Deductions from income from House Property

Deductions from House Property Income

 

Did you know that your rental income is not fully taxable? Yes, you can claim deductions from your rental income and pay tax only on the balance amount.  Now let us look at the available deductions from rental income:

Municipal Taxes:

These refer to the payments made to the state municipal corporations as property taxes and are available as a deduction against the annual value. It is to be noted that this expense is deductible only when the owner of the property has made the payment. In case the property tax is borne by the tenant then no deduction will be allowed to the owner.

Standard Deduction @ 30%:

You get a flat deduction of an amount equivalent to 30% on your rental income.  The only thing to be noted is that the rental income has to be reduced by any municipal taxes paid by the owner.

Interest on Housing Loan:

If you are paying a home loan for your property, any interest paid on such home loan is allowable as deduction in the following manner:

i. Self- Occupied House Property: Upto a maximum of Rs. 2,00,000

ii. Let- Out House Property: Actual interest paid without any limit

iii. Interest paid prior to the year in which possession of the house was received or construction completed is also allowable as deduction in five equal instalments starting from the year in which such possession was received or construction completed.

Now let us understand the above with an example: 

Mrs. Vini paid an amount of Rs. 4,25,000 as interest till AY 2013-14 (AY stands for Assessment Year, this means Financial Year 2012-13) in which construction of her apartment was completed. Thus, deduction available to her on account of pre-construction period would be as under:

Assessment Year Amount of interest (in Rs.)
2013-14

85,000

2014-15

85,000

2015-16

85,000

2016-17

85,000

2017-18

85,000

Total

4,25,000

Read: How to calculate income from House Property in case of co-ownership?

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