Basics of House Property

• A house property could be your home, an office, a shop, a building or

some land attached to the building like a parking lot. The Income Tax Act
does not differentiate between a commercial and residential property.
All types of properties are taxed under the head ‘income from house
property’ in the income tax return. An owner for the purpose of income
tax is its legal owner, someone who can exercise the rights of the owner
in his own right and not on someone else’s behalf.
• When a property is used for the purpose of business or profession or for
carrying out freelancing work – it is taxed under the ‘income from
business and profession’ head. Expenses on its repair and maintenance
are allowed as business expenditure.
• Self-Occupied House Property
A self-occupied house property is used for one’s own residential
purposes. This may be occupied by the taxpayer’s family – parents
and/or spouse and children. A vacant house property is considered as
self-occupied for the purpose of Income Tax.
• Let Out House Property
A house property which is rented for the whole or a part of the year is
considered a let out house property for income tax purposes
•  Inherited Property
An inherited property i.e. one bequeathed from parents, grandparents
etc again, can either be a self occupied one or a let out one based on its
usage as discussed above.
• 
Steps to Calculate Income From House Property

• Determine Gross Annual Value (GAV) of the property: The gross annual

value of a self-occupied house is zero. For a let out property, it is the rent
collected for a house on rent.
• Reduce Property Tax: Property tax, when paid, is allowed as a deduction
from GAV of property.
• Determine Net Annual Value(NAV) : Net Annual Value = Gross Annual
Value – Property Tax
• Reduce 30% of NAV towards standard deduction: 30% on NAV is allowed
as a deduction from the NAV under Section 24 of the Income Tax Act. No
other expenses such as painting and repairs can be claimed as tax relief
beyond the 30% cap under this section.
Tax Deduction on Home Loans

 Tax Deduction on Home Loan Interest: Section 24

• Homeowners can claim a deduction of up to Rs 2 lakh on their home loan
interest, if the owner or his family resides in the house property. The
same treatment applies when the house is vacant. If you have rented out
the property, the entire home loan interest is allowed as a deduction.
• However, your deduction on interest is limited to Rs. 30,000 instead of Rs
2 lakhs if both the following conditions stand satisfied:
• a. The loan is taken on or after 1 April 1999
• b. The purchase or construction is not completed within 5 years from the
end of the FY in which loan was availed