Taxation - Income TaxQuestion 5623 of 146
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1. The Net Annual Value (NAV) of the house property for the A.Y. 2024-25 is:

Options

A` 1,28,000
B` 1,44,000
C` 1,84,000
D` 2,00,000 (2 Marks)
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Correct Answer

✅ Option C — ` 1,84,000

All Options:

  • A` 1,28,000
  • B` 1,44,000
  • C` 1,84,000 ✓
  • D` 2,00,000 (2 Marks)

Detailed Solution & Explanation

LetuscalculatetheNetAnnualValue(NAV)ofthehousepropertyofMs.Prernafromfirstprinciples:<br>∗∗1.DivisionofHouseProperty:∗∗Thehousepropertyisdividedintotwoparts:−∗∗Self−occupiedportion:∗∗1/3rdofthehouseproperty.−∗∗Let−outportion:∗∗2/3rdofthehouseproperty,usedforcommercialpurposes.<br>∗∗2.Let−outPortion(2/3rd):∗∗−∗∗ActualRentreceived/receivable:∗∗‘12,000‘permonth.Forthefullyear:‘12,000×12=1,44,000‘.−∗∗FairRent(givenforthelet−outportiononly):∗∗‘30,000‘permonth.Forthefullyear:‘30,000×12=3,60,000‘.−∗∗MunicipalValue(fortheentireproperty):∗∗‘2,40,000‘.Forthelet−outportion(2/3rd):‘2,40,000×2/3=1,60,000‘.−∗∗StandardRent(fortheentireproperty):∗∗‘3,00,000‘.Forthelet−outportion(2/3rd):‘3,00,000×2/3=2,00,000‘.−∗∗ExpectedRent:∗∗HigherofMunicipalValue(‘1,60,000‘)andFairRent(‘3,60,000‘),butrestrictedtoStandardRent(‘2,00,000‘).ExpectedRent=‘2,00,000‘.−∗∗GrossAnnualValue(GAV):∗∗HigherofExpectedRent(‘2,00,000‘)andActualRentReceived/Receivable(‘1,44,000‘).GAV=‘2,00,000‘.−∗∗MunicipalTaxespaidbyMs.Prernaon30thJuly,2023:∗∗Municipaltaxesare10TotalMunicipalTaxes=10MunicipalTaxesattributabletothelet−outportion(2/3rd)=‘24,000×2/3=16,000‘.−∗∗NetAnnualValue(NAV)ofthelet−outportion:∗∗NAV=‘GAV−MunicipalTaxespaid=2,00,000−16,000=1,84,000‘.<br>∗∗3.Self−occupiedPortion(1/3rd):∗∗−NetAnnualValue(NAV)oftheself−occupiedportionisalways∗∗Nil∗∗underSection23(2).<br>∗∗4.TotalNetAnnualValue(NAV)ofthehouseproperty:∗∗TotalNAV=NAVoflet−outportion(‘1,84,000‘)+NAVofself−occupiedportion(‘Nil‘)=∗∗‘1,84,000∗∗.<br>Therefore,theNetAnnualValueofthehousepropertyis‘1,84,000.<br>Hence,∗∗OptionC∗∗isthecorrectanswer.\displaystyle Let us calculate the Net Annual Value (NAV) of the house property of Ms. Prerna from first principles: <br> **1. Division of House Property:** The house property is divided into two parts: - **Self-occupied portion:** 1/3rd of the house property. - **Let-out portion:** 2/3rd of the house property, used for commercial purposes. <br> **2. Let-out Portion (2/3rd):** - **Actual Rent received/receivable:** `12,000` per month. For the full year: `12,000 \times 12 = 1,44,000`. - **Fair Rent (given for the let-out portion only):** `30,000` per month. For the full year: `30,000 \times 12 = 3,60,000`. - **Municipal Value (for the entire property):** `2,40,000`. For the let-out portion (2/3rd): `2,40,000 \times 2/3 = 1,60,000`. - **Standard Rent (for the entire property):** `3,00,000`. For the let-out portion (2/3rd): `3,00,000 \times 2/3 = 2,00,000`. - **Expected Rent:** Higher of Municipal Value (`1,60,000`) and Fair Rent (`3,60,000`), but restricted to Standard Rent (`2,00,000`). Expected Rent = `2,00,000`. - **Gross Annual Value (GAV):** Higher of Expected Rent (`2,00,000`) and Actual Rent Received/Receivable (`1,44,000`). GAV = `2,00,000`. - **Municipal Taxes paid by Ms. Prerna on 30th July, 2023:** Municipal taxes are 10% of municipal valuation. Total MV = `2,40,000`. Total Municipal Taxes = 10% of `2,40,000 = 24,000`. Municipal Taxes attributable to the let-out portion (2/3rd) = `24,000 \times 2/3 = 16,000`. - **Net Annual Value (NAV) of the let-out portion:** NAV = `GAV - Municipal Taxes paid = 2,00,000 - 16,000 = 1,84,000`. <br> **3. Self-occupied Portion (1/3rd):** - Net Annual Value (NAV) of the self-occupied portion is always **Nil** under Section 23(2). <br> **4. Total Net Annual Value (NAV) of the house property:** Total NAV = NAV of let-out portion (`1,84,000`) + NAV of self-occupied portion (`Nil`) = **` 1,84,000**. <br> Therefore, the Net Annual Value of the house property is ` 1,84,000. <br> Hence, **Option C** is the correct answer.

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