House Property

Section 24 – Deductions from House Property Income

The Indian Government in every way supports the dream of millions of Indians to own a home. Through various of its schemes, government has subsidized the costs of owning a home. Section 24 aims at provide deductions on Rental Income and Interest on Home Loan for the property.

Income from House Property

Income from house property is possible in following scenarios –

  1. Rental Income
  2. Annual Value* – A property deemed to be let out (in cases when you own more than 2 properties)

When the property is occupied by self, annual value is nil. When the property is let out, Gross Annual Value(deemed rent) is the net rent paid. For a property deemed to be let out, rent can be assumed from a similar property let out.

Deductions Allowed under Section 24 Deductions

  1. Standard Deduction – Irrespective of the expenditure done on the property be it maintenance, insurance, electricity or other expenses the deduction is fixed at 30% of the Net Annual Value*. For a self-occupied house, standard deduction is zero as the rental income is zero
  2. Deduction of Interest on Home Loan – A deduction of up to ₹2 Lakh is allowed for the interest paid on home loan. This deduction is irrespective of the fact whether the house is rented out or self-occupied.
    The deduction is valid only when – loan is taken for purchase and construction of property, must have been taken after 1st April 1999 and purchase/construction must be completed within 5 years from the FY when home loan was taken. If any of the conditions are not met the deduction on interest is up to ₹30,000.

Pre Construction Interest – Section 24

  1. If you have taken a loan, you can claim deduction on the interest accrued on the loan pre construction
  2. Deduction is allowed in 5 equal instalments, for example if a property is completed in FY 2019/20 you can claim 20% of interest paid up till the previous FY.
  3. The claim is capped at ₹2 Lakh for an year

Calculation of Income under House Property

Maximum loss set off allowed in a Financial Year is of ₹2 Lakhs. Income under House Property is calculated as –

NAV – Standard Deduction(30% NAV) – Interest on Housing Loan(₹2 Lakh) – Preconstruction Interest

NAV in case of Self Occupied is 0.

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If the loan amount is less than ₹35 Lakhs for a house of value less than ₹50 Lakhs then taxpayer can claim an additional deduction of ₹50,000 under Section 80EE as a part of Section 80 Deductions.

*Annual Value = Gross Annual Value (Rent per month * 12) – Municipal Taxes – Other Taxes paid to local authorities

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