What is Section 23 As Per Income Tax Act?

Section 23 Income Tax Act is a significant provision that determines how the taxable income of a person is calculated. This section lays down the rules for calculating the income of an individual, which forms the basis for determining the tax liability. Specifically, Income Tax Act Section 23 (1)(c) provides guidance regarding the annual value of property in certain situations:

• If the property or part of it is let and remains vacant during the whole or any part of the year, the actual rent received or receivable by the owner in respect of that property is less than the sum for which the property might reasonably be expected to let from year to year.

• In such cases, the amount actually received or receivable shall be taken as the annual value for tax purposes.

In summary, Section 23 of Income Tax Act 1961 deals with the determination of the annual value of a property, especially when it remains vacant or the actual rent received is lower than the expected rent. 

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Section 23 Income Tax Act pertains to the computation of income from house property for the purpose of taxation. Here are the key points covered under Section 23:

• Section 23 lays down the method for computing the annual value of a property, which is used as the basis for determining the taxable income from house property.

• The annual value is generally the actual rent received or receivable by the owner of the property, or the municipal valuation, whichever is higher.

• Section 23 allows for the deduction of certain expenses incurred in the maintenance and management of the property to arrive at the net annual value.

• These deductions include municipal taxes paid during the previous year, and a standard deduction of 30% of the net annual value to account for repairs and maintenance.

• Section 23 also covers cases where a property is owned by multiple persons, and each person's share of the income from the property is computed separately. Additionally, it includes provisions for properties let out on rent, self-occupied properties, and deemed to be let-out properties.

The gross annual value of a property is determined based on certain factors such as the rent received or receivable, the municipal valuation, or the fair rental value of the property, depending on the specific circumstances of the case.

Overall, Section 23 of the Income Tax Act provides the framework for computing the income from house property, which forms part of an individual's total taxable income. This is all details about Income Tax Act Section 23.

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The procedure of calculating income under the heading "Income from House Property" begins with determining the property's annual worth. Section 23 of income tax act specifies how to calculate the annual value as well as the rationale behind it.

What is Section 23 as per Income Tax Act?

The annual value of any building or land that belongs to the assessee is subject to taxation under the "Income from House Property" heading. However, the annual value of such property would not be subject to tax under the heading "Income from house property" if it is used for any business or profession that the owner engages in and whose profits are subject to tax as profits or gains from business or profession.

• Where the property is let out throughout the previous year [Section 23(1)(a)/(b)]:

When a house is rented out year-round, the GAV would be greater than the;

1. Expected Rent (ER) 

2. Actual rent received or receivable during the year

• Where let-out property is vacant for part of the year [Section 23(1)(c)]:

When a rented property remains empty for a portion of the year, the loss resulting from the vacancy is deducted from the higher of the actual rent collected or due and the expected rent, with the remaining sum representing the property's GAV.

• In the case of self-occupied property or unoccupied property [Section 23(2)]:

If the property is used just for personal occupancy or if it was vacant for the whole previous year, its annual value is zero because the owner receives no benefit from it.

• Where a house property is let-out for part of the year and self-occupied for part of the year [Section 23(3)]:

The ER for the entire year must be considered when calculating the GAV if a single unit of a property is partially occupied and partially rented out during the year.

• In case of deemed to be let out property [Section 23(4)]:

If the assessee owns more than one residential property for self-occupation, the yearly valuation of any such property will be zero and the income from any such property will be computed under the self-occupied property category at the assessee's discretion.

• In case of a house property held as stock-in-trade [Section 23(5)]:

In some circumstances, properties composed of any building or land can be held as stock-in-trade, and the entire property or any portion of it may not have been rented out for the entirety or any portion of the preceding year.

The annual value of that property or that portion of the property in such situations shall be zero.

• In the case of a house property, a portion is let out and a portion self-occupied:

The income from any portion or part of a property that is rented out must be calculated separately under the "let out property" category, and the revenue from any other portion or part of the property that is used for personal use must be calculated under the "self-occupied property" category.

For the purpose of calculating revenue from home property, the entire property need not be considered as a single unit.

My discussion about Section 23 of income tax act, ends here. I hope this helps:)

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