From the following informations, the annual value of house property will be

Municipal value = Rs. 1,60,000

Fair rental value = Rs. 1,40,000

Actual rent received @ 20,000 p.m. = Rs. 2,40,000

Municipal tax/local taxes = Rs. 16,000

The correct answer is - Rs. 2,24,000

Key Points

• Annual Value Calculation
  • The annual value of a house property is determined based on the higher of the municipal value or the fair rental value, but not exceeding the actual rent received.
• Step-by-Step Calculation
  • Municipal Value: Rs. 1,60,000
  • Fair Rental Value: Rs. 1,40,000
  • Actual Rent Received: Rs. 2,40,000 (Rs. 20,000 x 12)
  • Municipal Tax: Rs. 16,000
  • Step 1: Higher of Municipal Value and Fair Rental Value = Rs. 1,60,000 (since 1,60,000 > 1,40,000)
  • Step 2: Compare with Actual Rent Received = Rs. 2,40,000 (since 2,40,000 > 1,60,000)
  • Step 3: Adjust for Municipal Tax = 2,40,000 - 16,000 = Rs. 2,24,000

Additional Information

• Gross Annual Value (GAV)
  • Defined as the highest of the municipal value, fair rental value, or actual rent received.
  • It is the basis for calculating the income from house property for tax purposes.
• Municipal Taxes
  • Taxes paid to the local authority are deductible from the Gross Annual Value.
  • They must be paid by the owner and not the tenant to be considered for deduction.
• Net Annual Value (NAV)
  • Calculated as Gross Annual Value minus the municipal taxes paid by the owner.
  • Used to determine the income from house property for tax calculation.