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”.
Let’s understand what exactly house property means in order to understand the income from house property.
What conditions need to be met?
Now the income will be taxed as income from house property only if following conditions are satisfied:
Now there are two scenarios of 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.
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.
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.
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.
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.
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;
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 :
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))
This post was last modified on September 23, 2023 11:13 am
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View Comments
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.
Ownership is relevant for the previous year As tax is levied only on the income of previous year, annual value of property, owned by a person during the previous year, is taxable in the following assessment year, even if the assessee is not owner of the property during the assessment year.
PLEASE EXPLAIN THE CONTENTS..
Dear NISHAD ..Agree with the point.
What would you like to know??
THANKS Sreekanth.
I wanted to know whether Income from house rent during FY 2016 -17 is taxable during 2016-17 or in 2017-18. Please clear the doubts. How is it interpreted?
Dear NISHAD,
Rental income received during Financial Year 2016-17 (from April 2016 till 31st March 2017) is taxable in that FY itself, you need to file your Income tax return before July 2017, for Assessment year 2017-18.
Financial year starts from 1st April and ends on 31st March (wherein there is income pertaining to the whole year or part of the year). Assessment year is the year immediately following the financial year wherein the income of the F.Y. is assessed.
Hi Sreekanth,
I have two flats in one is self occupied and other is let-out. For Self Occupied Loan is already closed. For Let-out property claiming exemption of 2.9 Lakhs on interest. I understand I will have to shell out more tax from 2017-18 for this.
I am planning to sell self occupied property and invest more to buy a own villa, for self occupation. So I will have to get some new loan for villa. Whether I will be able to claim exemption of 2 Lakhs for that also?
Dear Vasudev,
Yes, on self-occupied property, you can claim Rs 2 Lakh and as you reightly pointed, the loss from Let-out property is restricted to Rs 2Lakh from FY 2017-18.
Kindly read: Budget 2017-18 & 15 important Direct Tax proposals ..
Hi Sreekanth,
Thanks for your informed articles. Please help me with my below query.
I have two flat in same complex. First flat I have given on rent and is loan free. There is ongoing loan for the 2nd flat where I am staying with my family.
Since my 2nd flat is on loan, I want to show this flat as let out and show the first flat(which is actually occupied by tenant) as self occupied so that I can avail full interest payment benefit which is higher that Rs 2 lakh.
Is it permissible as per law to do as mentioned above? Also I want to revise my return file for AY 15-16 and 16-17 with this above mentioned chage which will get me significant refund(more that Rs 30k per year). Can I do so?
Last thing I want do is to show my share of loan is 50(even though my wife is home maker with no income but co-owner of my 2nd flat). I noticed this also increases my tax refund amount compared to when I am showing it as my share 99 and wife's 1. Can you please explain why it is so and can I do as 50-50?
Thanks a lot in advance. I'll eagerly wait for your response.
Dear Atanu,
If you have two self-occupied properties, you can then have a choice to pick either of the two as let-out/self-occupied.
As you have given one flat on rent, there are chances that your tenant(s) may claim HRA quoting your PAN, so suggest you to continue disclosing the income from house property as it is..
If you are the one who is paying entire EMIs, you can claim 100% tax benefit, your spouse can give you a self declaration regarding this (that she is not going to claim tax benefits). Suggest you to do this way from this Assessment year.
Hi Sreekanth,
Thanks for your reply. Your reply raised my some more queries. Please advise.
For the AY 15-16, I was getting my second flat ready to move in and hence around 6 months I occupied both flats and not was on rent. So is that ok in that case if I show my 2nd flat instead of my first flat as let out for remaining 6 months of the year? Also my current tenant has his own small business and I know that he is not claiming HRA for the rent he is paying me for my 1 st flat. In this case can I go ahead and claim my 2nd home to be let out?
Thanks again for your response. I'll look forward to your further advise on this.
Dear Atanu,
You may do so, if you can justify your stand.
Thanks again Sreekanth for taking out time to reply me. I promise this is going to be my last set of queries related to this. Please answer me.
Below are the points I have to justify my case, please confirm if they are strong enough:
I am planning to file revised return file for AY 2015-16 before 31st March 2017 as I have filed my original before 31st July 2014. Am I ok here?
As mentioned previously, out of my two flat either one was vacant for 7.5 months in AY 2015-16. So for this period(which is more than half of the year), I want to declare my bigger flat which is on loan as deemed let out property. But remaining 4.5 months of the year my small flat was on rent(which I want to declare SOP for full year even though I stayed there close to 7 months only) for which I received rent less than 1 lakh and hence my tenant not required to furnish my PAN.
Since we can't show 1 flat as SOP for 7.5 months and other one for 4.5 months, I would like to take the bigger portion to declare my choice.
Please confirm if my point is as per the rule and if I have justifiable points for the same.
Thanks a lot.
Dear Atanu,
If IT dept has already processed your old ITR and assessment has been done, I doubt if one can REVISE his/her ITR in such circumstances.
Suggest you to consult a CA and take advice.
As per Budget 2017 - for loss on let-out property (after calculating loan interest and rentals, deductions) is now limited to 2 Lacs only and remaining can be carry forward. I want to understand if someone has 3 properties as let-out and has loss from property of more than 2 Lacs on each property (after calculating loan interest and rentals, deductions).
Pls clarify can person claim 2 Lacs loss on each property or 2 lacs is combined for all 3 properties.
Dear Gaurav,
I believe that it is Rs 2 Lakh combined for all 3 properties.
In budget, Heads of income have been referred to, "Set-off of loss under the head ‘Income from house property’ against any other head of income shall be restricted to two lakh rupees for any assessment year", so it can be implied as for 'multiple properties'.