How to compute taxable income from House Property

The Income from House Property shall be computed separately for each property. The basis for calculating income from house property is the annual value of the house property as determined under the Income Tax Act and not the actual rent. As a general rule, the annual value is a notional figure and may have no relation to the actual income earned from the property. Even if no income is earned from the property, it will still have an ‘annual value’.


Particulars
 Amount 
AGross Annual Value (‘GAV’) 
XXX
BLess: Municipal tax actually paid during the year
XXX
CNet Annual Value (‘NAV’) (A-B) 
XXX
DLess: Standard deduction (30% of C)
XXX
ELess: Home Loan Interest
XXX
FIncome from House Property (C-D-E)
XXX

The GAV of self occupied properties shall be Nil.

Deductions from House Property Income

Only three deductions are allowed against the house property income, one from GAV and two from NAV are allowed.

Municipal Tax
Standard deduction @ 30%
Interest on borrowed capital
  •  Should be borne by the owner
  • Actually paid by the owner during the year
  • Notional deduction
  • Can be claimed by any person
  • Purpose of loan must be related to the Property
  • Loan taken from any person allowable
  • Deduction allowed on accrual basis
  • Certificate from lender required to claim deduction
  • No deduction if interest paid outside India and no TDS has been deducted on such payment. 

TDS on Rent

The person who is paying rent is liable to deduct tax at source.

In case the person receiving the rent is an NRI, the TDS rate shall be 30% (excluding cess) irrespective of the amount of rent. In other words, no threshold limit is applicable for deducting TDS on rent to NRI. Whereas in case the person receiving the rent is a resident, TDS @ 10% shall be liable to be deducted only if the aggregate rent paid or payable in a financial year exceeds Rs 2.4 lakhs. Click here for detailed discussion on TDS on rent.

Joint Property

In case the property is in the joint names of two or more persons, the income from house property shall be computed for each co-owner separately for their respective shares.

  • Standard deduction @ 30% shall be allowed separately for each co-owner.
  • Deduction for interest on housing loan can be claimed to the extent of share in housing loan.
  • The limit of Rs 2.4 lakhs for deduction of TDS shall be applied for each resident co-owner separately. In other words, it is not the total rent for the property but total rent paid to each co-owner which is to be considered for determining threshold limit of Rs 2.4 lakhs.

Set Off & Carry Forward of House Property Losses

The loss from one house property can be set off against income from other properties. In case the net result under the head Income from House Property is a loss, such loss can be set off against income from other heads of income.

With effect from financial year 2017-18, where the net result of computation under the head Income from House Property is a loss and you have income assessable under any other head of income, you shall be entitled to set off such loss only to the extent of Rs 2 lakhs. The balance loss shall be allowed to be carried forward up to 8 years for set off against future house property income. 

Disclaimer: The views / the analysis contained therein do not constitute a legal opinion and is not intended to be an advice. Readers of this document are advised to seek their own professional advice before taking any course of action or decision, based on this document.

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