Tax Treatment Of Income From House Property
- 3m•
- 1,112•
- Updated 17 Mar 2023
What Is Income From House Property?
Income from house property refers to the rent earned from any property, and is taxable under the Income Tax Act.
It is important to remember that even if you have not rented out the property, you may still have to pay tax on the deemed rent. The deemed rent is based on the municipal body’s valuation.
Income from house property must be included in your gross total income if:
-
You are the owner of the property
-
The property in question is a house/building/land.
-
The property is used for a purpose other than running your business or profession.
House Property Income Tax Deductions
You can avail a number of deductions when computing the net taxable income from a house property. These deductions defined under Section 24 of Income Tax Act include a standard deduction and interest paid on home loan taken for purchase of the said house property.
The standard deduction applicable under the current tax regime is 30% of the net annual value (we’ll explain this concept in the next section) of the house property. Do note that any brokerage or commission paid to acquire the property is not a deductible expense.
Gross Annual Value And Net Annual Value
Gross annual value of a house property is the deemed rent it can be expected to be let out at. If the property is let out and the actual rent is lower than the deemed rent, then the deemed rent is considered the gross annual value of the property.
In case, the rent is higher than the deemed rent, the actual rent is considered the gross annual value of the house property. Net annual value of the house property is gross annual value minus the municipal taxes paid for the property.
Income From House Property
The income from house property is calculated as: Net annual value - Standard deduction at 30% - Interest on home loan availed. It is important to remember that income from house property is added to the total income only if the house property, or a part thereof, is let out for at least a part of the financial year.
Further, if you have more than one house property, you can choose any one of these as self-occupied. But the income you receive from the remaining properties are added to the total income.
Finally, you are taxed according to the tax slab under house property income tax.
