Calculation of Income Tax under House Property in India
Calculation of Income Tax under House Property in India

Owning a house property is a significant milestone for many individuals. However, along with the joy of homeownership comes the responsibility of paying taxes related to the property. In India, income from house property is taxed under the head "Income from House Property" in the income tax return. Whether you own a residential property, a commercial building, or land attached to a building, understanding the taxation rules is essential. Let's delve into the basics of house property tax calculation and deductions.

Types of House Property

1. Self-Occupied House Property:

  • A self-occupied house property is one that you use for your own residential purposes. It could be occupied by your family members (parents, spouse, and children).
  • If the property remains vacant, it is still considered self-occupied for income tax purposes.
  • As of FY 2019-20, you can claim up to two self-occupied properties for tax benefits.
2. Let-Out House Property:
  • A house property that you rent out (either partially or fully) during the year falls under this category.
  • Rental income from a let-out property is taxable.

3. Inherited Property:
  • An inherited property can be either self-occupied or let-out, depending on its usage.

Steps to Calculate Income from House Property

1. Determine Gross Annual Value (GAV):
  • The GAV is the potential rental income that the property could fetch if it were rented out.
  • For a self-occupied house, the GAV is zero.
  • For a let-out property, the GAV is the actual rent received or the fair rental value, whichever is higher.
2. Deduct Municipal Taxes:
  • Subtract municipal taxes paid during the year from the GAV.
  • The remaining value is the Net Annual Value (NAV).
3. Deduct Standard Deduction or Actual Expenses:
  • You can choose between the standard deduction (30% of NAV) or actual expenses (such as repair and maintenance costs).
  • The formula is: Income from House Property = NAV - Standard Deduction or Actual Expenses.
4. Deduct Interest on Home Loan:
  • If you have taken a home loan for the property, you can claim a deduction on the interest paid.
  • The maximum deduction allowed is up to ₹2 lakh per financial year.
5. Calculate the Final Income from House Property:
  • Add back any interest on home loan that exceeds the ₹2 lakh limit.
  • Include the resulting income in your total income for tax purposes.

Reporting in Income Tax Return (ITR):

● While filing your ITR, report the income from house property under the relevant section.
● Provide details of the property, rental income, municipal taxes, and deductions claimed.

Remember that accurate reporting and understanding the tax implications of your house property are crucial. Seek professional advice if needed to ensure compliance with tax laws.

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