Income Tax on House Property Guide & FAQs

Any subsequent recovery of unrealized rent shall be deemed to be the income of taxpayer under the head "Income from house property" in the year in which such rent is realized (whether or not the assessee is the owner of that property in that year).​

Income from house property in the case of a self-occupied property will be either Nil (if there is no interest on housing loan) or negative (i.e., loss) to the extent of interest on housing loan. Deduction in respect of interest on housing loan in case of a self-occupied property cannot exceed Rs. 2,00,000 or Rs. 30,000.

Maximum deduction will not be available in the following situations:

1. If capital is borrowed before April 1, 1999 for purchase, construction, reconstruction, repairs or renewals of a house property;
2. If capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and
3. If capital is borrowed on or after April 1, 1999 but construction is not completed within 3 years from the end of the year in which capital was borrowed. In the above situations only deduction up to Rs 30,000 can be claimed.

Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:

1. If capital is borrowed before April 1, 1999 for purchase, construction, reconstruction, repairs or renewals of a house property;
2. If capital is borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property; and

Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.

Thus, total deduction available to the taxpayer account of interest will be 1/5th of interest pertaining to pre-construction period (if any) +Interest pertaining to post construction period (if any).​

There are 2 deductions available:

1. Standard Deduction
2. Deduction of interest on a home loan

Standard Deduction of 30% is given to compensate annual repair and maintenance expenses incurred on House Property.

Suppose you have rented out a property and the net annual value was Rs. 12 Lakhs in the previous Financial Year. You can deduct 30% i.e. Rs. 3.60 Lakhs for the purpose of repair and maintenance, regardless of the actual amount spent by you on repair and maintenance. Your taxable income would thus be Rs. 8.40 Lakhs in the previous financial year.

In case of Let out and Deemed to be Let Out properties, you can deduct the actual interest paid by you on a loan taken for the purpose of buying, repairing, constructing, renewing or reconstructing the house property (unlimited).

Income chargeable to tax under the head "Income from house property" in the case of a let-out property is computed in the following manner:

Gross Annual value of self-occupied property is ZERO. And property shall not be charged with Income-tax if the same is used by owner for his own business / profession. Hence, in this case, Income from house property is NIL.

Yes, if the loan is taken for purchase, construction, repair, renewal or reconstruction of the house. If the loan is taken for personal or other purposes then the interest on such loan cannot be claimed as deduction.​