As per the Income-tax Act, 1961 in reference to house property means any building (or land adjacent to such building) owned by the assessee himself. House property includes flats, shops, office space, factory sheds, commercial buildings, agricultural land and farmhouses etc.
What is Self-occupied property?
A property that is used by the assessee or his family for their own residence. As per the Income-tax Act, if the assessee owns more than one self-occupied property, only two of them can be claimed as self-occupied property.
The taxpayer can choose any of the two beneficial properties as his self occupied property. As the owner himself is residing in it, the question about rent receivable does not arise. Hence there is no income from self-occupied house property however, interest paid on housing loan can be claimed as a deduction.
If the housing loan is taken to purchase or construct the property, then the maximum interest of Rs. 2,00,000/- can be claimed by the taxpayer during a financial year.
What is Let out a property?
Let out property is a property that has been let out by an assessee for monetary consideration i.e. rent. The rent received shall be treated as ‘Income from house property'. There is no ceiling limit for claiming deduction of interest on housing loan on let out property.
House property income (rental income) is taxable. Even if house property is not registered in the name of taxpayer, rental income shall be treated as his income because he is enjoying the ownership right viz. possession of such house property.
What are the eligible deductions allowed to be deducted from house property income?
Rental income received by the taxpayer is taxable under ” Income from House Property”. However Income Tax Act, 1961 has provided some expenditures under Section 24 which can be claimed as deduction.
There are 3 deductions eligible to be deducted from the Net Annual Value of house property namely:
- Standard Deduction of 30% of net annual value.
- Interest on housing loan.
- Municipal taxes paid.
The loss from house property can be set off only up to Rs. 2 Lakh in a year. The balance loss can be carried forward to the next 8 financial years for set off.
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