- Rental Income on a let out property
- Annual Value of a property which is ‘deemed’ to be let out for income tax purposes ( when you own more than one house property)
- Annual Value of the property which is self occupied, which is Nil
Under section 24 of the Income Tax Act you are allowed to make certain deduction from the Net Annual Value of your House Property. Net Annual Value is Gross Annual Value less Municipal Taxes Paid. In case the property is let out, its rent received is your Gross Annual Value, whereas in case of a deemed to be let out property, a reasonable rent of a similar place is your Gross Annual Value. For a self occupied house property the Gross Annual Value is Nil.
There are only 2 deductions available under section 24
- Standard Deduction – Standard Deduction is 30% of the Net Annual Value calculated above. This 30% deduction is allowed even when your actual expenditure on the property is higher or lower. Therefore this deduction is irrespective of the actual expenditure you may have incurred on insurance, repairs, electricity, water supply etc. For a self occupied house property, since the Annual Value is Nil, the standard deduction is also zero on such a property.
- Deduction of Interest on Home Loan for the property – In case you take a home loan for purchase, construction, repair, renewal or reconstruction of your house property – the interest is allowed as a deduction from the Net Annual Value. Deduction for interest on money borrowed is allowed on accrual basis (allowed even though interest may not actually have been paid), so keep claiming your interest deductions each year basis interest that is due (instead of interest that is paid). Do remember that no deduction is allowed for any brokerage or commission for arranging the loan. In case of a self occupied house property, this deduction is allowed to be claimed and therefore, you may in such a case have a loss under the head House Property. The total amount allowed towards this deduction is Rs 2,00,000 beginning assessment year 2015-16. In case of a let out or a deemed to be let out property, the entire interest is allowed as deduction under section 24 till Financial Year 2016-17. From Financial Year 2017-18 deduction for interest on let out property is allowed upto Rs 2 Lakhs. You can start claiming this interest when the construction of your property is complete.
Pre-construction interest – is allowed when you have taken a loan for purchase or construction of a house property (not allowed in case of loan for repairs or reconstruction). The deduction for this interest is allowed in 5 equal installments starting from the year in which the house is purchased or the construction is completed. For example, if construction of your property completed in FY 2016-17, on 25th June 2016, you can claim 1/5th of interest paid up till 31st March 2016 when you file your return for FY 2016-17.
Though pre-construction interest is allowed to be deducted on the basis of 1/5th each year beginning the year in which the construction is completed – the total amount of preconstruction interest and interest on housing loan that can be claimed in a year should not exceed Rs 2,00,000 in any case.
|Type of House Property||Self Occupied||Let Out||Deemed Let Out|
|Gross annual Value||NIL||XXX||XXX|
|Less: Municipal Taxes or Taxes paid to local authorities||Not Applicable||XXX||XXX|
|Net Annual Value(NAV)||Nil||XXX||XXX|
|Less: Standard Deduction||Not Applicable||30% of NAV||30% of NAV|
|Less: Interest on Housing Loan||Restricted to Rs 2 Lakhs||No Limit||No Limit
(From FY 2017-18 restricted to Rs 2 Lakhs)
|Income from House Property||(XXX)||(From FY 2017-18 restricted to Rs 2 Lakhs)||XXX|
Conditions for claiming Interest on home loan deduction – You need to meet all the below 3 conditions to claim this deduction
- Loan has been take after 1st April 1999 for purchase or construction
- The acquisition or construction is completed within 5 years(3 Years till Financial Year 2015-16) from the end of the financial year in which the loan was taken
- There is interest certificate available for the interest payable on the loan
Note that your interest deduction may be limited to Rs 30,000 if any one of these conditions is met –
- Loan is borrowed before 1st April 1999 for purchase, construction, repairs or reconstruction of house property
- Loan is borrowed on or after 1st April 1999 for repairs, renovation or reconstruction of house property.