Deductions on Property Income - Section 24

Buying a home is one of the most common long-term investment goals for many Indians. The bulk of a person's income goes to a home EMI loan. Therefore, the government has provided a lot of property tax benefits under Section 24 of the Income Tax Act.

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15min

1. Income from House Property

The following income will be taxed under the heading ‘Income from house property’ of the Income tax Act, 1961.

  • Rental Income on sale
  • Annual Price The property 'considered' for rent purposes (when you have more than two houses)
  • Annual number of Nil's residence.

The annual value of the property you work for is zero or negative when it comes to paying interest on a home loan. If the property is vacated, the rent received is your Gross Annual Value. To find an area that is considered excluded, a reasonable rental of the same area is your Total Yearly.

2. Deductions Under House Property

Municipal rates - Municipal rates are the annual amount paid by a local municipal organization. Municipal rates must be deducted from the Annual Total amount to determine the Annual total value of the property. Tax deductions are only allowed if they are paid by the owner and paid during that financial year. Regular Deductions - Normal Deductions are 30% of the Annual Round value listed above. This 30% hold is allowed even if your actual cost on the building is high or low. Therefore, this is deducted regardless of how much money you have spent on insurance, repairs, electricity, water supply etc. In the case of a private home, as the Annual Value is the Nil, common capture is also zero in that area. . Mortgage Interest Debt for this property - Homeowners may want to deduct up to Rs.2 lakh interest on their home loan interest if the owner or his or her family lives on the property. The same treatment applies when the house is empty. If you rent a property, all interest on a home loan is approved as collateral. Your interest deduction is limited to Rs.30,000 if you fail to meet any of the conditions given below with a discount of Rs.2 lakh.-

  • The home loan must be for the purchase and construction of the property;
  • The loan must be repaid on or after 1 April 1999;
  • Purchase or construction must be completed within 5 years from the end of the financial year for which the loan was taken

3. Pre Construction Interest

If you have taken out a loan to buy or build a house, you may want to deduct it from pre-construction interest. However, this is not permitted in the case of loans for repairs or reconstruction. The amount of pre-construction interest rate and interest rate for an unneeded home loan should not exceed Rs 2 lakh in any case. The deduction for this interest is approved for 5 equal installments from the year the house was purchased or the building was completed. For example, if the construction of your property is completed by FY 2018-19, 25 June 2018, you may claim 1/5 of interest paid up to 31 March 2018 when you submit your FY 2018 return -19.

4. Conditions for Claiming Interest on Home Loan

You need to meet all 3 criteria below to claim this deduction

  • The loan was taken after 1 April 1999 for purchase or construction
  • The acquisition or construction is completed within 5 years (3 years to FY 2015-16) from the end of the financial year from which the loan was taken
  • There is an interest rate certificate available for repayment on loans. Note that your deducted interest may be limited to Rs 30,000 if any of these conditions are met -
    • Loans borrowed before 1 April 1999 to buy, build, renovate or rebuild a house
    • Loans are borrowed on or after 1 April 1999 to purchase, build, renovate or rebuild a house.

5. Computation of Income Under House Property

It says, a person repays a mortgage loan of Rs 4 lakh per year when Rs 2 lakh is part of the interest. You have also received pre-construction interest of Rs 3 lakh. He earns Rs 7000 a month in rented land and pays Rs 3000 in rates. Let's calculate his income from real estate in both cases: 1. He has a place to live, or 2. A place to rent out


Type of House Property Self Occupied Let Out
Gross annual Value (Rent paid- 7000*12) NIL 84,000
Less: Municipal Taxes or Taxes paid to local authorities NA 3,000
Net Annual Value(NAV) Nil 81,000
Less: Standard Deduction(30% of NAV) NA 24,300
Less: Interest on Housing Loan 200,000 200,000
Less: Pre-construction interest (1/5th of 3 Lakhs) 60,000 60,000
Income from House Property (260,000) (203,300)
Overall loss restricted to (200,000) (200,000)

Remember, the maximum loss set-off allowed in a financial year is limited to Rs 2 lakh. The remaining loss can be carried forward to future years – 8 years in total. However, in these 8 years, it can only be set off from income from house property.

6. Example of claiming deductions under the following scenario:

Mr X owns 3 houses, 2 of which are residential, 1 of which are for rent. The interest on the mortgage on both houses is Rs 3.00 lakhs and the interest on rent is Rs. 2.5 lakh. What are all deductions that he or she may claim under the mortgage?

Frequently Asked Questions

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Income from House Property?

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The following income will be taxed under the heading ‘Income from house property’ of the Income tax Act, 1961.

  • Rental Income on sale
  • Annual Price The property 'considered' for rent purposes (when you have more than two houses)
  • Annual number of Nil's residence.

The annual value of the property you work for is zero or negative when it comes to paying interest on a home loan. If the property is vacated, the rent received is your Gross Annual Value. To find an area that is considered excluded, a reasonable rental of the same area is your Total Yearly.


CEO Krishna Gopal

Krishna Gopal Varshney is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Myitronline.com. Myitronline is amongst the top emerging startups of Asia and authorized ERI by the Income Tax Department. A dedicated and tireless Expert Service Provider for the clients seeking tax filing assistance and all other essential requirements associated with Business/Professional establishment. Connect to us and let us give the Best Support to make you a Success. ”

Krishna Gopal Varshney
Co-founder & CEO