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
Hello - I took under construction home around Sep-2015, and My EMI started from Feb-2016. Initially Builder promised hand over was around DEC 2016,Due to delay in construction had over date moved to Jun 2017.
Now whether I am eligible to show Paid EMI - principle and interest as Tax benefit for this financial year 2016- 2017
Dear Subrahmanyeswara,
If you get the possession of proerty in Jun 2017, then you can claim PPI + Regular EMIs as tax deduction (subject to ceiling limit, if any) from FY 2017-18 / AY 2018-19.
I have 2 home loans from SBI. How can I get the PAN number of SBI for form 12BB?
Hi,
Please provide SBIs PAN number if you have got the info.
Dear Arjun..please contact the concerned bank or financial institution and get PAN number.
Hello Sir,
Thanks for your reply but Sir please tell me which amount i should take and under which section from may 2015 to dec 2015 underconstruction interest paid is Rs.85423 and principal is Rs.7239 and after possession i.e from Jan 2016 to march 2016 interest is Rs.44272 and principal is Rs.3422.So please tell me which amount should i show while filing itr and under which section whether i have to show the interest amount in negative
Please tell me with amount of interest ane principal that i should show while filing itr1.One more query my stampduty is Rs.142431 as you said i can claim it under section 80c so should i have to show it twice i.e first for registration of flat and second for claiming it or only one time that means for both registring and claiming
As well as please tell me which interest amount can i claim and where i think interest amount will reflect twice one under income from house property and second amount for claiming and will the interest amount under both section will be same or different and should the interest amount under both the section should be negative or only i have to show negative under income from houseproperty and positive for claiming under section?
I took the Pradhan Mantri Jeevan Jyoti Bima of Rs.330/- can i show it while filing itr1 if yes then under which section
Last query i took the flat but i am not residing there i stay with my parents in october i will shift there but the flat is vacant so do i have to submit any document and while filing under the head income of houseproperty should i select the type selfoccupied
Hello Sir,
Thanks for your reply.Sir i am going to shift to that flat so can i show it selfoccupied and from may 2015 to dec 2015 it was underconstruction so i want to know which interest amount i should take the interest i paid when the property was underconstruction or after the possession i paid interest.As well as same query for principal amount which amount i should show under section 80c underconstruction principal amount or after possession principal amount.And which interest amount i can claim after possession or when it was underconstruction.
Dear Samina,
You may show it as 'Let-out property' and show 'nominal rental income' and deduct the interest payments from the rental income.
Yes you have to show the interest amount as Negative figure.
The premium paid towards PMJJBY scheme is eligible for tax deduction under section 80C.
Hi Sreekanth,
I have a doubt regarding LET OUT and SOP cases. my cases is as under -
I have bought an under construction flat in NOIDA(my 1st property) in Oct 2012(FY12-13) and got the possession in Feb'2016(FY15-16). My office location is in DELHI and I reside nearby my office location and don't want to shift to my flat in NOIDA and rather want to LET OUT. Although till date my flat is vacant since i got the possession in Feb'16.
As part of income tax deduction during FY2015-16, my employer provided me the tax rebate of Rs 2 Lacs under section 24(b) considering it is an SOP, when I asked them about my willingness to treat it as LET OUT(because I have paid more than 2 lacs on home loan interest in FY15-16 which also includes PPI amount), the employer explained that it is too late in current FY to treat it as let out and suggested me to leave it as SOP only in the FY15-16 and they will consider it as LET OUT in next FY.
Please suggest should I claim refund in ITR after declaring my flat as LET OUT ?
Dear Rakesh,
Did you file your income tax return for AY 2016-17? (as SOP or let-out)?
I have filed ITR of AY16-17 as SOP but I want to revise it and claim it as LET OUT, is it not possible now...?
Please suggest...
Dear Rakesh..I believe that you can REVISE if your ITR has not yet been processed.
Thanks Sreekanth,
Yes, my ITR is still to be processes by IT dept. but just want to confirm--
1) if my my case is good enough to claim refund by treating my flat as LET OUT from AY16-17 itself ?
2) As I got possession in Feb'16 i.e. only two months in AY16-17, how to calculate rental income ?
thanks
Dear Rakesh,
You can show the actual rental income received.
thanks a lot Sree,
Just last Q,
a) I did not receive any rent as it was vacant for last FY, should I show the notional rent or it will be ZERO ?
b) My flat is still vacant in this case how to calculate rental income for current FY ?
Dear Rakesh ..If you are showing it as Let-out property and kept vacant (2 months), its better to show some notional rent and then calculate the income from house property.
Hi Sreekanth,
-->I purchased flat in DEC-2015.The amount paid by me for home loan from DEC-2015 to MAR-2016 is PRE-EMI (Rs.79245) . From April-16 my actual EMI started. Currently my parents are staying in the house from May-2016.How much i can claim this year ?(Complete PRE-EMI amount can be claimable or is it like PRE-EMI/5 for next 5 years starting from this year. )
--> This is my first own house. My loan amount is 27 lakhs. Property value is 35 lakhs. Can i claim under Sec.80EE. If so how much i can claim?
Thank you in advance.
Dear Naren,
If you have taken possession of the house in FY 2016-17 then you can claim PPI interest (1st instalment) + regular interest payment (subject to ceiling limit) from AY 2017-18.
Kindly read: Under construction property & income tax implications.
You can claim up to Rs 50,000 under Section 80EE, over and above Rs 2 Lakh .
Hi Srikant
Me and my wife, both are working in PSU. We recently purchased ready to move in flat and residing in the flat. For the FY 2016-17, our interest on home loan shall be Rs 5.71 Lakh. As per Section 24 B, we both can claim 2 lakh each for income tax. The following are my queries :
1. Is there any way by which we can claim our full interest.
2. I read that there is no limit if property is rent out. It is quite strange to me if a person is not residing in the property than he can claim full interest and also claim HRA exemption.
Kindly advice.
Regards
Dear Gaurav,
1 - As the property is Self-occupied you can claim up to Rs 2 Lakh (per person).
Kindly note that Section 80EE can be applicable in your case.
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 in 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.
2 - Yes, what to do, it is our tax law :)
Hi Sreekanth,
That's a really nice post on home loans. I have a question on home loan tax benefit as below.
I am a pensioner. I have a house (vacant as we stay in another rented house) and recently, I have also bought a new house in our locality on my wife's name (home maker) and it is still under construction.
We have taken a home loan for this new house and I am a co-borrower to this loan and we are paying interest every month. I have read that we can't get tax deductions when house is in construction, but not sure if that applies to co-borrowers. So, will I be able to claim tax deduction using home loan interest.
Also, do I have to declare it as let-out property in the ITR form for this year if I have to avail tax-benefits on the loan in the future? If so, should the rental income be zero?
Thanks in Advance.
Dear Shankar Ji,
Yes, if the property is under-construction, one can not claim tax benefits (owner or co-owner).
Read : Under Construction property & income tax implications.
You can declare and disclose the rental income (if any) when you take the possession of the property.
Dear Srikant,
I am a PSU employee residing in corporation housing colony provided by the employer with spouse and children at Faridabad. My wife is also working in govt. organisation. I have purchased a Duplex house (say A) in 2010 in Gujarat taking housing loan from employer and registered jointly with spouse . Later on I purchased a flat (say B) in Faridabad in 2013 taking loan from Bank ( In joint name- Spouse & Me as second ) and registered jointly with spouse. I claim tax benefit only on interest on loan taken from my employer on property A (Apprx 1.3 Lac). My spouse claim tax benefit only on interest on property B limited to 2 lac. Since last 20 months both the property is vacant and not receiving any rent. we both file ITR1 and select Self occupied. the interest on property B is more than 2 lacs. How to plan to get more benefit on tax part. Can my spouse claim the entire interest for tax exemption under Let Out? Pl advise.
Thanking You in advance for your suggestions.
Dear JAGRUP,
You can treat the Gujarat property as SOP and the Faridabad property as Let-out property kept vacant for whole year.
On Let-out property as it is vacant, rental income would be NIL but you can claim whole interest payment.
hello sir
I booked a ready flat in thane in April 16 . loan Amount is 26 lacs. my EMI will start from aug 16 and upto mar 17 approximate interest calculation will be 142000 and for principal it will be 13000. my question is can i claim deduction of Rs 50000 under section 80EE over and above the interest of Rs 142000 ? my flat is completed and builder has also received OC but I am not taking possession since i have not paid Development Chargers to builder. can i claim benefit for Income Tax under section 24 for 142000 ?
Dear Nalini ..Yes you can claim Rs 1.42 Lakh + Rs 50k in AY 2017-18 ITR.
hi Sreekanth
I asked the same tax queries in Caclubindia.com but i got totally different view point. Even in my office there is different opinion about this . pls suggest.
Dear Nalini,
Yes, I stand corrected. Apologies.
Once can claim Rs 50,000 only after utilizing the ceiling limit u/s 24.
As your total interest payment is Rs 1.42 Lakh, you can claim up to this limit.
If you take possession of the flat then you can claim tax benefits.
But according to section 24 one can take benefit once construction is completed . For that im providing oc certificate... why possession is required.. any case law is there?
Dear nalini ..Suggest you to get the possession certificate and then you can claim tax benefits on home loan.
Hi Sreekanth,
Under Section 24 there is no ceiling for interest in case of let out property. In case of self occupied property, there is a 2 lakh limit on interest. In that case can 50k under 80EE be utilised over and above 2 lakhs?
Hi Nalini,
Generally onecan claim interest deductions from income only after the construction of the house gets completed.
However the Income Tax Act has a provision to claim the accumulated pre-construction period interest as a deduction in five equal instalments over a period of 5 years starting from the year in which the construction is completed.
E.g. If you book a house under construction in June 2013 and gets a home loan of Rs. 20,00,000 sanctioned from a bank.
Suppose you have to pay an interest totaling to Rs. 200,000 till the year you get possession of house in May 2015,
then you can claim this entire sum of Rs. 200,000 from the FY 2015-16 onwards as RS. 200,000/5 = Rs. 40,000 each year until FY 2019.
This pre-EMI interest is a part of the total Rs. 2,00,000 deduction available in case of self-occupied house property.
Thanks
Aditya
Dear Aditya,
Yes,it can be utilized if the actual interest payments are more than Rs 2 Lakh.
Hi Sreekanth,
Thanks for the wonderful post.
I co-own a independent property with my brother containing 5 flats . We both live in one of the flat and rent the other 4
We declare 2 flats rent income each as sublet property income, we do not claim HRA has we live in a own flat and declare as SOP.
We have joint loan and calculate let out income for each flat using rent -interest paid per each flat -maintenance and file ITR1
Can you please suggest any other option to claim better tax benefit.
Can I add my non working wife as co-owner and benefit from rental income
Dear satish,
Yes, if it is possible you can gift or include your spouse as co-owner of the property (for certain portion of the property) and then she can disclose her portion of rental income in ITR (if her income is below basic exemption limit then filing ITR is not mandatory).
Hi Sreekanth,
Can I make a gift deed and include my wife as part owner of property with the loan still existing (loan is from SBI bank) ?
Does the clubbing income applicable in this case
Dear satish ... I missed 'clubbing of income' clause. Apologies.
If you gift the property, no taxes on this transaction. But the rental income received by your spouse will be clubbed to your income.
Is there no way to avoid clubbing of income?
There is no benefit in transferring property to wife otherwise.
Dear Satish,
You can add her name in the Sale deed as co-owner of the property and receive adequate consideration, in this case it won't be treated as a GIFT.
For example – where the husband to reduce his tax liability transfers an asset (full portion) worth Rs 1,00,000 to his wife for Rs 50,000 . 1/2nd of the income from this asset will be taxed in the hands of the husband. If he receives no consideration, in that case the entire income from this asset will be clubbed with the husband’s income.