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Example Three

Mr X was allotted a flat under construction in December, 2005 for Rs 20,00,000. The construction of the apartment is completed in April, 2006. It is rented out from April, 2006 to March, 2007at a monthly rent of Rs 15,000. He has taken a loan of Rs 15,00,000 from a housing finance company in December, 2005. The interest outgo on the loan till March, 2006 is Rs 37,500 and a further Rs 1,12,500 from April, 2006 to March, 2007. The principal repayment during 2006-2007 is Rs 1,00,000.

In addition he makes the following expenditure in respect of the house property:
Municipal Taxes: Rs 4,000
Repairs: Rs 2,000

   Home finance
Your guide to taxes
Example one
Example two
Example three
Example four
Example five
Example six

Assuming that the income of X from other source is Rs 2,50,000, his Taxable Income and for Tax the Assessment Year 2007-08 will be:
Computation of Tax
  Rs Rs Rs
Annual Value (15000 x 12)
Less: Municipal Tax 		1,80,000
4,000		    
       
Net Annual Value
Less: Standard Deduction @ 30 %
of NAV 		  52,800 1,76,000
       
Interest:      
Pre-construction (37,500÷5) 7,500    
Post-construction 1,12,500    
    1,20,000  
Total Deduction     1,72,800
Income from House Property     3,200
Income from other Sources     2,50,000
       
Gross Total Income     2,53,200
Less: Deduction U/s 80C     1,00,000
       
Total Taxable Income     1,53,200
       
Income Tax     5,640
Add: Surcharge     NIL
Add: Education Cess @ 2%     113
Net Taxable Income     5,753