Direct Taxes

Income from House Property

In case of all assessees, “Income from house property” shall be computed as under:

In the case of Let Out Property [whether for residential purpose or for business purpose]
The annual value of any property shall be deemed to be:
1. The sum for which property might reasonably be expected to let from year to year; or
2. When property or any part of property is let, the annual rent received/receivable less unrealised rent or the sum as above, whichever is higher.
3. Where property or part of it is let and was vacant for whole or part of year, and rent received/receivable less unrealised rent is less than the sum as per (i) above due to the vacancy, then the rent actually received/receivable.
4. The annual value of the property (being building or land appurtenant thereto) to be considered as nil [for up to two years (up to A.Y. 2019-20 – one year) from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority] provided such property is held as stock-in-trade and not let during the whole or any part of the previous year.
Deduction shall be allowed as under:

Sl. No.	Nature of Deduction	Section	Limit/Condition
1	Municipal Tax, etc.	23(1) First proviso	Only if borne and actually paid by the owner irrespective of the financial year in which the liability to pay such taxes was actually incurred as per the method accounting employed by the owner.
2	Standard deduction	24 Clause (a)	30% of Annual Value.
3	Interest on borrowed capital	24 Clause (b)	Interest payable on capital borrowed for the purpose of acquisition, construction, repair, renewals or reconstruction only. If the Assessee opts to pay tax under new tax regime under section 115BAC, then he will not be eligible to claim deduction under section 24(b).

Sl. No.

Nature of Deduction

Section

Limit/Condition

Municipal Tax, etc.

23(1) First proviso

Only if borne and actually paid by the owner irrespective of the financial year in which the liability to pay such taxes was actually incurred as per the method accounting employed by the owner.

Standard deduction

24 Clause (a)

30% of Annual Value.

Interest on borrowed capital

24 Clause (b)

Interest payable on capital borrowed for the purpose of acquisition, construction, repair, renewals or reconstruction only.

If the Assessee opts to pay tax under new tax regime under section 115BAC, then he will not be eligible to claim deduction under section 24(b).

Preconstruction Interest

Interest for the period prior to acquisition or construction would be deductible in five equal instalments from the year of completion.

In the case of two self-occupied house properties (up to A.Y. 2019-20 one self occupied house property)
The annual value of two self-occupied houses or part of such houses shall be nil. Further the aggregate amount of deductions shall be allowable as under:

Nature of Deduction	Section	Limit/Condition
Interest on borrowed capital	24 Clause (b)	₹ 2,00,000/- from A.Y. 2015-16 onwards, ( ₹ 1,50,000/- up to A.Y. 2014-15) provided :.
		i. Property is acquired or constructed on or after 1 April 1999 and such acquisition or construction is completed within 5 years (up to A.Y. 2016-17 the period was 3 years) from the end of the financial year in which capital was borrowed.
		ii. A certificate from the lender certifying interest payable to him is furnished by the assessee.
		In other cases, ₹ 30,000. Interest in excess of above may qualify for rebate u/s. 80C(2)(xviii) (Re: Krishnan Kuppuswami vs. ITO 74, taxmann 289) (Pune Trib.).
		No other deduction allowed in respect of two self-occupied properties whose value is taken at NIL.
		For A.Ys. 2014-15 onwards, additional deduction is available to an individual for interest payable on housing loan – see section 80EE for further details Ref. App.

In the case of more than two self-occupied house properties
Only two houses (up to A.Y. 2019- 20 - one house) according to assessee’s choice are treated as self-occupied and deduction mentioned in B will be allowed. In respect of all other houses, even though self-occupied, notional income as stated in A(i) above will have to be computed. In such cases, all deductions mentioned in ‘A’ would be available.
Please refer page 93 for Set off and carry forward of losses. Also, an Assessee opting to pay tax under the new tax regime under section 115BAC will not be able to set off House Property loss against other heads of income.
Property owned by co-owners – Section 26
Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not be assessed as an A.O.P. (Association of Persons) but the share of each person in the income from the property as computed under Sections 22 to 25 (i.e., Income from house property) shall be included in his total income.
Arrears of Rent – Section 25B (up to A.Y. 2016-17)
Arrears of rent received in respect of let out property, if not charged to tax in earlier previous year, is taxable in the year of receipt after deducting 30% of such amount.
Arrears of Rent and Unrealised Rent received subsequently – Section 25A (with effect from A.Y. 2017-18)
Arrears of rent or unrealised rent received or realized subsequently in respect of let out property, if not charged to tax in earlier previous year, is taxable in the year of receipt after deducting 30% of such amount, irrespective if the assessee is the owner of the property or not in the year of receipt of such arrears of rent or unrealised rent.