How to calculate net annual value of house property?

The value of a property decreases or increases as per demand, market trends and developments. Thus the calculation of the annual value of the property is also important. It is the sum that you might have received had you rented your property. The annual value of a property plays a crucial role in Income Tax return filing hence must be known to everyone. If you understand the

net annual value formula, things will automatically get sorted. When I started learning about it, I came across the formula and evaluated our property’s annual value. If you are interested in doing the same, read this answer for guidance.

How to calculate annual value of property?

I think you have already learnt what aspects need to be included to get the annual value of a property from Mohit and Bhawish’s answers. Let me list them again here

• Actual rent received

• Municipal value

• Fair rent

• Standard rent

Annual Value Calculation = Gross annual value- municipality taxes paid by the owner

So in short suppose you had rented your property for Rs 20,000 per month, your annual income would have been 12*20000 = Rs 240000

Now you must have been paying water bills, electricity bills, maintenance charges and more. Let these charges be Rs 60,000 per year. So your

Annual Value will be Rs 240000-60000 = Rs 1,80,000 per year.

I hope the net annual value formula is clear now.

Hey,

As you know by now, real estate is a great investment opportunity. If you plan to sell your house in the present or the future, you need to know its market value. You also should be aware of all external factors that impact property valuation. I will tell you details about how to calculate annual value of house property.

Computation of annual value of house property - how is it done?

If you rent out your property then the property evaluation will be slightly different. The actual rent received will be taken as the Gross Annual Value of Property for calculation of Income from House Property. Net Annual Value is Gross Annual Value minus Municipal taxes like property tax, sewerage tax, and so on.

It is calculated with the formulae :

Gross Annual Value of Property = Higher of Expected Rent or Actual Rent Received = Higher of Y or A

The net annual value of any property is the amount at which the property is expected to be let out. In the process of calculation, we assume that the tenant is responsible for repairs and maintenance. All necessary expenses need to be borne by the tenant that allows the property to be in a state to command the rent.

It is the rent received by the owner for his property. If the landlord is taking care of maintenance then the rent will be higher. If the obligations for repairs fall on the tenant, then the rent will be less. 

It is the value of the property as set by the municipal authorities. It is done for municipal taxes to be levied on the house. 

It is the rent amount that a similar property will get. 

It is the rent amount that has been fixed under the Rent Control Act.

I hope you have carefully read my answer on the Computation of annual value of house property and understood the points. 

If you have a property that is either kept vacant or rented out, then for income tax calculation purposes, you should know about income from house property. it covers the rent earned from the property which is chargeable to tax. In this answer, I will explain how to calculate net annual value of house property.

For let-out property, actual rent received is according to the agreement between the tenant and the owner.

This means how much rent similar property in the locality can get with similar amenities and facilities.

Rent specified under the Rent Control Act

It is similar to guidance value or circle rate. Rent value is determined by a local municipal corporation.

After the calculation of the above-mentioned values is done, you can calculate notional rental income from house property using this formula.

Z = Higher of D (Municipal Value) or B (Fair Rent Value).

Y = Expected Rent = Lower of C or Z

Gross Annual Value of Property = Higher of Y (Expected Rent) or A (Actual Rent Received)

In most cases, the actual rent received will be the Gross Annual Value of Property for calculating the Income from House Property.

This is how to calculate net annual value of house property.

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I hope now you have a complete understanding of how to calculate net annual value of house property.