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
Hi Sreekanth,
I am terribly confused as which IT form needs to be filled and submitted for IT return. To give you an overview I own an apt and its self-occupied. Your article says "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."
Does that imply that I can fill and submit ITR 2A for AY 2016-17 ? Please do let me know.Thanks.
Dear Celina,
I need to know your other sources of income to advise..
Kindly read: Which ITR form to file?
Other sources of income is none.
I have 2 properties. One is self occupied and other one is deemed let out. I am a pensioner and that is my only source of income. Which ITR form is applicable here? ITR 1 or ITR 2A? The instructions on incometaxindiaefiling.gov.in state that ITR 1 is applicable if you have 'Income from One House Property'. Since I own two properties but earn (deemed) income from only one property is ITR 1 applicable in my case?
Dear Anil,
You have to file ITR 2A.
Hi,
I have 2 properties in the same city, same apartment. I have home loans for both the flats (one was take in the year 2009 and the other flat was purchased in 2016 with another home loan in the year May 2016). The first flat is occupied by myself(me, spouse and kid) and the newly purchased flat is occupied by my parents.
For the property occupied by me, the outstanding loan amount is 8lac, whereas the new one is 25 lac
Need your guidance, how to get tax benefits on the interest paid on both the properties.
Regards
Venkat
Dear Venkat,
You may declare the property in which your residing as SOP and treat the other one as Let-out property.
Dear Srikanth,
I bought an apartment in Vijayawada and cleared all the loan during 2014. Gave it for rent of Rs. 12000. Paying 5200 per year property tax. I am staying in Chennai and paying 15000 rent. I am not claiming for any house rent deduction as I am getting some rent and paying rent. After going through some blogs realized that I am paying more rent than what I am getting. Request your help in understanding my case from an IT tax expert perspective and what should I do.
Dear SR Reddy,
If you are employed and receiving HRA, you can claim it.
Regarding own property, you have to calculate the 'income from house property' by adding rental income minus standard deductions & property taxes.
Hi Sreekanth,
I had taken a home loan for a flat in Noida in Sep'11 and first disbursement was in Dec'11. The construction completed in Sep'14 but registry was not possible because of National Green Tribunal case on Okhla Bird Sanctuary and final offer for possession for registry came in Mar'16 and registry got completed in April'16.
can I avail the tax benefit on home loan in FY2016-17 , If yes then how much
Dear Manoj,
Tricky one. When did you get the possession of the flat? (occupied?)
Dear Sreekanth
I took possession once authorities allowed/released the Occupancy certificate for property which was on-hold due NGT orders. I took possession in April'16.
regards
manoj
Dear Manoj,
Very tricky situation..I believe that you can claim income tax deduction of up to Rs 30,000 only. Suggest you to kindly check with Tax expert too.
In April'16 only once NGT & Authority allowed the official possession
Hi Shreekanth,
Giving CASH in the form of GIFT to parents - How effective it is as far as Tax savings is concerned? Please also specify of there is any regulation associated with it.
Thanks.
Best Regards,
Swapnil
Dear Swapnil,
Suggest you to go through below articles;
Received Gift - Find out if it is taxable or tax-free?
Gifts & Tax implications.
Hi Shreekanth
May I continue to remain living in rented property even though I have my flat in same city (Pune). My flat has loan over it. So that I can simultaneously take benefits of HRA as well as Loss on House Property by giving my flat on rent. I am doing so since my current residence (which is rented one) is comfortably situated from perspective of office commute & kid's school vicinity also.
Thanking you in advance.
Best Regards,
Swapnil
Dear Swapnil,
You may do so, as long as you can justify your point (Is your own property located very far from your work location?)
Thanks Shreekanth. My owned property is 35-40km from work location whereas rented one is approx 20km.
Hi
I booked a flat with builder for which I took home loan from Bank, Booking of flat Jan 2011, Loan taken from June 2011, Possession date : July 2016
I have been giving the Pre EMI & the EMI to the bank, since June 11
Now since I will take the possession in July 16, can I avail the tax benefit on home loan interest which I have been paying since june 11 till date in the FY 2016-17, if yes please guide.
regards
Dear Puru,
Actually, you can claim tax deduction of up to Rs 30,000 only (assuming this is a Self-occupied property).
But there has been a recent change of rule/provision in Budget 2016-17.
"In view of the fact that housing projects often take longer time for completion, it is proposed that clause (b) of section 24 be amended to provide that the Deduction under the said provision on account of Interest paid on Home Loan for acquisition or construction of a self-occupied house property shall be available if the acquisition or construction is completed within FIVE years from the end of the financial year in which capital was borrowed.
This amendment will take effect from 1st day of April, 2017 and will, accordingly apply in relation to assessment year 2017-2018 and subsequent years."
Hi Sreekanth
Frankly I have not understood your reply, I will further clarify the situation
1. As of now the property is not self occupied as the place is not livable, it will be kept vacant, and I will be staying in rented apartment.
2. Now since I have taken loan in june 2011, am I eligible for 20% deduction on the interest amount for last 5 years.
regards
Dear Puru,
Till Assessment Year 2016-17, the construction has to get completed within 36 months to claim income tax deductions on home loan payments, else one can claim up to Rs 30,000 only as tax deductions.
There has been an amendment to this rule as given in my previous comment.
Yes, you can claim the tax deductions from Fy 2016-17/ AY2017-18.
Hi Sreekanth
The construction was already completed in 2011, and I had taken the loan at same time, hope I can go for deductions of 20% per year on home loan interest.
regards
Dear Puru..If the construction has been completed then may I know as to why the possession is happening in 2016?
Dear Shreekanth
Delays were sue to other government agencies providing clearances.
regards
Dear Shrikanth
I am a salaried individual. I have 15 year old (A) house located at 50km from Mangalore which is vacant due to no demand and having only a loan interest of Rs.50000/- (paying Rs.2100pm) to my employer.
I bought a flat (B) at Mangalore in Feb.2011 for Rs.40Lakhs from bank loan and paying an emi of Rs.35000/-. Outstanding loan is 26Lakhs and annual interest outgo is Rs.240000. Flag (B) is self occupied.
I am greteful, if you could advice me, How can I maximise the tax benefit without changing the present occupancy status.
Dear sheshadri,
The only option is to declare the Property B as Let-out one and claim the entire interest payments as tax deduction. For that you have to change the occupancy status, right??
Is there a chance to add anyone (ex-spouse, who is an earning individual) as co-owner and co-borrower?
Hi Sreekanth,
My office is in Powai Mumbai and have property in Thane. As I want to stay near to office I am staying in powai and given my thane flat on rent. I can not claim HRA for the Powai home because of some reasons. Can I do not claim HRA on powai home and show my thane house as self occupied? Please let me know.
Dear Kapil..Have you taken home loan?
Yes I have taken the home loan.
Dear Kapil,
If you have given the property on rent and have a home loan on it, you may show it as 'LET-OUT' property and claim the total interest payments as tax deduction u/s 24.
If you do not want to do this, you can show it as Self-occupied property provided your tenant does not claim his HRA quoting you as a Landlord.
Thanks Sreekanth. Tenant has his own business of interior decorator so he will not quote HRA.
Also one more question on same line if I have two properties in same city one is self occupied(A) and other is let out(B). Both properties have home loan. But self occupied property is having more home loan interest which going beyond 2 lakh and let out property is having lower rent and lower home loan interest. So can show let out property(B) as self occupied and self occupied(A) as let out and claim their interest accordingly? If yes then can I show rent I have received against original let out property(B) as I am getting for original self occupied property(A)?
Hi Sreekanth,
One more thing to check if you missed my above post if I have two properties in same city one is self occupied(A) and other is let out(B). Both properties have home loan. But self occupied property is having more home loan interest which going beyond 2 lakh and let out property is having lower rent and lower home loan interest. So can show let out property(B) as self occupied and self occupied(A) as let out and claim their interest accordingly? If yes then can I show rent I have received against original let out property(B) as I am getting for original self occupied property(A)?
Dear Kapil,
Yes, you have the choice to do so.
If you own 2 properties in same city, it can be beneficial to declare property which has higher Home Loan outstanding amount as Let out and 2nd one as self occupied. It is your choice to declare a particular property as Self occupied or Let out. The property with max interest outflow can be declared as Let out property and other one as self occupied property.
Thanks Sreekanth.
But what is the rent should i show for the higher Home loan outstanding amount properly(A) if i show it as let out. Is it which i am getting from the from the my other property(B) which rented out and showing as self occupied?
Dear Kapil..You may show the average rent that is prevailing in the location.