doument created on 22 August 2016

Deductions Allowable from House Property Income

  • Municipal tax levied by local authority and borne by owner in respect of house property
    ( For let out properties only )
    First proviso to section 23(1)

    Exemption

    Amount actually paid during the relevant previous year

    Available to

    All Assessee

  • Standard Deduction
    ( For let out properties only )
    Section 24(a)

    Exemption

    30% of the Annual Value (Gross Annual Value- Municipal Taxes)

    Available to

    All Assessee

  • Interest incurred on borrowed capital after acquisition / Construction
    Section 24(b)

    Exemption

    The maximum tax deduction for accrued interest during the year for a self-occupied property acquired, constructed, repaired, renewed or reconstructed with borrowed capital and aquired / constructed within 3 years from the end of financial year in which the loan was taken, is allowed upto a maximum limit of Rs. 2 Lakhs.

    In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed and the entire amount of accrued interest during the year can be claimed as deduction. Such property is treated as let out property and rental income is to be shown in the Income Tax return. Even if the the property is not occupied, it is still considered letout. A notional rent income is computed based on market rates, which becomes taxable after making 30% deduction towards maintenance and repair.

    In case the property has not been self-occupied by the owner due to reason of his employment, business or profession carried on at any other place and he has to reside at that other place not belonging to him, then the amount of tax deduction allowed shall be Rs. 2,00,000/- only.

    Where an assessee owns more than one house property, only one house property at the assessee's option is treated as self-occupied. Other house property(ies) is/are treated as let out.

    Where a house property is let during during the whole or any part of the previous year or any other benefit therefrom is derived by the owner, the house property is not treated as self-occupied.

    If the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the maximum deduction for accrued interest is reduced to Rs 30,000/- only. This limit of 3 years has been increased to 5 years from Financial Year 2016-17 and onwards.

    Available to

    All Assessee

  • Deduction in respect of Interest for Pre-construction Period
    Section 24(b)

    Exemption

    The interest payable by an assessee in respect of funds borrowed for the aquisition / construction of a house property and pertaining to the period prior to the previous year in which such property has been aquired of constructed, to the extent it is is not allowed as a deduction under any other provison of Income Tax Act, will be deducted in five equal installments commencing from the previous year in which the property is aquired or constructed.

    Available to

    All Assessee

  • Standard Deduction from arrears of rent or unrealized rent received subsequently
    Section 25A

    Exemption

    30% of arrears of rent or unrealized rent.

    Available to

    All Assessee

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