# Gross Annual Value (GAV) — Special Cases

The basic GAV rule is `GAV = Higher of (Expected Rent, Actual Rent net of unrealised rent)`. However, special situations modify this rule. Learn each scenario individually because the treatment differs.

## (i) Deemed Let-out Property

A deemed let-out property is one which the assessee could let out but is treated as if let out under the law (e.g., when the assessee owns more than 2 self-occupied houses, the additional ones become deemed let-out).

Since there is no actual letting, Actual Rent (Step 2) = 0.
Therefore: GAV = Expected Rent (Step 1).
Expected Rent itself = Higher of (Municipal Value, Fair Rent), but restricted to Standard Rent (if any).

## (ii) Let-out Property which is Self-Occupied for Part of the Year

If a property is partly self-occupied and partly let-out during the same previous year (sequentially in time, not in area), no adjustment is made for the self-occupied period. The standard comparison rule (Higher of Expected Rent for the full year vs. Actual Rent for the let-out period) applies as usual.

## (iii) Let-out Property which is Vacant for Part of the Year

This is the trickiest case. Compare `Actual Rent (Step 2) + Vacancy Rent` against `Expected Rent`:

Comparison	GAV
(Actual Rent + Vacancy Rent) ≥ Expected Rent	Actual Rent (Step 2) — vacancy benefit reduces GAV
(Actual Rent + Vacancy Rent) < Expected Rent	Expected Rent (Step 1)

The logic: if the property would have fetched the Expected Rent had it not been vacant, the assessee gets the benefit of vacancy and pays tax only on Actual Rent.

## (iv) Partly Let-out and Partly Self-Occupied (by Area)

When part of the house is let out and another part is self-occupied (e.g., ground floor let out, first floor self-occupied):

1. Treat the two portions as two separate properties.

2. Divide all figures in the area/portion ratio — Municipal Value, Fair Rent, Standard Rent, Municipal Tax, and Interest on Loan.

3. Do NOT divide Actual Rent — it relates only to the let-out portion.

4. Compute income separately for each portion (one as let-out, one as self-occupied).

Worked example

### Example 1

Question: Mr. Ganesh let out his house property at ₹20,000 p.m. The tenant vacated on 31.1.26. Unrealised rent was ₹10,000. Compute GAV under three cases of Expected Rent.

Setup:

Let-out period: 1.4.25 to 31.1.26 = 10 months
Vacancy period: 1.2.26 to 31.3.26 = 2 months
Step 2 (Actual Rent for let-out period – Unrealised Rent) = (20,000 × 10) – 10,000 = ₹1,90,000
Vacancy Rent = 20,000 × 2 = ₹40,000
Step 2 + Vacancy Rent = ₹2,30,000

Case 1: Expected Rent = ₹2,10,000

Since ₹2,30,000 > ₹2,10,000 → GAV = ₹1,90,000 (Step 2 wins because vacancy adjusted total exceeds Expected Rent).

Case 2: Expected Rent = ₹2,30,000

Since ₹2,30,000 = ₹2,30,000 → GAV = ₹1,90,000 (when equal, Step 2 still wins).

Case 3: Expected Rent = ₹2,50,000

Since ₹2,30,000 < ₹2,50,000 → GAV = ₹2,50,000 (Expected Rent wins — vacancy did not fully bridge the gap).

⚠️ Common exam mistakes

Treating GAV of deemed let-out property as zero. Even with no actual rent, Expected Rent becomes GAV.
Forgetting to ADD vacancy rent back when comparing in the vacancy case — students often compare Actual Rent alone with Expected Rent.
Dividing Actual Rent in proportion to area when part is self-occupied and part let-out. Actual Rent belongs only to the let-out portion.
Pro-rating Expected Rent for self-occupied period within a year — Expected Rent is always taken for the FULL 12 months in sequential cases.

Reference:

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Gross Annual Value (GAV) – Special Cases

Worked example

⚠️ Common exam mistakes