ITR Filing: Tax Rules on Income from House Property That You Should Know
For computing taxable income, a standard deduction of 30% of the rent received is allowed. In addition, deduction in respect to interest paid on money borrowed for buying, constructing, renovating, and repairing the house is also allowed. If the house is self-occupied, a maximum deduction of two lakhs is allowable for up to two self-house properties taken together.
However, in case the house property is let out, you can claim a deduction for the full interest paid on the money borrowed, but the loss under the head “Income from House Property” can be set off against other income during the same financial year up to two lakhs. Any unabsorbed loss over two lakhs has to be carried forward for set off against house property income in the next eight years.
Let’s take an example. If the interest component of a home loan for one let out house comes to around Rs. 3.50 lakhs and a monthly rent of ₹15,000 is received, then the loss from the house property let out can be claimed as a deduction against the salary income. Against the rental income of Rs.1.80 lakhs, you will get a standard deduction of Rs.54,000 which leaves Rs.1.26 lakhs. After adjusting interest of Rs.3.50 lakhs, the loss under the head “Income from House Property” comes to Rs.2.24 lakhs. As only a maximum of two lakhs of the loss can be set off against other income, including the salary income, the balance Rs.24,000 will have to be carried forward for the next eight years, which can only be set off against the positive income under the house property head.
It is crucial to know the tax laws on income from house property and various deductions available to save taxes. You can also consult a tax and investment expert for more detailed and accurate information.