Income from House Property and Taxes

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Income from House Property and Taxes

• Jaipurrental.com

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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

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• 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.

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Self-Occupied House Property

• A self-occupied house property is used for one's
  own residential purposes. This may be occupied by
  the taxpayers 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.

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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.

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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.

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How to calculate Income from House Property
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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.

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Deduct Property Tax

• Property tax, when paid, is allowed as a
  deduction from gross annual value of the
  property.

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Calculate Net Annual Value

• Gross Annual Value Property Tax

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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.

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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.

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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)