Skip to main content

Tax of House Property

 

Taxation of house property

 

The income tax laws provides for taxation of your income under various heads. Income from house property is one of them. This article will discuss taxation of house property and tax benefits on housing loans.

Taxation of house property
If you are an owner of a house property, you are required to offer for tax, the rent which you receive or which you are reasonably expected to receive. This is known as "Annual value" in income tax parlance. The head "Income from house property" covers residential as well as commercial property except the property you are using for your business or profession.

For residential house properties, the taxation laws treat one house property as self-occupied in case the same is not let-out and is used by you for your residence or remains vacant due to your stay in any house not owned by you at any other place. In case, the single property is actually let out, you have to offer the rent received on such property for taxation. In case you are using more than one house property for self-occupation, you have to choose one of such property as self-occupied and offer notional rentals in respect of other property/ies for taxation.

Deductions from Annual Value
For calculating the income taxable under the house property head, the taxation laws allow you two deductions. The first deduction is standard deduction in respect of repairs etc. at the flat rate of 30% of the annual value calculated as above. The amount of deduction in respect of repairs is available whether you have actually incurred any expenditure on repairs or not. Since the annual value of one self-occupied house property is taken at nil, no deduction is naturally available for repairs in respect of such property.

The other deduction available is in respect of interest on loan taken to purchase or construct a house property, or even for repair or reconstruction of your existing property. This benefit of interest deduction is available for all properties whether residential or commercial. It may be interesting to note that even processing fee or prepayment fee paid in respect of home loan is also treated as interest and thus can be claimed as deduction. The loan can be taken from any body including your friends and relatives and not necessarily from banks and financial institutions.

For one self-occupied property, the deduction is restricted to Rs. 2 Lakhs per year and for let-out property or any additional self-occupied property which is treated as deemed to have been let out, you can claim the full interest payable. So in cases where more than one property is self-occupied, it is always advisable to treat the property on which interest is lower as self-occupied, in case the interest payable on any or all of the property is more than Rs. 2 Lakhs.

For under construction property, you can claim the interest from the year in which construction is complete and possession is taken. In respect of interest paid for the years prior to taking possession, you can claim aggregate of such interest in five equal installments from the year in which construction is completed within the overall limit of Rs. 2 Lakhs in case the same is self-occupied.

Deduction available under Section 80 C for Principal repayment of home loan:

An Individual and an HUF can claim principal repayment component of a home loan taken from specified institutions along with other eligible items like Life Insurance Premium, NSCs, EPF, ELSS and stamp duty and registration charges etc. The overall deduction is restricted to Rs. 1.5 lakhs from current year. This deduction is available only for residential house property. Moreover it is only available for purchase or construction of a house and not for renovation, additions or repairs of any existing house property.

In case you decide to sell the residential house acquired with home loan, within five years from the end of the year in which possession of the house was taken, all the deduction allowed for Principal repayment in earlier years shall be treated as income of the year in which this property is sold. Moreover no deduction under Section 80 C shall be allowed for principal repayment made during the year.

Hope that above discussion helped you in understanding the taxation of house property and benefits in respect of money borrowed for your house.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now