Important Keyword: Income from House Property, Income Source, Section 80C, Section 80EE.
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Income from House Property and Taxes
India has experienced sustained and rapid growth over the past few decades, with aspirations to achieve developed nation status by its 100th year of Independence. In this journey towards progress, income from house property plays a significant role as a major source of passive income for many individuals. Rental income derived from properties, whether it’s a building or land attached to it, is subject to taxation under the head “Income from House Property.”
This taxation framework ensures that income generated from real estate assets contributes to the country’s economic growth and development. By taxing rental income, the government generates revenue to fund essential services and infrastructure projects, furthering the nation’s progress towards its vision of becoming a developed and prosperous society.
What is House Property?
House property encompasses a diverse range of real estate assets, including buildings and the land attached to them. This broad definition encompasses various types of properties, such as apartments, independent houses, shops, offices, warehouses, factories, and any other building or land that generates rental income. It’s important to note that the term “house property” isn’t limited to residential houses; it also includes commercial buildings.
This comprehensive classification highlights the inclusive nature of the term, covering both residential and commercial properties. Whether it’s a cozy home, a bustling office space, or a bustling retail outlet, any structure or land that generates rental income falls under the purview of house property. This wide-ranging definition ensures that all types of real estate assets are appropriately accounted for under the tax framework, reflecting the diverse nature of property ownership and rental income generation in India.
Income from house property is subject to taxation under specific conditions:
Ownership: The individual assessed must be the rightful owner of the property to be liable for taxation under the head “Income from House Property.” Ownership entails possessing legal title and the ability to exercise control over the property.
Non-Business Use: The property must be utilized for purposes other than conducting a business or profession. If the property is utilized for the owner’s business or profession, the income generated will be taxed under the head “Income from Business and Profession.”
Taxation Under Legal Owner: Income from house property will be taxable under the jurisdiction of the legal owner of the property. The legal owner is defined as the individual who holds the rights of ownership independently, without acting on behalf of another party.
Types of House Property under Income Tax
For tax purposes, the Income Tax Act categorizes house property into two types:
Self-Occupied House Property:
A self-occupied house property is one that is used for the owner’s own residence purposes. It may also be occupied by the owner’s family, relatives, or the owner themselves. If a property remains unoccupied, it is still considered a self-occupied property for income tax purposes.
If a taxpayer owns more than one house property, only one is treated as self-occupied for tax purposes, and the rest are assumed to be deemed let out. However, starting from the financial year 2019-2020, two properties can be considered as self-occupied. Taxpayers have the option to choose which property they want to designate as self-occupied.
Let-Out House Property:
Any house property that is rented out for all or part of the year is considered a let-out property for income tax purposes.
How to Calculate Income From House Property?
Calculation of Income from House Property:
For a self-occupied property used solely for residence or unoccupied throughout the previous year, its Annual Value is considered Nil, provided no other benefits are derived by the owner from such property.
When a property is let out for the whole or part of the financial year, the Gross Annual Value (GAV) is calculated as the higher of two factors:
a) Expected Rent (ER): This refers to the rent that the property is expected to fetch if it were let out at its full potential. It is determined based on factors such as the market rate for similar properties in the locality, the size and condition of the property, and other relevant market trends.
b) Actual rent received or receivable during the year: This is the rent actually received by the owner from the tenant(s) during the financial year. If the full rent has not been received due to any reason, the amount that is due and receivable is also considered.
The Gross Annual Value (GAV) is determined by taking the higher of these two values, ensuring that the income from the property is accurately assessed for taxation purposes.
Particulars
Self Occupied Property
Let Out Property
Gross Annual Value (GAV)
NIL
XXX
Less: Municipal Tax Paid
NIL
(XXX)
Net Annual Value (NAV)
NIL
XXX
Less: Standard Deduction u/s 24 @ 30% of NAV
NA
(XXX)
Less: Interest on Borrowed Capital u/s 24
(XXX)
(XXX)
House Property Income
XXX
XXX
In the case of a self-occupied property, the deduction for interest on a home loan is subject to a maximum limit of INR 2,00,000 under section 24 of the Income Tax Act. This means that regardless of the actual interest paid on the home loan, the maximum deduction allowed for interest is capped at INR 2,00,000 for self-occupied properties.
However, in the case of a let-out property, the entire amount of interest paid on the home loan can be claimed as a deduction without any upper limit. This means that the taxpayer can claim the full amount of interest paid on the home loan as a deduction from the rental income generated from the let-out property.
Deduction from House Property Income
Deduction for Home Loan Interest under Section 24
For a self-occupied house property, the owner can claim a deduction of up to INR 2 lakhs (INR 1,50,000 for e-filing FY 2013-14) on home loan interest. However, in the case of a let-out property, the entire interest paid on the home loan is allowed as a deduction.
The deduction for home loan interest is subject to certain conditions. If any of these conditions are not met, the deduction is restricted to INR 30,000. These conditions include:
The loan must have been taken on or after 1st April 1999.
The home loan must have been taken for the purchase or construction of a new property.
The acquisition or construction must be completed within 5 years from the end of the financial year in which the loan was taken.
Additionally, if the loan is taken for repairs or reconstruction of the property, the deduction for interest is limited to a maximum of INR 30,000. Pre-construction period interest paid can be claimed as a deduction in five equal installments starting from the year in which the construction of the property is completed.
Deduction for principal repayment of the home loan under Section 80C is also available, up to a maximum of INR 1,50,000, subject to certain conditions:
The loan must be taken for the purchase or construction of a new property.
The property must not be sold within five years of taking possession, otherwise, the deductions for repayment collected will be added back to the income in the year of sale.
Stamp duty, registration charges, and other transfer-related expenses are also deductible under section 80C, subject to a maximum limit of INR 1,50,000. These deductions are allowed in the year in which they are paid.
Deduction for first time Home buyers under Section 80EE
The first home loan from a bank or housing finance corporation, up to INR 25 lakhs, is eligible for an additional deduction of interest up to INR 1 lakh. To claim this deduction, the following conditions must be fulfilled:
The loan sanction must have been between 1st April 2013 to 31st March 2014.
The home loan amount does not exceed INR 25 lakhs.
The value of the house property does not exceed INR 40 lakhs.
The assesses does not own any other residential house property on the date of sanction of the loan.
The benefit of the deduction spans over FY 2013-14 and FY 2014-15. If the total limit of INR 1,00,000 is not utilized in FY 2013-14, the balance amount can be claimed as a deduction in FY 2014-15.
It is not necessary that the residential house property has to be self-occupied to claim this deduction.
Under Section 80EEA, the deductible amount for first-time homebuyers has been extended from INR 50,000 to INR 1,50,000. Only individuals can claim this deduction until they repay their home loan.
In the new income tax regime, individuals cannot claim home loan interest on self-occupied house property under Section 24(b). However, they can claim interest on home loans for let-out property only up to the amount of their rental income.
Chapter VI deductions, including deductions under 80C, 80EE, and 80EEA, are not available under the new regime.
Income Tax Deductions for Joint Owners
When it comes to co-ownership and co-borrowing scenarios in relation to a self-occupied house property and a home loan, there are specific tax implications:
Co-owners and Co-borrowers:
If co-owners of a self-occupied house property are also co-borrowers of a home loan, each co-owner/co-borrower can claim a deduction on interest on the loan, up to Rs. 2 lakh each.
Additionally, they can claim deductions on principal repayments, stamp duty, and registration charges under Section 80C, with a combined limit of Rs. 1.5 lakh.
The allocation of deductions for each benefit will be based on the respective share of ownership in the property.
Co-borrowers but not Co-owners:
If an individual is a co-borrower of a loan but not a co-owner of the property, they cannot claim interest on the home loan paid.
Moreover, they are not eligible for benefits related to principal repayment, stamp duty, etc.
Co-owners but not Co-borrowers:
If an individual is only a co-owner of the property and not a co-borrower of the loan, they cannot claim interest on the home loan paid.
However, each co-owner can still claim deductions on stamp duty and registration charges under Section 80C, with the allocation based on their respective ownership shares in the property.
Setting off losses from house property
Let’s calculate the income from house property for Rahul’s property in Ajmer under both scenarios:
Let-Out Property:
Rental Income: INR 40,000 * 12 = INR 4,80,000 per annum
Gross Annual Value (GAV): INR 4,80,000
Less: Municipal Taxes Paid: INR 30,000
Net Annual Value (NAV): INR 4,50,000
Less: Deduction for Standard 30%: INR 1,35,000 (30% of NAV)
Taxable Income from House Property: INR 3,15,000
Less: Deduction for Interest on Home Loan: INR 2,35,000
Net Taxable Income from House Property: INR 80,000
Self-Occupied Property:
Since the property is self-occupied, the Gross Annual Value (GAV) is Nil.
Therefore, the Net Annual Value (NAV) is also Nil.
Deduction for Interest on Home Loan: INR 2,35,000 (up to a maximum of INR 2,00,000 for self-occupied property)
Taxable Income from House Property: Nil (As the NAV is Nil for self-occupied property)
So, Rahul’s taxable income from the house property would be INR 80,000 if the property is let-out, and Nil if it is self-occupied.
Particulars
Let Out
Self Occupied
Gross Annual Value(GAV)
4,80,000
NIL
Less: Property Taxes paid
30,000
NIL
Net Annual Value (NAV)
4,50,000
NIL
Less: Standard Deduction @30%
1,35,000
NIL
Less : Interest payable on Home Loan
2,35,000
2,00,000
Income/Loss from House Property
80,000
2,00,000
In summary:
Self-Occupied Property:
Deduction for Interest on Home Loan: Maximum of INR 2,00,000
Loss from House Property can be set off against income from other heads, such as salary or business income.
Rental income from subletting is taxed as income from other sources.
Let-Out Property:
Entire amount of interest on home loan can be claimed as a deduction.
Loss from House Property can be set off against income from other heads.
Rental income from subletting is not taxed as income from House Property but under the head ‘Income from other sources’.
Documents Required to File ITR for Income from House Property
The House Property Income Documents Checklist is as follows:
PAN
Aadhaar
Utility Bill
Rent Agreement
Form 16A
Home loan repayment certificate/ Interest Certificate from the bank
Municipal Tax Receipts
I receive HRA from my employer, can I also claim a deduction for my Home Loan?
Certainly! You can benefit from both HRA (House Rent Allowance) and deduction for Home Loan simultaneously under certain circumstances.
Living in a Rental House with Family in Owned House:
You can claim HRA for the rent paid for the rental house.
Additionally, you can avail deduction for Home Loan interest on your owned house, up to a maximum of INR 2,00,000.
Living in a Rental House and Renting out Owned House:
You can claim HRA for the rent paid for the rental house.
There’s no limit on the deduction for Home Loan interest on your owned house that you’ve rented out.
Important Keyword: Income from House Property, Income Heads, Income Tax, ITR-2.
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What is Pre-construction Interest?
During the pre-construction period, which spans from the approval of the home loan until the completion of the construction of the house property, interest deduction is not permitted as the property is still under construction. However, the interest paid during this pre-construction period, known as Pre-construction Interest, is eligible for deduction. This deduction is allowed in five equal installments starting from the year in which the construction of the property is completed. This provision allows taxpayers to spread out the benefit of interest deduction over multiple years, easing the financial burden associated with constructing the property.
How to calculate Pre-construction Interest?
To calculate the pre-construction period of a constructed house property, we need to determine the period from the year the home loan was taken until the year in which construction is completed. However, for interest deduction purposes, the interest will be allowed from the date of the loan taken until the 31st of March before the financial year in which construction is completed.
Let’s illustrate with an example:
Suppose the home loan was taken in the financial year 2018-2019 (FY 2018-19), and the construction of the property was completed in the financial year 2021-2022 (FY 2021-22).
Pre-construction period:
From FY 2018-19 (year of loan taken) to FY 2020-21 (the year before completion).
This spans three financial years.
Interest paid during the pre-construction period:
Obtain the annual home loan certificate issued by the bank for each financial year.
Add up the interest paid for the pre-construction period from FY 2018-19 to FY 2020-21.
Divide the total pre-construction interest into 5 equal installments:
Once the total pre-construction interest is determined, divide it into five equal parts.
Claiming deduction:
Claim the deduction of pre-construction interest from the financial year of completion of construction (FY 2021-22).
This deduction can be claimed while filing the Income Tax Return (ITR) on the Income Tax e-Filing portal under the head “Income from House Property.”
Example
Kunal has taken a loan for the construction of house property in Pune. Here are the loan details:
Loan amount
Rs. 30,00,000
Loan taken in
November 2017
EMI
Rs. 25,000
Construction completed in
December 2019
To calculate the tax deduction Kunal can claim for the home loan while filing his return for the Financial Year (FY) 2019-20, we need to consider the pre-construction interest and the interest paid during the FY 2019-20.
Pre-construction interest:
Calculate the total pre-construction interest paid by Kunal from the year the home loan was taken until the completion of construction. Let’s assume this total pre-construction interest is INR X.
Interest paid during FY 2019-20:
Obtain the annual home loan certificate issued by the bank for FY 2019-20.
Determine the total interest paid by Kunal during FY 2019-20. Let’s assume this total interest paid during FY 2019-20 is INR Y.
Total deductible interest for FY 2019-20:
Add the pre-construction interest (INR X) and the interest paid during FY 2019-20 (INR Y) to get the total deductible interest for FY 2019-20.
Claiming the deduction:
Kunal can claim this total deductible interest as a deduction while filing his return for FY 2019-20 under the head “Income from House Property.”
Calculation of EMI payments for FY 2019-20
In the financial year 2019-20, Kunal paid a total of Rs. 3,00,000 as EMIs, out of which Rs. 1,35,000 went towards principal repayment, making him eligible for a deduction under Section 80C of the Income Tax Act. This deduction reduces his taxable income by Rs. 1,35,000.
Considering the property is rented out, Kunal can claim the entire interest amount of Rs. 1,65,000 as a deduction under Section 24(b) while filing his Income Tax Return (ITR) for the financial year 2019-20. This deduction helps reduce his taxable rental income, thereby lowering his overall tax liability.
let’s calculate the amount paid for pre-construction interest:
The pre-construction interest is allowed to be claimed in five equal installments starting from the year in which the construction is completed. In this case, since the construction was completed in December 2019, we need to calculate the pre-construction interest for the period from November 2017 to March 2019, which spans 17 months.
By determining the total pre-construction interest paid during this period and dividing it into five equal installments, Kunal can accurately calculate the amount of pre-construction interest to be claimed as a deduction in each financial year following the completion of construction.
Financial year
Period
EMI calculation
2017-18
November 2017 to March 2018
Rs. 25,000 x 5 = Rs. 1,25,000
2018-19
April 2018 to March 2019
Rs. 25,000 x 12 = Rs. 3,00,000
Total
= Rs. 4,25,000
Out of the total EMI payments amounting to Rs. 4,25,000, Rs. 1,91,250 is allocated towards principal repayment. This leaves Rs. 2,33,750 (Rs. 4,25,000 – Rs. 1,91,250) as the pre-construction interest, which is eligible to be claimed in five equal installments of Rs. 46,750 each, starting from the financial year 2019-20.
Therefore, Kunal will be able to claim a deduction of Rs. 1,65,000 (the interest paid during the financial year 2019-20) plus Rs. 46,750 (the first installment of pre-construction interest) totaling Rs. 2,11,750 as deduction towards home loan interest for the financial year 2019-20.
Important Keyword: Co-owner, Deemed Owner, Income from House Property, Income Tax.
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Co-Owner and Deemed Owner of Property
In India, it’s common for individuals to jointly own a house property with their spouse or children, often to increase their eligibility for higher loan amounts. However, under Section 27 of the Income Tax Act, there are instances where the legal owner of the property may not be considered the true owner. Instead, someone else may be deemed the owner for income tax purposes, leading to different tax implications.
In cases where the legal owner is not considered the true owner, the income tax implications can vary significantly. It’s essential for taxpayers to understand these implications to ensure compliance with tax regulations and optimize their tax planning strategies.
This distinction between legal ownership and deemed ownership under Section 27 of the Income Tax Act highlights the importance of careful consideration when dealing with jointly owned properties. Taxpayers should seek professional advice to fully understand the tax implications and make informed decisions regarding their property ownership arrangements.
Deemed Owner
Income from house property is taxable in the hands of its owner. However, in certain cases, the legal owner may not be considered the actual owner, and a deemed owner may be liable to pay tax on the income earned from the property. Here are the scenarios where a person is deemed to be the owner of a property, even if they are not the legal owners:
Transfer to Spouse: If an individual transfers their property to their spouse without adequate consideration, the transferor is deemed to be the owner of the house property. This excludes transfers made to a spouse in connection with an agreement to live apart.
Transfer to Minor Child: When an individual transfers a house property to their minor child for inadequate consideration, the transferor is deemed to be the owner of the transferred property. However, this does not apply to transfers made to a minor married daughter.
Holder of an Impartible Estate: The holder of an impartible estate, which cannot be legally divided, is deemed to be the individual owner of all properties within the estate.
Member of a Co-operative Society, Company, or Association of Persons: A member of a co-operative society, company, or association of persons who is allotted a building or part thereof under a House Building Scheme is deemed to be the owner of the allotted property, even if the society/company/association is the legal owner.
Possession of a Property: A person who is allowed to take or retain possession of any building as part performance of a contract under Section 53A of the Transfer of Property Act, 1882, is deemed to be the owner of that building.
Rights in a Property: A person who acquires any right in or with respect to a building, as referred to in Section 269UA(f), is deemed to be the owner of that building. This excludes rights obtained through leases from month to month or for a period not exceeding one year.
Co-Owner
When a house property is jointly owned by one or more persons, each joint owner is referred to as a co-owner. According to the Income Tax Act, if a house property is owned by co-owners and their respective shares in the property are definite and ascertainable, then the income from such house property will be assessed separately in the hands of each co-owner.
When computing Income from House Property for co-owned properties, the annual value of the property will be considered in proportion to each co-owner’s share in the property. This ensures that each co-owner is taxed based on their ownership stake in the property, reflecting their individual rights and responsibilities.
Important Keyword: Income from House Property, Income Tax, ITR for Rental Income.
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ITR for Rental Income
House property income pertains to the earnings derived by an individual from a property owned and leased out for residential or commercial use. Whether you possess a house or generate rental income, it must be disclosed as Income from House Property in your Income Tax Return (ITR). The taxpayer is responsible for computing the income and paying taxes on rental income based on applicable slab rates.
Under the head ‘Income from House Property,’ taxpayers should report the following types of income:
Rent Income from House Property: Any income earned from renting out a house property, whether residential or commercial, should be reported. This includes the rent received from tenants.
Vacant House Property: If a house property is vacant and not rented out, the potential rental income or deemed rental value should be reported as income under this category.
Housing Loan on a Property: If a taxpayer has taken a housing loan for the acquisition, construction, repair, or renovation of a property, the interest paid on the loan is eligible for deduction under this head of income.
Jointly Owned House Property: If the property is jointly owned by multiple individuals, each co-owner must report their share of the rental income or deemed rental value under this head of income.
Calculation of Rental Income
Particulars
Self Occupied Property
Let Out Property
Gross Annual Value (GAV)
NIL
XXX
Less: Municipal Tax Paid
NIL
(XXX)
Net Annual Value (NAV)
NIL
XXX
Less: Standard Deduction u/s 24 @ 30% of NAV
NA
(XXX)
Less: Interest on Borrowed Capital u/s 24
(XXX)
(XXX)
House Property Income
XXX
XXX
Under Section 24, taxpayers are entitled to a standard deduction of 30% of the Net Annual Value (NAV) of the property, regardless of actual expenditure on insurance, repairs, water supply, etc. Taxpayers can claim a maximum loss of INR 2,00,000 under the head ‘Income from House Property’ in a financial year.
Pre-construction interest, paid during the pre-construction period, is deductible in five successive financial years starting from the year in which construction was completed.
For co-owned self-occupied house property, each co-owner can claim a deduction of up to INR 2,00,000 for housing loan interest, with the annual value (NAV) being NIL for each co-owner.
For co-owned let-out house property, income is calculated as per normal provisions of House Property and then apportioned among each co-owner, who can claim the deduction for housing loan interest.
Tax benefits on rental income include deductions for repayment of loan principal under Section 80C, deduction for interest on home loan under Section 24 of House Property, and additional deductions under Sections 80EE and 80EEA for first-time homebuyers, subject to prescribed conditions.
Regarding TDS on rental income:
Under Section 194I, TDS on rent of land or building is deducted at 10% if the rent amount exceeds INR 2,40,000 per annum.
Under Section 194IB, TDS on rent of land or building is deducted at 5% by individuals or HUFs not liable to tax audit, if the rent amount exceeds INR 50,000 per month or part of the month.
Landlords receive Form 16A from tenants once they file the TDS Return every quarter. Landlords can view TDS Credits in Form 26AS on the income tax website and claim the TDS credit in the Income Tax Return.
ITR Form for Rental Income
Taxpayers should select the appropriate Income Tax Return (ITR) form based on their total income, type of house property income, and income under other heads. Here’s a summary of the ITR forms applicable for rental income:
ITR Form
Total Income
HP Income
ITR 1 or ITR 4
Upto INR 50 lacs
One House Property
ITR 2 or ITR 3
More than INR 50 lacs
Multiple House Property
House Property Loss incurred in a financial year can be set off against any other income in the same year. If there’s any remaining loss after set-off, it can be carried forward for up to 8 years. However, the carried forward loss can only be set off against house property income in future years.
According to the Income Tax Act, a taxpayer who files a Belated Income Tax Return under Section 139(4) cannot generally carry forward losses to future years. However, an exception is made for house property losses. Even if a taxpayer files a Belated Return, they can still carry forward house property losses to future years for set-off against house property income.
Important Keyword: Income from House Property, Property Tax.
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Property Tax – Definition, Types and Calculations
In India, property tax serves as a significant revenue stream for municipal authorities at the city level. This tax is imposed on real estate properties and is calculated based on various factors such as the property’s area, construction, size, and value.
Municipal authorities assess the property tax by considering factors such as the location and amenities available in the vicinity. The tax rate may vary from one locality to another and is often determined by the municipal corporation or council.
Property tax plays a crucial role in funding essential services and infrastructure development within cities. Revenue generated from property tax is utilized for maintaining roads, providing sanitation services, ensuring clean water supply, and other civic amenities.
Property owners are required to pay the assessed property tax to the municipal authorities within a specified timeframe. Failure to do so may result in penalties or legal actions by the municipal corporation.
What is a Property Tax?
In the realm of taxation, the term “property” encompasses all tangible real estate assets owned by an individual. This includes not only residential structures like houses but also commercial properties such as office buildings and premises rented out to third parties.
Property tax, therefore, is an annual levy imposed on land and property owners by local government bodies or municipal corporations. The funds collected through this tax serve a crucial purpose: they are utilized for the maintenance and upkeep of public infrastructure and amenities. These may include essential facilities such as roads, sewage systems, parks, government buildings, and other communal spaces.
Property tax acts as a vital source of revenue for local governing bodies, enabling them to finance various public services and infrastructure projects that benefit the community at large. By ensuring the regular payment of property tax, property owners contribute directly to the development and maintenance of their local area, thereby fostering a better living environment for all residents.
What are the Types of Property?
In India, properties are broadly categorized into four main types:
Land: This is the most prevalent type of property owned by citizens. Land refers specifically to the core land without any construction or improvement. It forms the foundation upon which other types of properties are built or developed.
Improvements made to the land: This category encompasses enhancements or developments made on the land itself. It includes constructions like buildings, warehouses, or any other structures erected on the land. These improvements enhance the utility or value of the land.
Personal property: Personal property comprises movable assets that individuals own. This category includes vehicles such as cars, buses, cranes, or trucks, which can be transported from one location to another. Unlike land and improvements, personal property can be easily moved or transferred.
Intangible property: Intangible property refers to assets that do not have a physical form but hold value. This includes ownership rights to intellectual property such as patents, trademarks, copyrights, and royalties. While intangible, these assets can be bought, sold, licensed, or transferred like tangible properties.
How is Property Tax Calculated?
Property tax calculation in India takes into account various factors, with methods differing between municipal corporations. However, the fundamental computation remains consistent.
Location and Amenities: The area, amenities available, and status of occupancy influence assessment.
Property Type: Whether residential, commercial, or land.
Construction Details: Year and type of construction, such as multi-storied or single floor, pukka or kutcha structure.
Floor Space Index and Carpeted Area: These factors determine usable space within the property.
After assessing these parameters, municipal corporations utilize one of the following methods:
Annual Rental Value System (RVS) or Rateable Value System: Tax is based on the yearly rental value of the property, determined by municipal authorities considering factors like size, condition, location, and amenities. This value may not necessarily reflect actual rent collected. Hyderabad and Chennai municipalities employ this method.
Capital Value System (CVS): Tax is calculated as a percentage of the property’s market value, determined by the government based on location. The market value is published and revised annually. Mumbai’s municipal corporation follows this method.
Unit Area Value System (UAS): Tax is calculated based on the per-unit price of the property’s built-up area. This price considers location, land price, and usage. The final tax value is obtained by multiplying the per-unit price with the built-up area. Municipal authorities in cities like Kolkata, Delhi, Bengaluru, Patna, and Hyderabad use this method.
How to pay Property Tax Online?
To pay property tax online through the official website of the Municipal Corporation, follow these steps:
Visit the official website of the concerned municipal corporation.
Navigate to the “Online Services” section and select “Pay Property Tax.”
Choose the option to proceed with paying property tax and move to the payment options.
Fill out the appropriate property tax form, which could be form 4 or 5, depending on the property type and category.
Ensure to select the correct assessment year, representing the year for which the tax is being calculated and paid.
Enter the Property Identification Number (PID) and provide other necessary information, such as the owner’s name and property documents.
Select the preferred mode of payment from the available options.
After entering all relevant details and completing the payment process, a challan will be generated on the screen.
Print out the generated challan for future reference and record-keeping purposes.
How to Calculate Income from House Property?
When computing Income from House Property, several key points need consideration:
Net Annual Value Calculation: The net annual value of a residential property is determined by subtracting municipal taxes from the gross annual value. This provides an accurate reflection of the property’s income-generating potential after accounting for taxes.
Partial Occupancy: If a house remains vacant for any duration during a financial year, rental income should only be considered for the period the house was occupied, not for the entire 12 months. This ensures that income calculations accurately reflect the property’s actual rental earnings.
Offset Vacancy Loss: In cases where a property remains vacant while property tax is still paid, the owner can offset this loss against income from other sources within the same fiscal year. Alternatively, if the loss cannot be offset in the same year, it can be carried forward for up to 8 years. This provision helps mitigate financial losses incurred due to property vacancy.
Income Tax Deductions on Income from House Property
Tax deductions can significantly reduce the tax liability on income from house property, with two main avenues available under sections 24 and 80C of the Income Tax Act:
Deductions under Section 24:
Standard Deduction: Property owners can claim a standard deduction equivalent to 30% of the net annual value. This deduction reduces the taxable income from house property.
Interest on Loan: Interest paid on loans taken for the purchase, construction, or renovation of a house is eligible for tax exemption. For self-occupied properties, individuals can claim an exemption of up to INR 2,00,000 on the interest paid. If the loan is taken before the completion of construction or purchase, interest paid during this period can be claimed in five equal installments starting from the year of purchase or construction completion. However, for renovation or reconstruction loans, exemption can only be claimed after completion of the renovation or reconstruction.
Deductions under Section 80C:
Under Section 80C, individuals can claim a deduction of up to INR 150,000 on stamp duty and registration charges incurred while purchasing a new house. Additionally, expenses related to the transfer of property can also be claimed for deduction.
These deductions provide significant relief to taxpayers, reducing their overall tax burden and promoting investments in housing. By taking advantage of these provisions, individuals can optimize their tax planning strategies and maximize their savings.
