Income From House Property: Deductions & Tax Planning

Income from house property is taxable in the hands of its owner. We will talk here about the deduction and income calculation from let-out property and self occupied property. 

Deduction from Let-out (or deemed to be let-out) Property

Standard Deduction: The total deduction is available is 30% of the net annual value of the property.

Interest on Borrowed Capital: Any repair, acquire, construction, repair, renovation and reconstruction with borrowed capital is allowable without any limit as a deduction. Interest payable for the pre-consturction period i.e. prior to the previous year in which such property has been acquired or constructed, shall be deducted in five equal annual instalments commencing from the previous year in which the house was acquired or constructed.

The amount is not deductible like expenditure not specified as specially deduction u/s 24 as electricity, water supply, salary of watchman, liftman, etc.

Self Occupied Property

Standard Deduction: Not Allowed

Interest on Borrowed Capital: This section is applicable to only own`ed house property. The privilege of this section allows an assessee to claim deductions upto INR 2, 00, 000 with effect from AY 2015-16 [Rs.1,50,000 for A.Y.2014-15] for acquisition or construction of the house. The whole arrangement is unavailable under the following conditions:

  • The whole construction or acquisition of the house should be over by 3 years from the FY during which the capital was borrowed.
  • Certificate from the borrower in respect of the due principle and interest.

The section offers a deduction for loan taken for acquisition or construction of house on or after April 1, 1999.

A strategic use of these deductions can save a lot of tax for an assessee. However, when it comes to determining the exact tax liability, make sure that you avail a professional’s assistance who can understand your current affairs in detail and offer you with the best guidance. Be smart and choose the most effective way to pay for your taxes!

If there is loss showing while calculating income from house property then it can be adjusted against income from any other house property.

Other Deductions Eligible from Total Income

Deduction U/s 80EEThis section allows an assessee to claim deductions in respect of Home Loan Interest. The fulcrum of this section relates to an individual assessee only and offers a cushion of upto INR 1, 00, 000. An assessee can claim deductions upto INR 1, 00, 000 as interest payable on home loan for two successive financial year. However, this amount is purely based on cumulative nature. For example- If Mr. X has paid a home loan interest of INR 25, 000 in the present AY, then he can claim the balance INR 75, 000 in the next AY. Under any case, the total deduction amount shall not exceed INR 1, 00, 000. The whole section is applicable under the following conditions:

Complete information about section 80EE

  • The assessee is buying a house for the first time.
  • Home Loan amount should not exceed INR 40 Lakhs.
  • Home Loan should be availed only from a recognized Financial Institution.
  • The loan should have been sanctioned in between April 1, 2013 to March 31, 2014.

If you claimed as deduction u/s 80EE, shall not be deductible against income from house property.

Deductions under 80C: The benefit of this section is applicable to taxpayers who have availed a loan for the purpose of purchasing a residential house property. Usually, the installment is computed on the basis of Equated Monthly Installment or otherwise more commonly known as EMI. There are two sections which compromise of EMI- Principle and Interest. An assessee can claim deduction for the principle amount. The scope also allows inclusion of expenses such as stamp duty and other expenditure made on account of facilitating house loan. The total amount available for deduction is INR 1, 50, 000 for every AY.

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