Archive / Investment Adviser (Level 2) / Concepts in Taxation

nism-series-xb-section-24a-standard-deduction-net-annual-value[ INVESTMENT ADVISER (LEVEL 2) ]

Under Section 24(a) of the Income Tax Act, what is the statutory 'Standard Deduction' permitted from the Net Annual Value (NAV) of a rented house property?

[ A ]A flat 50.0% of NAV.

[ B ]Actual repair bills submitted with physical receipts.

[ C ]A flat thirty percent (30.0%) of the Net Annual Value (NAV), allowed towards repair and collection expenses irrespective of actual expenditure.[ CORRECT ]

[ D ]Zero standard deduction on rental income.

Takeaway

The correct answer is C: Section 24(a) grants a flat 30% standard deduction on the Net Annual Value of let-out house property, applied automatically regardless of the owner's actual repair or maintenance spend.

Derivation

Net Annual Value is first computed as gross rent received less municipal taxes actually paid by the owner. From that NAV, Section 24(a) allows a statutory flat 30% deduction intended to cover repairs, collection charges and general upkeep -- the taxpayer does not need to submit a single receipt or prove any expenditure occurred; the 30% applies even if the owner spent nothing or spent far more. This is a deliberately simple, formulaic rule (unlike, say, business expense deductions which require substantiation), and the exam typically tests whether candidates confuse it with an 'actual expense' regime.

Why the others fail

A — A flat 50.0% of NAV.

Overstates the rate; the statutory figure is 30% of NAV, not 50% -- a common distractor that inflates the deduction.

B — Actual repair bills submitted with physical receipts.

Wrong mechanism entirely: Section 24(a) is a flat statutory percentage, not a reimbursement of actual, receipt-backed repair bills.

D — Zero standard deduction on rental income.

Incorrect; the standard deduction is a fixed 30% of NAV, not zero -- it applies automatically to every let-out property.