If the building is let out throughout the previous year

Gross annual value shall be deemed to be

(a) The sum for which the property might reasonably be expected to let from year to year i.e. expected
rent, OR
(b) The actual rent received or receivable
Whichever is higher

Expected rent = Municipal Value or Fair rental value whichever is higher. But it cannot exceed standard rent.

Case 2: If the building is self occupied

The property which is in the occupation of the owner for his own residence.

Case 3 : If the building could not be occupied due to employment

If the house cant be actually occupied by assessee because of reason of his employment/business or
profession, he has to reside at an other place in a building not belonging to him.

Annual Value of 2 & 3 shall be NIL if the property is not let out during any part of previous year.

Deductions from such property

In respect of such property interest on capital borrowed for purchase, construction, repair, renewal or
reconstruction is deductible up to Rs. 30,000/-

However if the loan is taken on or after 01.04.1999 for purchase or construction and construction is
completed within 3 years from the end of financial year in which capital was borrowed, the total deduction of
interest shall not exceed Rs. 2,00,000/-

Case 4 : If the property is deemed to be let out

In case there is more than one self occupied property then except one house ,remaining houses shall be
deemed to be let out at the option of assessee and the gross annual value shall be the expected rent.

Case 5: Property which is let out but remained vacant during the whole or part of the previous
year

(i) If because of such vacancy actual rent is less than expected rent then actual rent shall be the
gross annual value
(ii) If actual rent is more than expected rent, then actual rent or expected whichever is higher shall be
the gross annual value.

Case 6: Property let out during one part of previous year and self occupied during another part of
the previous year.

The valuation of such property shall be done as if let out throughout the previous year as in Case 1.

Notes: 1 Actual rent is taken only for the period it is actually let out while expected rent is always taken
for the entire previous year.

For better presentation, in this case only, if FRV is not given then actual rent should be assumed
as FRV.
 SUMMARY TABLE

Let Out Could not Self Deemed PLO/PSO Vacant

Occupy Occupied to be Let
out
GAV a)ER or Nil ER aA)ER Actual rent
b) AR NAV Nil (12MONTH
Whichever NAV S)
is higher b) Actual
rent
Deduction No limit Rs Rs No limit No limit No limit
of Interest 30,000/- or 30,000/- or
Rs. Rs.
2,00,000/- 2,00,000/-

Questions that can be asked.

1) Explain annual value and deductions available under head house property. Or
2) Explain how to compute annual value if property is let out throughout the year.