Section 23 of ITA, 1961 : Section 23: Annual Value How Determined

Explanation using Example

Imagine Mr. Sharma owns a property in Mumbai which he has rented out. The reasonable expected rent for the property is ₹30,000 per month. However, he has managed to rent it out for ₹35,000 per month. According to Section 23(1)(b) of The Income-tax Act, 1961, the annual value of his property for tax purposes would be the actual rent received, i.e., ₹35,000 per month, not the expected ₹30,000.

Now, consider that Mr. Sharma's property was vacant for 2 months, and he could only receive rent for 10 months in the year, totaling ₹3,50,000. As per Section 23(1)(c), the annual value would be based on the actua...

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