Income From House Property
The rent received from any house property is taxable as Income from House Property and some specific deductions are also allowed from such income.
The Income chargeable under head House Property would be added to the income computed under the other 5 heads of income in the income tax return and tax would be levied as per the income tax slab rates.
Terminologies Associated With Income From House Property
Annual value: This is the actual rent received or to be received by the property owner on renting out the house.
Municipal value: This is the value on house property as calculated by the municipal authorities for imposing municipal taxes.
Fair rent value: Fair rental value is the rent which a similar property with similar features in the same locality would fetch.
Standard rent: The standard rent is determined under the Rent Control Act. If the standard rent has been fixed for any property under the Rent Control Act, the property owner cannot charge a rent higher than the standard fixed rent.
Calculation of income from house property
Gross Annual Value (GAV): This is the highest of:
- Rent received
- Fair market value
- Municipal Valuation
In case the Rent Control Act applies, Gross Annual Value will be the highest of:
Deductions from income from house property
- Standard Deduction: The assesse can claim 30% of the NAV as a deduction towards rent collection, repairs etc., irrespective of what the actual expense incurred is. This deduction will not be permitted in case the GAV is nil.
- Interest on home loan: Deduction can be claimed for interest on home loan under Section 24 of the Income Tax Act. The limit under this section is Rs 2 lakhs.
Conditions associated with claiming tax exemption on home loan interest are:
- Loan should be availed after 1st April, 1999 for property purchase or construction.
- The taxpayer can claim benefits for repairs or reconstruction work of an existing property.
- Processing and prepayment charges shall be regarded as interest payment.
- The purchase or construction needs to be completed within 3 years from the end of the financial year in which the loan was availed.