In this case there can be two scenarios:

1. The amount of actual rent received for a part of the year is less than the Annual Lettable Value (ALV) (expected rent or potential rent)
   
2. The amount of actual rent received for a part of the year is more than the Annual Lettable Value (ALV) (expected rent or potential rent)
   

The expected rent or ALV is computed for a full year whereas the actual rent is computed only for the period for which it was received. These two values are compared to each other. This is the law as per section 23(1) of the Income Tax Act.

Scenario A:

If the property is let out for a part of a year and the amount of actual rent received is less than the expected or potential rent, then the actual rent shall be the Gross Annual value of the property which shall be considered for computation of ‘income from house property’. In this case, the taxpayer gets the benefit of vacancy allowance.

Scenario B

If the property is let out for a part of a year and the amount of actual rent received is more than the expected or potential rent, then the actual rent shall be the Gross Annual Value of the property which shall be considered for computation of income from house property. In this case, the taxpayer does not get the benefit of vacancy allowance.

Example

Shri Shyam owned a flat which was given on rent for a period of 8 months in FY 2017-18 for a rent of Rs.15000/- per month and in FY 2018-19 for a rent of Rs.10000/-.

The other values are as under:

Standard Rent: Rs. 90,000/-

Municipal value: Rs.100,000/-

Fair rent: Rs. 120,000/-

What will be the Gross Annual Value of the property computation of income from house property?