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3. Income from House Property

Income from House Property may be calculated in below cases :

  • Income from Rent on a let out house property.

  • Annual Value of a property which is ‘deemed’ to be let out for income tax purposes , more than one house property.

  • Annual Value of the property which is self-occupied, which is nil.

Income Tax Act Sec. 24 allowed to make certain deduction from the Net Annual Value of House Property. Net Annual Value calculated as gross annual Value less Municipal Taxes Paid. In case the property is let out, its rent received is the gross annual Value, whereas in case of a deemed to be let out property, a reasonable rent of a similar place is gross annual Value. In case of a self-occupied house property the gross annual Value is nil.

Deductions under House Property

a. Standard Deduction

a. Standard Deduction – Standard Deduction is 30% of the Net annual value. This 30% deduction is allowed even when actual expenditure on the property is higher or lower. Therefore this deduction is irrespective of the actual expenditure incurred on insurance, repairs, electricity, water supply etc. For a self occupied house property, since the annual value is nil, the standard deduction is also zero on such a property.

b.Deduction of Interest on Home Loan

b.Deduction of Interest on Home Loan– Deduction of up to Rs.2 lakhs can be claimed on the home loan interest, if the owner/ family reside in the house property. Same procedure applies when the house is vacant. If there is rented out the property, the entire interest on the home loan is allowed as a deduction.

Deduction on interest is limited to Rs.30,000 instead of Rs 2,00,000, if any of the conditions arise as given below .

  • Loan must be utilized for purchase and construction of a property.

  • Loan must be taken on or after 1 April 1999.

  • Construction or Purchase or must be completed within 5 years.

c. Pre-Construction Interest

c. Pre-Construction Interest Loan taken for purchase or construction of a house property, but it is not allowed for repairs & maintenance / reconstruction of property. The deduction for this interest is allowed in 5 equal instalments starting from the year in which the house property is purchased or the construction is completed.
Though pre construction interest is allowed to be deducted on the basis of 1/5th each year beginning the year in which the construction is completed, the total amount of pre-construction interest and interest on housing loan that can be claimed in a year should not exceed Rs 2 lakhs.

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Conditions for Claiming Interest on Home Loan

All the below three conditions can be claim for deduction.
  • a. Loan has been taken after 1st April 1999 for purchase or construction of property.

  • b. The acquisition or construction is completed within 5 years(3 Years till Financial Year 2015-16) from the end of the financial year in which the loan was taken

  • c. Interest certificate must be available for the interest payable on the loan If interest deduction may be limited to Rs 30,000, if below any conditions arises.

  • d. Loan is borrowed before 1st April 1999 for purchase, construction, repairs or reconstruction of house property

  • e. Loan is borrowed on or after 1st April 1999 for repairs, renovation or reconstruction of house property.

Computation of Income under House Property

Type of House Property Self Occupied Let Out Deemed Let Out
Gross annual Value Nil XXX XXX
Less: Municipal Taxes or Taxes paid . Not Applicable XXX XXX
Net Annual Value(NAV) Nil XXX XXX
Less: Standard Deduction Not Applicable XXX
(30% of NAV)
XXX
(30% of NAV)
Less: Interest on Housing Loan Restricted to Rs 2 Lakhs No Limit No Limit
Income from House Property XXX XXX
(From FY 2017-18 restricted to Rs 2 Lakhs)
XXX
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