Income from house property & deductions allowed under Sec 24 of Income Tax Act
Income from house property includes
income earned by an individual through the property owned by him. The
property would comprise a house, an office building, godown, factory, shop,
auditorium, etc. Income from house property is taxable in the hands of
owner/deemed owner of the property. Owner is a person who is entitled to
receive income from property in his own right.
‘Income from house property’ is
defined by section 22 of the Income Tax Act and the computation of income
falling under this head is governed by sections 23 to 27.
How Income of house property is calculated?
|
Income of house
property
|
Figures in Rs.
|
|
Total annual rental
income value
|
15,000 x 12 =
1,80,000
|
|
Less: Municipal
taxes for the financial year
|
10,000
|
|
Net annual value
(NAV)
|
1,70,000
|
|
Less: Deductions
under Section 24
|
|
|
Standard deduction
(30% of NAV)
|
1,70,000– 51,000 =
1,19,000
|
|
Interest on
borrowed capital (if any)
|
1, 00,000
|
|
Income from house
property
|
19,000
|
Formula for rented Property
Income or Loss on House Property =
(Annual Rental Value of House property – Property Tax) –30% of (Annual Rental
Value-property tax)-Interest paid on Housing Loan
The above calculation
is done for a let out property i.e given on rent. Even if your property is not
let out property, you still need to calculate the notional market rent . The
interest paid on the loan is exempt under Section 24.
Self-occupied property
For self-occupied property (SOP),
rental income will be taken as ‘nil’ in the above calculation. The rental
income is zero in self occupied property as it doesn’t earn any rent.
Accordingly, you cannot subtract municipal taxes nor can you deduct any
standard deduction. This loss from SOP can be adjusted against your income from
other sources such as salary, capital gains, business, etc and hence reduce
your overall tax liability.
Deductions Allowable under Section 24 of Income Tax Act :
Where
a housing property has been acquired / constructed / repaired / renewed with
borrowed capital, the amount of interest payable yearly on such capital is
allowed as deduction under Section 24 of Income Tax Act, subject to the limits
stated below. Penal interest on housing loan is not eligible for deduction. If
a fresh loan has been raised to repay the original loan and the new loan has
been used only for the purpose of repaying the original loan then, the interest
accrued on such fresh loan is allowed for deduction.
1. If
the property is acquired or constructed with the capital borrowed on or after
01-04-1999 and such acquisition or construction is completed within 3 years of
the end of the financial year in which capital was borrowed then the actual
interest payable is allowed as deduction subject to a maximum Rs. 1,50,000/-.
2. In
other case interest up to maximum Rs.30,000/- is deductible.
3. The ceiling of
Rs.1,50,000/- or Rs. 30,000/- is only in case the property is self occupied.
There is no
limit on deduction of interest if the property is let out.
For more information click on:www.incometaxindia.gov.in
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