Define annual value and state the deductions that are allowed from the annual value in computing the income from house property.

Annual Value and Deductions in Computing Income from House Property:

1. Annual Value Definition: Annual value is the potential rental income that a property could generate in a year. It is the basis for computing the income from house property for tax purposes.

2. Deductions Allowed from Annual Value:

2.1 Standard Deduction: A standard deduction of 30% of the annual value is allowed to cover expenses such as repairs, maintenance, and collection charges.

2.2 Municipal Taxes: The municipal taxes paid during the year on the property are allowed as a deduction from the annual value.

2.3 Interest on Loan: For self-occupied properties, the interest paid on a loan taken for the purchase, construction, repair, or renovation of the property is allowed as a deduction up to Rs. 2 lakh per year. For let-out or deemed let-out properties, the entire interest amount is deductible without any limit.

2.4 Unrealized Rent: If the property remains vacant and the rent is not realized, a deduction for the unrealized rent (subject to certain conditions) can be claimed.

3. Example:
Suppose a property's annual value is Rs. 1,00,000. After deducting the standard deduction of 30% (Rs. 30,000) and municipal taxes of Rs. 10,000, the net annual value is Rs. 60,000.

4. Conclusion:
Annual value is the potential rental income of a property, used for computing income from house property. Various deductions are allowed from the annual value, including a standard deduction of 30%, municipal taxes, interest on loan, and unrealized rent. These deductions help in determining the taxable income from house property and reduce the tax burden on property owners.