A guide on Income Tax on House Property and related FAQs. Covering income from House Property or Rental / Let-Out property, arrears of Rent, Pre-construction period, Home Loan Interest, part occupied, Unrealized rent, realized Rent, Standard Deduction, examples, self-occupied property
Rental income from a property being a building, land, or an apartment of which the assessee is the owner is charged to income tax under the head "Income from house property".
A property is considered to be a self-occupied when an individual uses it for their own living purpose. If they own more than one property, only one can be considered as a self-occupied property and the rest are considered to be let-out or deemed let out.
A scenario where an individual enjoys a fixed income from a property in the form of rent, it is known as Let out Property.
Two House properties can be taken as self-occupied and other properties if any even if it does not let out should be taken as deemed to be let out.
The amount received on account of arrears of rent (not charged to tax earlier) will be charged to income tax after deducting a sum equal to 30% of such arrears. It is charged to tax in the year in which it is received. Such amount is charged to tax whether or not the taxpayer owns the property in the year of receipt.
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:
Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:
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:
Standard Deduction of 30% is given to compensate annual repair and maintenance expenses incurred on House Property.For Example:
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 Income value||XXXX|
|Less: Municipal taxes paid during the year||XXXX|
|Less: Deduction under section 24||XXXX|
|Less: Deduction under section 24(a) @ 30% of NAV (Standard Deduction)||XXXX|
|Less: Deduction under section 24(b) on account of interest on borrowed capital||XXXX|
|Net: Income from house property||XXXX|
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.