Any amount received from renting out a residential property, a shop, a building, or a factory building is taxable under the head ‘Income from House Property’.
House Property Income is broadly taxed under the following categories:
Rental income from house property:
The tax on rental income is determined after deducting municipal taxes, standard deduction, and interest paid towards any home loan availed. As per Section 24(a) of the Income Tax Act, a taxpayer is entitled to a 30 % standard deduction from the rental income to cover expenses like renovation/repairs irrespective of the actual expenditure.
The individual earning rental income must be the legal owner of the property to avail of the deductions permissible under the Income Tax. If the individual earning the rental income is not the owner of the property, the same is taxable under the head “Income from Other Sources”.
| Particulars | Amount |
| Gross annual value | XXXX |
| Less:- Municipal taxes paid during the year | (XXX) |
| Net Annual Value | XXXX |
| Less:- Deduction under section 24 | (XXX) |
| Deduction under section 24(a) @ 30% of NAV (Standard Deduction)Deduction under section 24(b) on account of interest on borrowed capital | (XXX) (XXX) |
| Income from house property | XXXX |
Rental income from building and equipment:
In cases where letting out of the building and letting out of other assets are separable, for example, letting out of washing machine and other gadgets along with the house, the rent received for the house will be taxed under the head ‘Income from House Property’ and rent of other assets will be taxed under Income from Other Sources or Profits and Gains of Business and Profession.
Self-Occupied House Property:
A property that is self-owned and used for owner’s family or relative or own residential purposes. An assessee can use two properties for the above purposes and they are considered as self-occupied properties. For self-occupied property, you can claim a deduction of the interest paid on housing loan up to Rs. 2 lakhs and when you use 2 properties as self-occupied, the total interest allowed is Rs. 2 lakhs for both the properties put together.
Co Ownership:
When a property is owned by more than one person jointly, both the owners can claim the deduction benefits on both – principal and interest amount on a home loan. As per Section 80C of the Income Tax Act, both the co-applicants can avail the benefit of up to Rs 1.5 lakh each on principal repaid and up to Rs 2 lakh each on the interest paid by each of the co-owner according to their respective share of the interest paid.
Note: The above tax benefit is available only if each co-owner has purchased or funded the house property. Also, the share of each co-owner is definite and ascertainable
Principal paid on housing loan:
Under section 80C of the Income Tax Act, the maximum deduction allowed for the repayment of the principal amount of a home loan is Rs. 1.5 lakh. Furthermore, this benefit can only be availed in the year these expenses are incurred and House property should not be sold within 5 years of possession. Otherwise, the deduction claimed earlier will be added back to your income in the year of sale.
24(b) Interest on housing loan:
Under Section 24, homeowners can claim a deduction for interest payments up to Rs 2 lakh on their home loan, if the owner or his family resides in the house property. The deduction of up to Rs 2 Lakh applies even when the house is vacant. If you have rented out the property, the entire home loan interest is allowed as a deduction.
Section 80EE Interest on housing loan:
As per Section 80EE of the Income-tax Act, deduction of up to Rs. 50,000 is allowed to an Individual towards interest on loan taken for acquisition of a residential house property. However, the deduction is allowed subject to following conditions:
- The loan should be sanctioned by the financial institution during the period beginning on the 01-04-2016 and ending on 31-03-2017
- The amount of loan should not exceed Rs. 35 lakhs
- The value of residential house property should not exceed Rs. 50 lakhs
- The assessee should not own any residential house property on the date of sanction of loan.
Section 80EEA Interest on housing loan:
The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, partnership firm, company, or any other kind of taxpayer, you cannot claim any benefit under this section.
A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEA. This deduction is over and above the deduction of Rs 2 lakh for interest payments available under Section 24(b) of the Income Tax Act. However, the deduction is allowed subject to following conditions:
- Housing loan must be taken from a financial institution or a housing finance company for buying a residential house property.
- The loan should be sanctioned during the period 1st April 2019 and 31st March 2022.
- Stamp duty value of the house property should be Rs 45 lakhs or less.
- The individual taxpayer should not be eligible to claim deduction under the existing Section 80EE.
- The taxpayer should be a first-time home buyer. The taxpayer should not own any residential house property as on the date of sanction of the loan.