If you own a property which is a building, plot or land attached to such building, then any rental income from such property will be chargeable to tax under the head “Income from House Property”.
One important point to be kept in mind is that such a property should not have been used for personal business or profession. So even if you own a shop (which is a building) and given it on rent, than income from such shop will be taxed as “Income from House Property”.
What is considered as House Property?
Let’s understand what exactly house property means in order to understand the income from house property.
- House property consists of any building or land attached to that building. The land may be in the form of a courtyard or compound forming part of the building.
- An open plot of land is not considered as House property
- House property includes flats, shops, office space, factory sheds & farm houses.
- Further, house property includes all type of house properties, i.e., residential houses, godowns, cinema building, workshop building, hotel building, etc.
What conditions need to be met?
Now the income will be taxed as income from house property only if following conditions are satisfied:
- Assessee has to be the owner of the property
- The property is being used for any purpose other than for carrying out business & profession.
Income from House Property & Scenarios
Now there are two scenarios of income from house property:
- Income from self-occupied house property is the property which you are using as your own residence throughout the year without letting it out or using it for another purpose and since you are using the property for your own purpose, there will not be any income from the same property. Thus your income from self-occupied house property will always be NIL.
- Income from let out house property: In case if your property is let out, you will receive rent from your tenant(s). This rent income will be taxed as your income from house property. In short rental income received by the owner from letting out the house property will be taxed under income from house property.
Rental income from subletting is not taxed as income from house property since in that case person receiving the rent income from subletting is not the owner of the property.
How to calculate Income from House property FY 2023-24 / AY 2024-25?
First we determine the Gross Annual Value. The gross annual value of a self-occupied house is zero. Whereas in case of Let out house, it is the rent collected.
| GROSS ANNUAL VALUE OF THE PROPERTY |
| Less: Municipal Taxes paid by owner |
| = Net Annual Value (Gross Annual Value – Property Tax) |
| Less: 30% standard deduction on NAV ( under Section 24(a) of the Income Tax Act) |
| Less: Interest on home loan (allowed under Section 24(b)) |
| = Income from house property |
Since the gross annual value of a self-occupied house is zero, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads in the current Assessment Year. Losses that cannot be set off, shall be carried forward up to 8 assessment years.
Income Tax Benefits on home loan for AY 2024-25 (under Old Tax Regime)
Tax benefit u/s 80C
You can claim home loan interest on any number of homes you own. The home loan benefits can be categorised into two parts, principal repayment and interest payment. Benefits for principal repayment are available u/s 80C and the maximum deduction limit u/s 80C is Rs. 1,50,000.
Tax deduction u/s 24
The benefits for home loan interest payments are available u/s 24B and 80EE of the income tax act. As per income tax act, you can have only one home two homes as self-occupied (from FY 2019-20 / AY 2020-21) and for that, you can claim the home loan interest benefits u/s 24B up to Rs. 2,00,000.
For all the let out and deemed let out properties, you can claim the home loan interest benefits u/s 24B without any limits.
- Tax benefit on loan repayment of second house / Let-out property will be restricted to Rs 2 lakh per annum only (even if you have multiple house the limit is still going to be Rs 2 Lakh only and the ceiling limit is not per house property).
- The unclaimed loss if any will be carried forward to be set off against house property income of subsequent 8 years. In most of the cases, this can be treated as ‘dead loss‘.
- I believe that this is a major blow to the investors who have bought multiple houses on home loan(s) with an intention to save taxes alone.
- As of now (till FY 2016-17), interest paid on your housing loan is eligible for the following tax benefits ;
- Municipal taxes paid, 30% of the net annual income (standard deduction) and interest paid on the loan taken for that house are allowed as deductions.
- After these deductions, your rental income can be NIL or NEGATIVE and is called ‘loss from house property’ in the latter case.
- Such loss is currently allowed to be set off against other heads of income like Income from Salary or Business etc. which helps you to lower you tax liability substantially.
- Interest paid on housing loan taken (Section 24).
- Under the new tax regime, set-off & carry forward of loss under Income from House Property is not allowed. However, you can still use it to nullify rental income from a let-out property.
Section 80EE
This was a new proposal which had been made in Budget 2016-17. The same will be continued in FY 2017-18 / AY 2018-19 too. First time Home Buyers can claim an additional Tax deduction of up to Rs 50,000 on home loan interest payments u/s 80EE. The below criteria has to be met for claiming tax deduction under section 80EE.
- The home loan should have been sanctioned during / after FY 2016-17.
- Loan amount should be less than Rs 35 Lakh.
- The value of the house should not be more than Rs 50 Lakh &
- The home buyer should not have any other existing residential house in his name.
New Section 80EEA
Besides the tax deductions under Section 80C and 24b, an individual can now claim up to Rs 1.5 lakh under Section 80EE from FY 2019-20 or AY 2020-21 onwards, subject to below conditions;
- The home loan should have been sanctioned between 1st April, 2019 to 31st March 2020.
- The Stamp duty value of the property should not exceed 45 Lakhs.
- Taxpayer should not own any other residential property on the date of loan sanction.
- This tax benefit will be available from 1st April 2020 (AY 2020-21) and till the end of the home loan tenure (closure).
- The total interest deduction is now Rs. 3.5 lakh (Rs 2 Lakh +
Rs 1.5 Lakh).
Kindly note that the deduction under Section 80EEA is available for home loans from banks and approved financial institutions only. Under Section 24, even interest paid on home loans from friends and relatives is eligible for tax benefit.
To claim tax benefit under Section 24, you should have received possession of your house (interest paid before possession is eligible for deduction over the next 5 years in 5 equal installments). Section 80EE and 80EEA do not impose any requirement of possession or completion of construction. Therefore, Section 80EEA provides you immediate tax relief even if you have purchased an under-construction property.
Continue reading :
Income Tax Deductions List FY 2023-24 | Under Old & New Tax Regimes
Under Construction House : How to claim tax deduction on Home Loan Interest payments?
Disclaimer: All information in this article has been provided by Quicko.com and Relakhs.com is not responsible for correctness of the data. Quicko is engaged in assisting in online ITR preparation and filing. You can sign up with Quicko.com and efile your tax returns within minutes absolutely free. The author can be contacted at anand@quicko.com.
(Kindly note that ReLakhs.com is not associated with Quicko.com) (Post last updated on : 23-Sep-2023))
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Dear Sir,
Myself & my wife , both are co-borrower in flat & co-owners in self occupied flat property. But I am paying full EMI to loan account. My wife is also salaried person.
Can she also claim tax benefit undersection 24B along with me ?. (% ownership not mentioned in anywhere in documents)
Dear Sir,
If a person holds a property in an independent site house constructed (with first floor and second floor) which is let to out for two different persons, Will these two floors forms two separate house property or one house property?
Besides if the same person also hold 2nd house in which he resides and purchased since 5 months old, what are to be take care to taxation purpose.
I thank you for your kind advise
Dear Viswanathan,
It is considered as one house property only (assuming you have one Khatha/Patta only).
The second house is considered as Self occupied one and the first property with two floors as LETOUT Property.
Related articles :
* Self Occupied Property (SOP) & Tax implications
* Income Tax Deductions List FY 2020-21 | New Vs Old Tax Regime AY 2021-22
Dear Sreekanth
I had purchased a flat in Sep-2018 in my(Govt. employee) and my wife’s(Pvt. employee) name.
Home loan is also on our names. But the 100% EMI is paid by myself (my bank a/c) only,
there is no contribution from my wife in EMIs.
Rent earned is shown 50%-50% in our tax returns (in FY 2018-19 ITR).
But in Dec-2019, my wife quit her job.
1. Can I claim 100% home loan interest now as she is unemployed ?
2. Can the rental income be claimed by me 100% or it still need to be 50-50% ?
Please elaborate the tax implications for FY 2019-20 and FY 2020-21.
Mr Reddy,
I purchased second house on 15 February 2019 and it remained under repairs/renovation till 31 March 2019. It was not rented out for the 45 days of the year that I owned it.
May I know if it should still be considered deemed let for IT calculation purposes or not?
Thanks.
Dear Dahiya,
Yes, you can declare it as deemed to be let out.
From FY 2019-20/AY 2020-21, one can own two self-occupied properties.
Read :
* Understanding Tax Implications of Income from House / Property
* Self Occupied Property (SOP) & Tax implications
Mr Reddy, Thank you for your reply.
Considering it as deemed to be let out is the easiest thing to do. My question is that the house has been under my ownership for ONLY 45 DAYS IN THE FY.
A house is practically not expected to be put out on rent on the first day of its ownership. It will require some doing up, howsoever minimal.
Is there a genuine case for it to be shown NOT READY FOR LETTING OUT?
Thanks
Dear Dahiya,
I believe that you can declare it as let-out property but under the category ‘Let out property kept vacant for the whole year’. In this case, annual value is NIL.
However, kindly cross check with a CA if you can declare like this in ITR given your scenario.
Thank you, Mr Reddy.
Dear Sreekant
We purchase a flat with home loan where me and my spouse both are co applicant and co owner of the property. We have rented part of this flat for 5 months in fy 18-19 and for rest of the month it is self occupied. I do not work and hence cannot claim tax benefit, is it possible for me to show the property on let out in my ITR and my spouse show it as self occupied and claim tax benefit.
Thanks
Dear Shweta,
No, you can not claim like that.
The rental income realized has to be apportioned as per the ownership share in the property (by default it is 50:50).
Kindly read : Self Occupied Property (SOP) & Tax implications
Thank you Sreekanth for your prompt reply.
Still my query, can we get the tax benefit for home loan on this as SOP as we rented few rooms of the flat only.
Dear Shweta,
Did you go through the suggested article?
Yes, and I am confused if we can call it partly let out or not as the flat has single entrance. And if it is not then I believe we can not get benefit of SOP.
Dear Shweta,
Had it been partly let-out and pratly SoP for full year, then proportionately one can show it as let-up and Sop.
In this case, in addition to area, the division is also on time-basis, which makes this case a tricky one.
If your property is self-occupied for part of the year & let-out for remaining part of the year, then I believe that the income from your House property shall be calculated for the whole year as ‘Deemed Let-out Property’ only.
You may cross-check with a CA as well.
Thank you Sreekanth. I will consider it as deemed let out then.
i own a falt which is vacant.i have no loan.
can i have loss annual maitenence of flat as tax deduction?thanks
Dear ashok,
If you are considering it as a ‘Self occupied property’ then you can claim LOSS under the head ‘income from house property’.
Related articles :
* Self Occupied Property (SOP) & Tax implications
* Income Tax Deductions List FY 2019-20 | List of important Income Tax Exemptions for AY 2020-21
Hi,
Currently I am leaving in rented house .I have my own flat in same city .
so please tell me can i claim both HRA and loss on home loan?but my own flat is vacant i have not given it on rent .
is there any such criteria that distance between my rented house and Own house should be more then 30KM ,Will you please clarify .
Dear prashant,
You can claim HRA as well as loss on your property.
You can claim it as ‘Let-out property kept vacant’.
I believe that no such restriction is there in case you would like to let it out.
Related article :
Income Tax Deductions List FY 2018-19 | List of important Income Tax Exemptions for AY 2019-20
Sir,
First of all let me thank you for helping the queries and clearing out the doubts. I purchased a house in 2006 and cleared my loan till 2010. I am staying at this house now. In year 2011 i purchased another house in joint ownership with my wife. Its on rent since we purchased it. Since 2011 we are taking tax benefits (50-50%) for the second home we purchased? Now i have been filing IT returns in ITR1 form and showing the interest component + house rent for tax calculations.
Is this correct? Do i need to fill ITR2 for and show my old house as SOP and the new one as deemed out?
Dear Nilesh,
If you have multiple houses then you need to file ITR 2.
Kindly read : Which ITR form to file?
Just to clarify, i don’t have income from one house where i stay currently. There is no loan on it too. The link which you mentioned says that ITR2 shoudl be filed if there is income from multiple houses.
Dear nilesh .. We calculate the income whether it is Self occupied property or let-out one under the head ‘income from house property’.
I believe you should file ITR 2.
Hi Sree,
Me and my wife are working professionals. And we have jointly bought a resale flat in march,17 which is let out now from May,17. We have taken joint home loan towards it but full EMI is getting paid by my wife ONLY. First 3 months(mar,apr,may) interest got debited from our maxgain home loan a/c but this month on wards
ECS mandate(delayed bcz of bank’s system problems) has started from my wife’s salary account as decided by us. Now,
1. Let say Rs.1,50,000 is total annual rent we received from flat
2. Yearly Property Tax=Rs.5000
3. So, total income from house property= 1,50,000-5,000= Rs.1,45,000-(30% std.deduction for maintenance) = Rs. 1,01,500.
4. Let say total interest outgo towards loan amount in this Fiscal year= Rs.1,50,000
5. Loss of income from house property= Rs. – 48,500.
Questions/doubts-
1. As full EMI is deducting from my wife’s a/c, so tax exemption u/s 80C for principal part of EMI can be leveraged only by her. Is my understanding correct?
2. For april and may months, for which interest got deducted from joint home loan a/c, can either of us claim tax exemption u/s 24B? or both of us partly?
3. Income from house property gets adjusted to income of all the owners of property equally in case property is Let Out.
So the concern is in our case also will it be same OR will it be adjusted in my wife’s income only as she is paying EMI.
Ex. In our case as stated above, loss of income = Rs.48,500. Will that be adjusted as 24,250rs loss from her annual income and 24,250rs loss from my annual income?
Seeking your views and suggestions(if any)..
Best Regards..
Dear Raj,
1 – Yes
2 – If she is planning to claim 100% tax exemption, let it be same for the entire Financial year. You may request your banker to issue home loan statement in her name alone.
3 – Ideally, the rental income has to be disclosed by all the owners in their income tax returns as per their ownership share in the property.
Below is the ideal case which is generally suggested :
“The rental income will be distributed among the owners based on the proportion mentioned in the purchase deed or agreement. Further, if there is a housing loan, the proportion in which the loan has been taken should be the same as the proportion in which the property is jointly owned. Once this ratio is decided, it cannot be changed during the period the property is held.”
I Agree. So, does that mean distribution of rental income to all owners are irrespective of loan paying. In that case, loss of income will be adjusted to both of us separately. Am i right?
Dear Raj,
In your case, as your wife is paying 100% EMIs and also going to claim 100% of tax rebate, may be it is advisable the she only declares 100% of rental income in her income tax return.
Ohkk. Thanks a lot Sree. 🙂
Hi Sreekanth,
We are constructing independent house and we will
occupy it in sep 2017. I have taken home loan and the EMI started
from February 2016.
Can I claim both hra (till Aug 2017) and home loan tax excemption
for this financial year 2017 – 2018.
Do we need the occupancy certificate and if yes from
whom we should get this certificate.
Thanks,
Swathi
Dear Swathi,
Yes, you can claim both.
OC is not required for independent house.
Thanks Sreekanth for your quick response.
Swathi
Dear Mr Sreekanth,
I am buying a individual house through loan of Rs. 40L , this is my first loan and first home. My father and myself are sharing the EMI ( 30 years term) of Rs.39,333/- for the first 6 years starting from April 2017 , as he is the co-applicant. I am paying NPS around Rs 50,000/-(employee contri), LIC- Rs. 70,000/-. Kindly advise me on the tax benefits for housing loan, first home benefits under 24B ( or else).
Thank you
Narendran
Dear Narendran ..Kindly go through my latest article on ‘list of income tax exemptions FY 2017-18 / AY 2018-19.’
Hi Srikanth,
I own a house with 2 independent floors. The ground floor is self occupied and the first floor is let out on rent. I have a housing loan on which I am paying a total interest of 4.80 lakhs per year.
According to new provisions in budget 2017 can I claim interest of 2 lakhs for self occupied portion + 2 lakhs for let out portion ?
Can you help me on this.
Thank you
Pradeep
Dear Pradeep,
As per the budget 2017 proposal, the set off loss under income from house property under any other head of income has been restricted to Rs 2 lakh.
So, maximum loss that can be claimed under house property head in your income tax return in a financial year is restricted to Rs 2 lakhs. This limit is applicable on loss due to interest on all properties in total, maximum allowed is Rs 2 lakhs only.
Hi Srikanth,
I have one independent house with two separate portions. Ground floor is self occupied and the first floor is let out on rent. I am paying a total interest of 4.8 lakhs per year. According to latest provisions in the budget 2017, can I claim interest on housing loan 2 lakhs + 2 lakhs ?
Please can you advise?
Pradeep
Hi Srikanth,
House has been taken on rent by my wife and want to know that can she sublet the same to me. If yes, what would the tax implications and is there any materiality limit upto which I can only pay her as rent.
Also, would this income in her ITR be considered in income from business / profession or house property.
Thanks & Regards,
Dear Rajesh ..I believe that this is not possible.
Hi Sreekanth,
Really appreciate your quick response but in light of the recent judgement if the wife is earning husband can pay rent to her. Therefore, I had a this query that this should be applicable incase of sublet too.
Any thoughts?
Regards
Dear Rajesh,
I am not sure on this. If possible, kindly share any link/source regarding the judgement/court trial.
Hi Sreekanth,
Please refer the below link, if this helps!
https://goo.gl/GkQbLz
Regards
Dear Rajesh,
Ok. Thanks for sharing the link.
I am not sure how convincing is this judgment, not sure if this is again challenged at another high court or Supreme court.
So, if you can justify your stand, if there is a notice, you may go ahead based on this judgement.
Hi Srikanth,
I have recently purchased one home on LIC Home loan and that was occupied by my parents and i am staying in different city on rental home, please let me me know whether I can claim HRA and Home loan Tax exemption.
Also please let me know how much is the Amount limit for Home loan Tax exemption and whether it is included in 80c.
Thank and Regards,
Ramu B
Dear Ramu,
Yes, you can claim both.
Principal repayments can be shown u/s 80c up to Rs 1.5 Lakh.
You can declare your property as Self-occupied one.
Hi,
I have bought home in June’2016. After renovation, I moved in the new house in Nov’2017.
From Apr’2017 to Oct’2017 I was living in Rented property. The interest for Year 2016-17 was Rs 3.5 Lacs.
Can I claim tax exemption both Rent and Interest paid.
Dear Rakesh,
Yes, for the respective periods.