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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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