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How to determine Annual Value of let out house properties?

In respect of a let out house property, the rent received is usually taken as the annual lettable value. When, however, the rent is not indicative of the actual earning capacity of the house, the notional annual value will have to be found and adopted. The standard rent would be the Annual Value in the case of properties, subject to Rent Control Legislation. However, when the actual rent received or receivable is higher than the notional value as calculated above, the higher figure will be taken for the purpose of Income-tax. From the annual value as determined above, municipal taxes are to be deducted if the following conditions are fulfilled:

The property is let out during the whole or any part of the previous year (There is no such deduction in respect of a self-occupied house property).

The Municipal taxes must be borne by the landlord. (If the municipal taxes or any part thereof are borne by the tenant, the same will not be deductible).

The municipal taxes must be paid during the year. (Where the municipal taxes have become due but have not been actually paid, these will not be allowed. The municipal taxes may be claimed on payment basis i.e., only in the year they were paid even if the taxes belonged to a different year). Amount left after deduction of municipal taxes is net annual value.

Source: Income Tax Department

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