The steps involved in computation of gross annual value of a property which is let-out throughout the year are already discussed earlier, hence, we will take an illustration for better understanding.
From the following information provided by Mr. Raja in respect of 3 properties rented out by him compute the gross annual value of all the properties.
(*) All the conditions specified for deduction of unrealized rent are satisfied.
Gross annual value will be computed as follows:
Step 1: Compute reasonable expected rent of the property.
Step 2: Compute actual rent of the property.
Step 3: Compute gross annual value.
Based on these steps the computation will be as follows:
Note 1: Amount at Step 1 (,i.e., Reasonable expected rent) is higher of municipal value or fair rent (subject to standard rent).
Note 2: Amount at Step 2 is actual rent after deducting unrealized rent., i.e., Rs. 8,00,000 (9,60,000 – Rs. 1,60,000) in case of property A, Rs. 60,000 in case of property B and Rs. 8,80,000 (Rs. 9,60,000 – Rs. 80,000) in case of property C.
Note 3: Gross annual value will be higher of amount at Step 1 or Step 2.
Source:- Income tax website.