Income from House Property
When is Income taxable under 'Income from house property' head
The income from house property is added to your income only when it fulfills three basic conditions –
1. You are the owner of that property.
2. Property consist of any buildings and(or) land. Building can be residential house, factory building, shops, offices etc.
3. The property is used for any purpose except used by you(owner)for the purpose of running your own business or profession.
Income and tax on self occupied property
A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence.
An Individual is eligible to claim two properties as Self-occupied if it is used for own or family’s residential purpose. In that case, the Net Annual Value will be nil. Such a benefit can only be claimed for one house property.
Deductions
An Individual will be eligible to claim Interest on borrowed capital as deduction under section 24. In the case of a self-occupied house deduction on account of interest on borrowed capital is subject to a maximum limit of ₹2,00,000 (if loan is taken on or after 1 April 1999 and construction is completed within 3 years) ₹30,000 (if the loan is taken before 1 April 1999).
Income Computation
Income chargeable to tax under the head “Income from house property” in case of a self-occupied property is computed in following manner :
Particulars | Amount |
Gross annual value | Nil |
Less:- Municipal taxes paid during the year | Nil |
Net Annual Value (NAV) | Nil |
Less:- Deduction under section 24 | – |
Deduction under section 24(a) @ 30% of NAV | – |
Deduction under section 24(b) on account of interest on borrowed capital | XXX |
Income from house property | (XXX) |
From the above computation it can be observed that “Income from house property” in the case of a self occupied property will be either Nil or negative(loss), and can’t claim municipal tax, standard deduction except interest on borrowed capital. This loss will reduce the total taxable Income and thereby reduce overall tax liability.
Income and tax on Let out Property
A property not occupied by the owner for his residence will be treated as a let out property. Rent received from a let-out property chargeable to tax under the head ‘Income from house property’.
Deductions
- Standard Deduction
Standard Deduction is 30% of the Net Annual Value calculated above. This 30% deduction is irrespective whether your actual expenditure on the property is higher or lower.
2. Regular Deduction
An Individual will still be eligible to claim Interest on borrowed capital as deduction under section 24. In the case of a let-out house deduction on account of interest on borrowed capital is deductible without any maximum limit
Income Computation
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:
Particulars | Amount |
Gross annual value Higher of 1. Expected Rent (Municipal valuation upto maximum of rent determined under rent control Act) 2. Actual Rent receivable | XXXX |
Less:- Municipal taxes paid by owner paid during the year | XXXX |
Net Annual Value (NAV) | XXXX |
Less:- Deduction under section 24 | – |
Standard deduction @ 30% of NAV. No actual expenses of house property are deductible | XXXX |
Deduction under section 24(b) interest on borrowed capital | XXXX |
Income from house property | XXXX |