Income Tax – Rebate on Housing Loan up to Rs.2 lacs allowed Vivek November 18, 2015 Income Tax

Income or Loss from House Property – Deduction of Interest paid on Home Loan from Income under Section 24 of Income Tax Act.

how to calculate income or loss on house propertyCalculation of net income or loss on house property is an important aspect as far as tax payers who own a house property is concerned. Section 24 of Income Tax Act provides the method to quantify Income or Loss on house property. The procedure for calculating Income or Loss on house property is as follows
1. Net Income out of House Property (Rental Value) is worked out by deducting expenses such as property tax, and 30% rebate as maintenance from Annual Rental Value.
2. Secondly, this income is deducted by Annual value of Interest paid in respect of the said property.
3. If the result so arrived is a +ve value then property of the tax payer earns net income which has to be added to gross income for the year.
If the result is a -ve value then the same can be deducted from the income as loss on house property
The following five important points are very important when calculating Income or loss on house property.
1. In the case of self occupied property, annual rental value is nil. In this case interest that paid in a year (limited to Rs. 2,00,000/-) for housing loan can be deducted. Income Tax provisions terms this deduction as loss on house property. Loss on House property will be a negative figure which can be deducted from the gross total income.
2. If the home loan was borrowed before 1st April 1999, deduction in respect of interest paid on loan will be restricted Rs. 30,000/-. As far as home loan borrowed on or after 01.04.1999, annual interest paid up to Rs, 2,00,000 can be deducted from the Annual Rental Value of the property.
3. In the case of let out house property annual rental value will have to be added as an income out of house property. Even if the house property is not actually let out, and the property is also not self occupied then a rental value has to be determined as per the provisions income tax rules. By declaring annual rental value of house property for inclusion in gross total income, the ceiling of Rs. 2 lakh on deduction of interest paid on house property can be avoided. In other words, there will not be any limit in the deduction of interest paid on house property, if annual rental value is added to gross total income.
4. From the said annual rental value, municipal taxes are to be deducted.
5. Also, Deduction equal to 30% of the annual Rental value (Rental value-Tax paid), can be deducted while determining the income on house property.
Also checkout following links for more details on determination of Annual Rental Value and how to deduct entire amount of interest paid on housing loan from the gross total income.