Thursday, October 2, 2008

Income/Loss from House Property

One of my senior friends, who constructed a house ten years ago after borrowing House Building Advance asked me last week, whether interest accrued in respect of Housing loan during the year 2008-09, but payable on a later date (as per the House Building Advance recovery procedure) could be deducted from the Income for Income tax purposes during the year 2008-09.

I was surprised, when he told me that he did not deduct such interest for Income tax purposes in the previous years and was under impression it could be deducted only at the time of actual payment of interest. This made me to present this small guide for calculating Income / Loss on House Property.

Use this Calculator after going through the details given below

 

Income/loss on House Property Try Income Tax 2011-12 Assessment year 2012-13 online Calculation tool

Income / Loss from House Property Calculator
Self Occupied or property not in the place of working
Rented Out or Chosen to declare Rental value
Loan taken after 1.4.99 and construction completed Yes No
Enter Annual Rental Value/Rent Received from House Property (Enter 0 (zero) if self Occupied) Rs

Get Rs.

as rebate (30% of Income as Maintenance)
Enter Tax paid on House Property Rs

Enter Interest Paid on House Property

 

Maximum Limit of Interest allowed to be deducted for you is Rs.

Rs
Income / Loss on House Property (negative value shows Loss)
Rs.

 

Interest on loans taken to buy a house is deductible under the Income Tax Act while computing income under the head 'Income from House Property'. The relevant provisions for this are contained under Section 24 of the Income Tax Act. The interest is allowed as a deduction on accrual basis – on due basis, even if it has not actually been paid during the year.

The money can be borrowed for construction, acquisition, repair or reconstruction of property.

Maximum Limit of Interest that could be deducted : Under the Income Tax Act, for the purpose of computing income or loss under the head 'Income from House Property' in respect of a self-occupied house, a deduction of Rs 30,000 is allowed against interest on borrowed capital. However, a deduction on account of interest up to a maximum limit of Rs 1.5 lakhs is available if the loan has been taken on or after April 1, 1999 for constructing or acquiring the house, and the construction or acquisition has been completed within three years from the end of the financial year in which capital was borrowed. In case the property is let out, the entire amount of interest accrued during the year is deductible.

Annual Rental Value : The basis of calculating Income from House property is the "annual value". It is not necessary, as we have seen earlier, that the property should actually be let. Where the actual rent received is more than the reasonable return, it has been specifically provided that the actual rent will be the annual value. Where, however, the actual rent is less than the reasonable rent , the latter will be the annual value. The municipal value of the property, the cost of construction, the standard rent, if any, under the Rent Control Act, the rent of similar properties in the same locality are all pointers to the determination of annual value. From the said annual value tax paid, From the annual value as determined above, municipal taxes are to be deducted.  Also, deduction equal to 30% of the annual value (Rental value-Tax paid), irrespective of any expenditure incurred by the taxpayer (S.24(a)).

Determination of Annual Value of Self Occupied Property : Having understood the concept of Annual Value, we can now go into the details of its actual determination. Self-occupied house property does not generate any rent. Presently, a preferential treatment is given to one self-occupied house property which has not been actually let out at any time in which case, the annual value is taken as ‘Nil’. If, one is fortunate enough to own more than one house property using all of them for self-occupation, he is entitled to exercise an option in terms of which, the annual value of one house property as specified by him will be taken at Nil.

The annual value of the other self occupied house property/ies will be determined on notional basis as if it had been let out. To analyse this let us consider two situations. A person may own a house property, in Bangalore, which he normally uses for his residence. He is transferred to Chennai, where he does not own any house property and stays in a rental accommodation.

In such a case, the house property in Bangalore cannot be used for self-occupation and notional income, therefore, would normally have been chargeable although he derives no benefit from the property. To save the tax payer from hardship in such situations, it has been specifically provided that the annual value of such a property would be taken to be nil subject to the following conditions:

  • The assessee must be the owner of only one house property. 
  • He is not able to occupy the house property because of his employment, business etc., away from the place where the property is situated.
  • The property should not have been actually let or any benefit is derived therefrom.
  • He has to reside at the place of employment in a building not belonging to him.

Other Deductions : From the annual value as determined above, further deductions Tax paid on House Property and Repairs & Collection Charges subject to maximum of 30% of the Annual Value are deductible. Can there be loss under the head Income from House Property ?

This brings us to the question whether there can be any loss under this head. In so far as income from a self-occupied property is concerned and in respect of a property away from workplace, the annual value is taken at nil, no other deductions are allowed except for interest on borrowed capital upto a maximum of Rs.30,000. In such cases, there may be loss upto a maximum of Rs.30,000 (or Rs.1,50,000 as the case may be).

In respect of other type of house property, namely a house property that is let out, there are no restrictions on deductions and therefore, there can be loss under this head. Source of this article is one of the publications of Income Tax Department. Users who want check this publication can click the following link for more details

Detailed Article on Income / Loss on house property sourced from Income tax Department website

Click here to write a comment for this article

56 Responses to “Income/Loss from House Property”

  1. V.Padmanabhan said on Sunday, November 2, 2008, 6:48

    Sir, as the article is fully examined the interest on house building advance I think there is no further comments

  2. Income Tax Relief for 6CPC Arrears under Section 89(1) | Gconnect said on Friday, November 14, 2008, 17:05

    [...] check Income tax calculation on house property and Income tax calculation for [...]

  3. Income tax 2008-09 (assessment year 2009-10) | Gconnect said on Sunday, November 16, 2008, 20:46

    [...] Income / Loss on House Property Calculator [...]

  4. raja said on Tuesday, December 2, 2008, 14:45

    can a person who do not own the land(which is in name of father),takes the loan as a coapplicant for house contruction,and lives in the home,get the benefit for interest accrued under Income/Loss from House Property for income tax

  5. K.V.Ramana Murty said on Tuesday, January 20, 2009, 18:15

    I was under the impression that the 30% rebate on house rental income is to be deducted after deducting property tax if any paid to the Local Bodies . But in the example shopwn, 30% rebate was deducted on the Gross rental income and then Property tax deducted. Please clarify the correcte rule position.

  6. Ashok Kumar DT said on Friday, March 20, 2009, 13:14

    Dear Sir,
    I have availed house building loan along with purchase of site on Nov 2008.
    Building is still under constrction, the house is constructed at my native place and I stay in a rented house at Bangalore. I need clarification regarding, can I avail HRA rebate.

  7. rajagopal said on Saturday, May 23, 2009, 15:46

    I have occupied my own house after the construction during the year 2000-01. During the year 2008-09 I had to spend an amount of Rs. 35,000/- towarding painting charges including cost of paint. Kindly let me know whether I am eligible for any income tax relief for this amount. I am salaried person working in Central Government Department.

  8. Saleemoddin said on Tuesday, June 16, 2009, 18:04

    No, You are not eligible for tax relief. for more information on “income tax sections” and “Income tax calculation” you can visit. https://www.payit.in

  9. Bhanu Pratap said on Monday, June 22, 2009, 15:01

    I am salaried person working in Central Government Department. I purchased a Plot from Awas Vikash Parishad and take a loan for HDFC Bank for purchasing the same plot. I need clarification regarding, can I avail rebate on this Loan for Income tax purpose and also tell me in which ITR form I submit return.

  10. Phani Kumar said on Friday, July 24, 2009, 22:30

    Can we claim Loss on Let Out Property if the said property in in the same location of Employment say Mumbai?

  11. sampath said on Tuesday, July 28, 2009, 15:10

    I have an employee who has two property taken on loan. For one self occupied property, she claims the interest paid on housing loan of Rs. 1.50 lacs as Loss from House property, Claims 30000 deduction u/s 80 C towards the principal payment and also claims a loss of Rs.200000/- stating that it is loss from let out property. is this right?

  12. R.Goel said on Saturday, August 29, 2009, 19:48

    Can loss from house property be set off against salary?

  13. N S NAIR said on Monday, October 19, 2009, 12:57

    I availed HBA in th month of July 2000. From Financial Year 2000-01 to 2008-09, no tax relief availed under “Loss from House Property” towards the accrued interest. From November 20009 onwards, my interest on HBA will be calculated and paid. Can I avail the tax relief for repayment of interest on HBA from November 2009 to March 2010?

    Can I also avail tax relief for repayment of interest on HBA, if paid extra from the 60 per cent arrear received?
    Please let me know by return mail. Thank you.

  14. ajai said on Thursday, December 10, 2009, 13:58

    if working couples purchase a house through home loan ; what would be the % of tax rebate available to them due to this loan (in what proportion) ; what is the rule/instructions

  15. admin said on Friday, December 11, 2009, 9:36

    @ajai
    The property should be jointly owned by them. If they have 50%-50% liability on account of said borrowing, then exemption on interest on hp could be equally allowed to them.
    Pl check up this income tax provision

    http://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/section26.htm

  16. Lokesh said on Sunday, December 20, 2009, 23:00

    Dear Gconnect,

    Thanks a lot for such wonderful article, this is really beneficial and the calculator is funtastic.

    Am working in a company located in Noida(NCR) and own a property located at Indirapuram (Ghaziabad).

    Am living in delhi with my family in an accomodation not owned by me.

    Please sugegst can i claim both

    a). Deduction on Homeloan interest towards property at indirapuram

    b). HRA towards rent paid to my mother for my accomodation in delhi.

    Please suggest how can i save maximum out of it ???

  17. admin said on Monday, December 21, 2009, 12:22

    Lokesh
    ya. You can deduct the loss on house property (which is the interest on Home loan less rental value), while you claim exemption for HRA which is calculated based on the rent paid by you.

  18. Lokesh said on Monday, December 21, 2009, 13:24

    Dear Admin

    Thanks a lot for this valueble sugestion.

    Please also guide on

    “HOW TO CALCULATE THE Rental Value OF THE PROPERTY”

    is there any calculator or givernment guidlines available for the same ??

  19. admin said on Tuesday, December 22, 2009, 8:34

    @Lokesh
    If you receive any rent out of your house property, it’s the rental value

  20. Lokesh said on Tuesday, December 22, 2009, 13:54

    Hi,

    if my property is to ve deemed rented , what shall be the minumum rental value i must declare.

  21. admin said on Monday, December 28, 2009, 8:37

    @Lokesh
    Yes. You can do both

  22. SARABJEET SINGH said on Thursday, January 7, 2010, 15:30

    Dear Sir, Please help in this case – plot in Gurgaon in mother’s name-mrs. manjeet, construction cost Rs.25 lac , Housing loan rs 18 lac in Son name – sarabjeet singh , with mother – mrs manjeet as co applicant , now can the interest paid from the house property be exempt under Income tax act and be deducted from salary ( total taxable income )…house built in 2004 , and interest paid / EMI paid from there on , occupation certificate availed from HUDA in 2004…Also can i claim HRA if i m not staying in that property as work out of Delhi..

  23. SARABJEET SINGH said on Thursday, January 7, 2010, 15:31

    Also help me with the Income Tax Act under the same query to be shown / told to my Learned Income tax officer at delhi .

  24. LAXMINARAYANA said on Thursday, January 14, 2010, 16:59

    iam a govt employee,having availed home loan for my flat at hyderabad, lying vaccant, presently posted at delhi and staying in a rented accomodation.
    i submitted rent receipt for hra exemption for my rented accomodation at delhi and bank sttement for housing loan interest exemption u/s24. my office is telling that i can’t get both hra exemption and interest on housing loan deduction. kindly guide me with relavant rules to convince my administration.

  25. Karan Batra said on Wednesday, February 10, 2010, 14:46

    could you please guide me regarding the Income Tax return required for approval of a home loan…

    Say for eg:- on an income of 5 lakhs per annum, how much loan can i get… and is the whole income included or do they add or dedcut something… basically my question is would they include capital gains for computation of income

    thnx in advance

  26. admin said on Saturday, February 13, 2010, 10:06

    computation of loan amount eligible based on one’s income is purely relative. It would differ with bank to bank. For example SBI calculates loan eligibility based on your monthly income after deducting all your family expenditure per month. If the EMI is Rs.20,000 for loan of Rs.20,00,000, then your monthly income should be considerably more than Rs.20,000 for getting the loan of Rs.20,00,000/-

  27. NIFT said on Monday, February 15, 2010, 12:52

    Is Water Tax paid to Municipality exempt from Rental Income or is it included in the 30% maintenance rebate

  28. admin said on Monday, February 15, 2010, 13:02

    There is no separate exemption for water tax. Maintenance rebate of 30% is allowable.

  29. Yogesh Raithatha said on Saturday, February 27, 2010, 12:56

    Whether loss from House property can be set off against other head of income in the same year?. Return is to be filed yet.

  30. admin said on Saturday, February 27, 2010, 18:24

    loss on house property pertaining to the current year could only be deducted from the income

  31. K.M. Mannil said on Friday, March 26, 2010, 6:24

    I was retired from service on 31.5.09. I had a house loan from a nationalised bank and on retirement, i.e. in the month of June 09 I had closed my loan account. The principal amount at the time of closing was more than Rs.2 lakhs. Kindly clarify whether I am eligible for Rs.1 lakh rebate which is normally allowed for GPF, LIC, etc.

  32. admin said on Saturday, March 27, 2010, 9:16

    yes Housing loan principal amount Up to Rs.1,00,000 could be deducted under Section 80C. However, there will not be any room for other savings

  33. B P SINGH said on Wednesday, July 14, 2010, 11:18

    I have taken housing loan of 51.91 lakh for villa at Greater Noida ,last year interest was Rs.606302/-, and 140917/- as principal component ,rent received was Rs 60000/-,I stay in rented flat at vishakhapatanam and pay rent of Rs.18000/-pm.My basic pay is 58640/-(bp-49940+GP 8700), My EMI is 49799/- pm, total salary 1479330/-.
    Please explain my TAX LIABILITY to file return.
    BPSINGH

  34. admin said on Thursday, July 15, 2010, 16:29

    If you want to calculate your tax liability for year 2009-10 (financial year) you can simply do that by using the online tool provided by Gconnect for calculating income tax

    Click the following link

    http://gconnect.in/pages/it2009/member-index-nologin.php

  35. R.K.Jain said on Saturday, July 24, 2010, 22:02

    can either of claim 100% exemption on interest on hp.If yes then under which rule.

  36. admin said on Sunday, July 25, 2010, 11:28

    If the house is self occupied interest up to Rs.150000 can be deducted from income. In the case of house property not self occupied, 100% interest element can be deducted. However, rental value of house property is required to be included if the house property is rented out

  37. v h rao said on Sunday, September 5, 2010, 18:11

    it is giving very useful meterial about the central govt emolyees. thanq very much

  38. v h rao said on Sunday, September 5, 2010, 18:14

    sir i a in the grade pay of Rs 4200/ i am due for acp ie in jan 2011 pay is 18540/ in merged scale 5000-8000 what is my after get acp .

  39. admin team said on Tuesday, September 7, 2010, 21:33

    Dear rao
    your Gp will be 4600 on MACP

  40. v h rao said on Sunday, September 12, 2010, 22:01

    sir ,recently the court given judgement on sc/st c promotion criteria wef 1997 is there any use for sc/st s .if such any change in fixations from 1/1/06.

  41. KVN GIRIDHAR said on Monday, November 1, 2010, 13:29

    Sir,
    I have a self-occupied house. As such the annual rental value is Nil. House Tax is 1840 and Interest is 66292. So the total of house tax and interest on housing loan should be 68132, whereas the above calculator is showing only 67580. How come? Please clarify me immediatley whether the House Tax paid is fully exempt or not? If exempted, under which section or clause? My office is pressing hard for giving details of savings immediately otherwise they deduct tax from now onwards.

    Thank you Sir

    KVN GIRIDHAR

  42. admin team said on Tuesday, November 2, 2010, 21:39

    dear giridhar
    if self occupied the annual value is NIL.Thus you cannot claim municipal tax or the repairs etc. Only the interest element of Rs. 66292 is eligible if hose loan has been borrowed after 1/4/1999, as per Sec 24(2).

  43. Gconnect » Income Tax 2010-11 (Assessment Year 2011-12) for Salaried Class said on Tuesday, November 16, 2010, 9:27

    [...] Check this previous GConnect article and Calculator for exact details on Income or Loss on House Pro… [...]

  44. R.srihari said on Thursday, November 18, 2010, 11:57

    sir, I am a central govt. employee and have self occupied house at the place of my employment(Visakhapatnam) bought(in 2001) after availing HBA from my employer(GOI).Another flat I acquired(in 2009) at Hyderabad after availing loan from Axis bank. Can I claim IT deduction on both the interests paid towards house loan ? what will be the limit for such deduction?

  45. admin said on Friday, November 19, 2010, 15:02

    This is the circular issued by Income tax for the year 2009-10 in respect of salaried class.

    http://gconnect.in/gc/personal-income-tax/it-calculation-2009-10-for-salaried-class-notified.html

    It says
    “The deduction will also be allowable in respect of repayment
    of loans borrowed by an assessee from the Government,
    or any bank or Life Insurance Corporation, or National Housing
    Bank, or certain other categories of institutions engaged in the
    business of providing long term finance for construction or
    purchase of houses in India. Any repayment of loan borrowed from
    the employer will also be covered, if the employer happens to be a
    public company, or a public sector company, or a university
    established by law, or a college affiliated to such
    university, or a local authority, or a cooperative society, or
    an authority, or a board, or a corporation, or any other body
    established under a Central or State Act.”

    Based on this wordings there is no restriction about number of houses for which deduction of interest on house loans could be claimed. In your case the bank interest (no limit) on second house could be deducted. You may have to declare the rental value and include the same in your income

  46. S. Selvaraju said on Tuesday, November 23, 2010, 11:35

    I have built a house in my native place by availing HBA from my office (GOI) during the year 1999. The principle part is over and now interest on HBA is being deducted. During 2009, I have purchase a flat in Chennai through HDFC bank. My question is (a) whether I can get deuction of interest for both the houses and (b) in the Housing loan taken from HDFC, principle and interest are deducted. Can I show the principle amount recovered by HDFC under savings column i.e. upto Rs.1,00,000/-. Please advise me.

  47. admin team said on Sunday, December 5, 2010, 14:34

    dear selvaraju
    You can avail interest accrued/paid to HDFC only

  48. Sanjay said on Tuesday, December 14, 2010, 23:31

    Sir,
         This year our accounts section says no deduction of Interest part of Housing Loans will be given (for IT  exemption purpose) if it is taken for  HOUSE   EXTENSION/RENOVATION/MODIFICATION…it is not permissible as per IT Rules. Please guide is this objection correct..? I am living with family in it at work place (Lucknow)..and got house renovated & extended in 2005.

  49. girish said on Friday, January 14, 2011, 9:44

    the information is good………

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  55. sidharth saroha said on Wednesday, November 23, 2011, 16:00

    i have a property not in the place of working , i have taken loan in contruction link plan in 2011 and property is under construction. total interest paid during 2011-12 is 43651/- for the year. how can i avail the interest on home loan u/s 24 and how much?

  56. Gconnect » Income tax exemption for the interest on housing loan said on Monday, December 19, 2011, 7:57

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