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 Shreekant,
I have my own house in Mumbai and staying there now(No loan for this house). I have purchased a new house at my hometown in Tamil nadu in 2015 and my parents are staying there. I am paying the home loan for the same. Can I avail the Tax exemption for the house in my hometown in Tamil Nadu.
Thanks & Regards,
Rajkumar.
Dear Rajkumar,
Yes, you can treat it as either Self-occupied or Let-out (if parents pay rent) and accordingly you can claim income tax benefits.
Read: Self-occupied property & Income Tax implications.
hello
I ,am Mr.Rakesh Sapui age 72,have given my home in rental basis to a client and getting 37500/month as rent from him.
can you tell me how much amount i have to pay as Income Tax to the Govt.
also let me the calculation basics this this.
Thanks & Regards
Rakesh Sapui
Dear Rakesh,
The income tax slab rate is dependent on your other sources of income.
Also, out of this rental income you can deduct property taxes , 30% standard deduction & any interest on home loan (if you have loan) and then arrive at 'net income from your house property'.
Suggest you to use tax calculator available at income tax website to calculate your tax liability , click here ..
Mr Reddy
if house property, being res. flat,
(a) not let bout or
(b) let out only for a part of the year,
what is the tax position.
Your reply will be appreciated.
vswami
Dear Swami..Kindly go through this document..
Hi ,
Its a great blog , My situation is that I (single) have booked and have been allotted a unit in a housing scheme in NCR which is under 50L and also i intend to take loan of less than 35 L , I along with my father (Who owns another house at home town 500KMs away) are the co- applicants for the Unit , but only i will be availing home loan and seek tax exemption , my confusion is -
1.)Will I be eligible to avail 50000 Rs additional tax exemption under sec 80EE for FY 2016-17 , if my loan is sanctioned after 1 April?
2.)If yes, for how many years will i be eligible to avail 50000 exemption.
3.)The builder aims to finish the construction in FY 16-17 , so can i avail Sec 24 tax benefit for this FY.
4.)Can i add/remove/replace co applicants or co borrowers in a home loan in between the loan period , in case when i get married.
Dear Gaurav,
1 - Yes
2 - As of now, its for FY 2016-17 only I guess, we can get to know about the continuity of this section in next year budget (2017-18).
3 - If you get the possession of the property in FY 2016-17, you can claim tax benefits from FY 2016-17 (AY 2017-18) itself.
4 - Adding , absolutely no problem. But removing, you need to check with your banker.
HI Srikanth first off all i thank you that your blog is very hepful. My query regarding this topic is, My father registered house on my name. Now i have got one house on my name, now if i plan to buy a constructing house or constructed house do i am eligible for tax deductions under 24b and 80 EE. kindly can you explain this scenario.
Next can you explain another scenario where sec 24b and 80 EE will applicable to under constructiong house which will be completed with 1 and half year of span.
Thank you in advance
Dear Kasi,
Have you taken any home loan (on existing property)? Are you going to take home loan to buy the new property?
Section 80EE Details:
This is a new proposal which has been made in Budget 2016-17. 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.
Dear sir,
I have a query regarding 2 housing loan.
Joint home Loan in the name of me and my wife disbursed in December 2015. will be getting possession of flat prapose ed oct 2016. We paying approx 70000 till march 16. EMI paid by my wife account to Joint loan account coz her salary account in same bank.
1 So you told earlier 70000 will divided in five parts for next five FY.is that means 14000 for each year under sec.24.
2 the amount for 2016-17 sec.24 is 2.5 lacks+14000.or 2.5lacks only
3 can we both avail 2.5 lack for sec.24 and 1.5 lack for 80c. separately. Where the EMI deduction on joint account done by my wife's account only.
Dear arjun,
1 - Yes (Read : Under Construction property & Income Tax benefits)
2 - Rs 2 Lakh.
3 - If your EMIs amount to interest payment of say Rs 5 Lakh, each of you can claim Rs 2.5 Lakh u/s 24.
I own a land having car parking sheds. I want to let out the sheds for car parking to others on monthly rent. My query is whether the said income will be treated as House Property Income and will I get deduction of 30% u/s 24 as repair etc. ?
Dear Sunit..I believe that you can not claim standard deduction.
Hi Sreekanth, Thanks for nice article.
I have own flat in Mumbai, where I am staying and paying EMI.
I have taken Loan for second flat in Pune in April-15. also will get possession in Feb-16.
Please correct me on below understanding as per above dates.
I assumed Municipal & standard 30% deduction for second home but not mentioned in below statements.
Q1. Can I call Home 1 as SOP and declare actual rent of Home 2 of Feb16 & Mar16 Month only ; Home 1 claim as Principal amount & Interest up to Limit of 200000. For H2 entire Interest claim.
Q2. Can I call Home 2 as SOP; Home 1 as Let Out property and declare market rent for entire year ; So H2 claim as Principal amount & Interest up to Limit of 200000. For H1 entire Interest claim
Thanks and Regards,
AMOL
Dear Amol,
Actually if one has two properties in the same city, he/she can opt for NAY one of the property as SOP and the other one as LET OUT.
Since you are residing in Mumbai, ideally you have to treat the property in Mumbai as SOP (the same would have been recorded in your employer's database also , if your a salaried).
I believe that scenario 1 looks correct to me.
Dear Sreekanth,
I have a query regarding 2 housing loan i have and income from house property. below is a case with me.
1. One home in my home town -
1.1 Full EMI is started from January 2016 - can i claim the pre emi for Jan, Feb n March 15 in financial year 2016 after possession, will be getting possession on May 2016 .
1.2 will give it on rent - expected 10000/-PM
1.3 would like to claim the interest paid under sec 24/B with no limits of 2 lac - i might end up paying around 3.2 lakhs as interest only for financial year 2015-16, can i claim ?
2. Another Flat in Bangalore -
1.1 will be getting possession in June/ July 2016
1.1.1 Pre EMI started from Feb 2014 and ending on Feb 2016.
1.1.2 All these pre emi paid around 3.7 lakhs in 2 years can be divided / 5 and every year it can be claimed up to next 5 years along with actual interest paid after possession in this year subject to a cap of 2 lakhs - is this understanding correct? oe 2 lakhs cap is only when i go n stay there in flat?
1.2. will not stay in this Flat as this is far away from work place( around 43 KM)
1.2.1 Can i still claim 1.1.2 ?
3. on HRA
3.1 since the work place is far from the location where i have acquired the property, i would like to still continue in rented house and claim HRA - is this Ok ? possible ?
Please let me know your view on this .
Thanks,
Nitin
Dear Nitin,
You may get answers for all your queries here;
Under-Construction property & Income Tax implications.
Self-occupied property & IT implications.
Income from house property.
I stay in a rented flat in Mumbai and I am planning to purchase a ready to occupy flat in the same building.
1. If I continue to stay in the rented house and let out my owned flat, can I avail both HRA as well as Interest (sec 24B) deduction from Income tax?
2. If I move in to my own flat, is there any way of availing the Interest (sec 24B)(beyond 200000) deduction from Income tax?
Dear Ravi,
You have to consider it as Self-occupied property. You can not claim HRA. You can claim interest as tax deduction of up to Rs 2 Lakh.
Thanks. On the same query, I own a house at my home town occupied by my parents (I have been showing it as self occupied). I am planning to buy a house at my work place (> 500 km away from home town).
I read somewhere that if an individual owns more than one residential property, any one residential property at the discretion of the individual is considered as self-occupied property and the other residential property owned, even if it is not actually let out, will have to be considered as “deemed let out property” (DLOP).
Using this clause, can I show the hometown house as self occupied and workplace house as deemed let out and claim interest exemption us sec 24 (beyond Rs. 200000) after duly netting deemed rental income.
Dear Ravi,
If you are working in a location which is far away from your native, it can not be treated as self-occupied when you have two properties.
So, ideally you have to treat your property which is near to your work location as self-occupied one.
Also, you may declare the property near to location as the place of resident with your company right?? This may create unwarranted trouble.
Thanks. Appreciate your guidance.
My situation is:
I own a house in my home town, occupied by my parents.
I am purchasing a new house in my workplace with much higher interest amount.
My reading says that I can choose to show any one property as self occupied and one as deemed let out. I will show hometown property as self occupied (by parents) and workplace property as deemed let out (even though I stay there). I will show nominal rental income as per rules. This way I can get claim interest loss without any limits u/s 24(b). I will/can not avail HRA exemption.
Is there any issue you see in this arrangement?
Dear Ravi.. Looks fine. Kindly note this is possible only when a tax assessee has one ore more self occupied properties.
Thanks Sreekanth