House Property and Taxes

House Property and Taxes: If you want to know details about Income Tax for House Property and Taxes, then you have reached the right place. Here we will provide you details about what is Income tax house property, tax deductions on house property and lastly steps to calculate income from house property.

House Property and Taxes

House Property

House Property and Taxes

If you are having a house/flat that is on rent or kept vacant than you should know about the house property for tax calculation purposes. Also, this information will be helpful for tax saving if you want to fix an interest that you are paying on home loan taken from the same house against the same property.


What is Income from house property?

Income from house property is mainly the rent which is earned from the House property and it is chargeable to tax. However, sometimes the tax owner has to pay tax on ‘deemed rent’ if the property is not declared to IT-Department.

Income from house property is included if it satisfies all the below conditions:
1. The individual is the owner of the property.
2. The property should include house, buildings, and road.
3. This property can be used by the landlord for any of the purposes expect for running a business or profession.



Tax Deductions on Home Loans

1. Tax Deduction under the Section 24

Under Section 24, Homeowners can claim deduction up to Rs 2 lakh on their home loan interest only when the owner or any of family members live in that property. This condition is also applicable when your house is vacant. When you have given your house on rent, the whole interest on the home loan is given as deduction.

Here, the deduction on the interest is limited to Rs 30,000 if you unable to fulfill any of the conditions given below for the 2 Lakh refund.

All the conditions required for 2 lakh refund are as follows:
1. The home loan should only be taken for purchase and construction of new property.
2. The loan must have been taken after April 1, 1999.
3. Here, the purchase or the Construction should be completed within 3 years from the end of the financial year in which loan was taken.

When is the deduction limited to Rs. 30,000?

When the construction of the property is not completed within a period of 3 years, then the deduction on the home loan interest will be limited to Rs 30,000. Here, 3 years is mainly from the end of the financial year in which the loan was taken. For instance, if the loan is taken on 30th April 2014, then the construction of the loan should be completed until 31st March 2018. As per the Budget 2016, the period for construction of property can be extended for 5 years.

Apart from this, if the loan is taken for reconstruction, repairs or any kind of renewal, only Rs 30,000 will be given for deduction.

How can I claim the tax deduction on a loan taken before the construction of the property is finished?

One cannot claim the deduction on the home loan interest before the construction of the home is completed. The term from borrowing the money until the construction is completed is known as pre-construction period.

One will be able to claim the tax deduction in total 5 installments starting from the year the construction of property is finished.

2. Tax Deduction on Principal Repayment
(Under Section 80C)

Here, tax deduction to claim under the principal repayment is  Rs 1,50,000 which is within the term period of Section 80 for the Financial year 14-15. In order to view the principal repayment amount contact your lender or check your loan installment details.

Condition required to claim the deduction

1. The home loan should only be used for purchase or construction of new house property.
2. The property should not be sold in 5 years from the period you have purchased the property. By doing this, the deduction will be added back into your income in which you sell the property.

3. Tax Deduction for the First-Time Homeowners

Under the Section 80EE, which is currently introduced in the Income Tax Act, offers first-time homeowners tax benefit of Rs 1,00,000.

How to claim Tax Deductions on home loans?

  • The deduction amount is based on the ownership share that you have on that property.
  • The home loan should be own your name. Also, a co-borrower can claim the deductions.
  • Please note that home loan can be claimed from the financial year in which construction is completed.
  • Also, you have to submit the home loan interest certificate to the employer for him so that he can adjust the tax deductions at the source accordingly. The certificate contains details such as ownership share, borrower details, and EMI payments.
  • If you don’t submit the certificate, then you have to calculate the taxes on your own and then claim the refund.

Apart from above, if you are a self-employed or freelancer, then you don’t need to submit any of the documents to the anywhere, not also to the IT department.



Tax Benefits on home loan for Joint owners

In the case of joint owners, who are mainly the co-borrowers of a self-occupied house property can claim a deduction on interest of home loan up to Rs 2,00,000 each. Also, the deduction on principal repayments includes deduction from stamp and registration charges as per the Section 80C along with a limit of Rs 1,50,000 for each joint owners. Here, deductions can be claimed in the same ratio as of ownership share in the property.

Here, you have to take the loan with the another person, but if you are the owner of the property. Then also you will not get tax benefits.


Income from House Property

The owner of the property is taxed under the section ‘Income from house property’ for the income tax return. Also, the Income which is gained from the property which is mainly used for business or profession is not taxed under this Section.

Steps to Calculate income from house property

1. The gross Annual value of the property: The Gross Annual Value of the self-occupied house is zero. It is mainly the rent collected from a house on rent.

2. Less Property Tax: Property tax at the time of payment is allowed for deduction.

3. Net Annual Value: It is the difference between the Gross Annual value and the property tax.

4. Less 30% Standard deduction on NAV: Under section 24 of IT Act, 30% standard deduction on NAV is available. Please note that any other work such as painting and repairing can’t be claimed under 30% deduction.

5. Less Interest on a home loan: Deduction is also available for Interest on the home loan.

6. Income from house property: The total value of your income from house property. Income from house property will be applicable in the slab you fall.

7. Loss of house property: As here, the gross annual value of a property is zero, deduction from the house property will the loss of house property. You will be able to adjust income from income from all the other heads.

We hope that you got all the important information about House and Property Taxes. If you like this article, then please feel free to share this article with your friends and family members.

Leave a Reply

Your email address will not be published. Required fields are marked *