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 –
- Rental Income
- 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
- 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
- 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
- If you have taken a loan, you can claim deduction on the interest accrued on the loan pre construction
- 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.
- 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.
Managing property documents is one of the most tedious tasks, Sorted AI comes to your rescue here. It automatically organizes all the documents under heads such as insurance, invoice, property documents etc. and takes away the headache of managing these document manually.
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
Gaurav heads Growth & Marketing at Sorted AI. He is an IIT Kanpur Alumnus. He has more than 5 years of work experience in Entrepreneurship & Investment Banking where he worked with Credit Suisse & Tapp Me. He is an avid Keyboard/Percussion Player & a better discount hunter.