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