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Income from House Property

A house property can be anything whether it is your house, your shop or office, and also can be a building. The income tax does not differentiate between any of your commercial place or your house where you live. All the properties are taxed by income tax department under this head. An owner is a legal owner for the objective of income tax, owner is someone who can make use of owner’s every right and the right should not be use of on behalf of someone.

If the property is being used for any kind of business then it will be taxed under the head of ‘Income from Business and Profession’.

These are the different Types of House Property:

1. Self-occupied property:

If someone is using the property for personal residential for their own purpose then it can be known as Self-occupied property. This house property can be occupied by any of the family member of the tax payer. It can be his or her spouse or parents and children. Even if the property is vacant then too it will be considered as a self-occupied property for the purpose of income tax act.

2. Let out house property:

If the house is given on rent for entire year or any of the part of the year then it will be known as Let out House Property.

3. Inherited Property:

In this kind of property, property is hand down from parents or grandparents, it can be either self-occupied property or let out housing property.

How to Calculate?

Step 1: Calculate Property’s GAV (Gross Annual Value).

Step 2: Decrease Property Tax (When paid).

Step 3: Find Out NAV (Net Annual Value).

Step 4: Decrease 30% of Net Annual Value regarding standard deduction.

Step 5: Decrease Home Loan Interest (as per Section 24).

Step 6: Find out Income from house property.

Deduction on Home Loans:

1. SECTION 24:

If the house property is self-occupied then the owner can claim up to INR 2 Lacs on the loan interest as a deduction. This will be applicable if the house is vacant too. If the owner has rented out the property then the whole amount of home loan interest will be allow for deduction.

The amount of INR 2 lacs will be replaced to INR 30 thousands if any of the following condition are satisfied:

Condition 1:

  • If the home loan is taken on or after 1st April 1999,
  • If the construction or purchase is not completed within five years from when the loan was taken.

Condition 2:

  • The loan is taken for renewal and was taken on or after 1st April 1999.

2. Deduction On Principal Repayment:

The deduction is limited to INR 1.5 lacs under Section 80C. These are the condition for claiming deduction under this section is given below:

  • The loan will be taken for purchase or construction for new property,
  • The property shall not be sold off within five years from when you took the possession.

3. Deduction Under Section 80EE:

Tax benefit under Section 80EE is up to Rs. 50 thousands.

4. Deduction Under Section 80EEA:

If the taxpayer is claiming deduction under Section 80EEA then he/she will be not eligible for deduction under Section 80EE. Section 80EEA was added to extend the deduction of interest and for the tax benefit for loan taken during 01 April 2019 to 31 March 2020. A person can get tax benefit under this section is up to Rs. 1.50 lacs.