Income from

House Property and Taxes

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Jaipurrental.com
 Basics of
House Property Tax

The Income Tax Act does not differentiate between a
residential and commercial property. A house property
could any of the following:
 Residential Property
 Commercial Shop
 A Building
 Hostels
 Land attached to the building like a parking lot
 
Any property that is used for the business or carrying
our freelancing work is taxable under the 'income from
business and profession' head. Expenses incurred on
property repair and maintenance is considered 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 also considered as
self-occupied for the purpose of Income Tax. A
homeowner can claim his 2 properties as self-occupied
and remaining house as let out for Income tax
purposes.
Let Out House Property

A residential property which is used for the rental
purpose, either whole or parts of the property for the
entire year or 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.
How to Calculate
Income from
House Property

Calculate Gross Annual Value (GAV):


The GAV of a self-occupied house is nil (zero). If the
owner has property in some other city and he is living
in a rented house in another city for employment
purpose, the annual value will be considered as nil. For
a let out property, it is the rent collected for a house on
rent.
 Deduct Property Tax

 Property tax, when paid, is allowed as a deduction
from gross annual value of the property.
 Calculate
Net Annual Value
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=Gross Annual Value – Property Tax

 Deductions
Under Section 24

 Standard deduction: 30% on NAV is allowed as a
deduction from the NAV under Section 24 of the
Income Tax Act.
 Interest on borrowed capital or home loan interest:
Deduction under Section 24 is also available for
interest paid during the year on housing loan
availed.
 Loss from
House Property

 When you own a self-occupied house, since its GAV
is Nil, claiming the deduction on home loan interest
will result in a loss from house property. This loss
can be adjusted against income from other heads.
 Example

Income from House Property Amounts (in Rs.)
Total Annual Rental Income (Rs.) 3,00,000
Less: Municipal Taxes Paid (Rs.) 20000
Net Annual Value 2,80,000
Deductions under Section 24
Standard deduction (30% of NAV) 84,000
Home Loan Interest 96,000
Total Deduction 1,80,000
Annual Taxable Value 1,00,000 (2,80,000 – 1,80,000)
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