A House property could be your home, an office, a shop, a building or some land attached to the building like a parking lot. The Income Tax Act does not differentiate between commercial and residential property. All types of properties are taxed under the head ‘income from house property’ in the income tax return.
Property used for own residential purposes is know as Self-Occupied House Property(SOP) and Property which is rented for the whole or a part of the year is considered a Let-Out House Property (LOP) for Income Tax purposes.
Note: From FY 2019-20 and onwards, the benefit of considering the houses as self-occupied has been extended to 2 houses. Now, a homeowner can claim his 2 properties as self-occupied and remaining house as let out for Income tax purposes. The choice of which property to choose as self-occupied is up to the taxpayer.
Calculation
a. Determine Gross Annual Value (GAV) of each Property ( for SOP it is zero)
b. Reduce property Tax paid to government
c. Calculate Net Asset Value(NAV)= GAV - Property tax paid
d. Reduce deductions u/s 24 i) Standard deduction 30% of NAV and ii) Interest on house loan (refer section 24 for more details)
e. The resulting value of above calculation is Income from House property.
Note: When you own a self occupied house, since its GAV is Nil, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads.
Further Tax deduction u/s 80C is available with respect to Principal Repayment of loan subject to conditions as mentioned below
The home loan must be for purchase or construction of a new house property.
The property must not be sold in five years from the time you took possession. Doing so will add back the deduction to your income again in the year you sell.
Stamp duty and registration charges and other expenses related directly to the transfer are also allowed as a deduction under Section 80C.
Above deductions are subject to a maximum deduction of Rs.1,50,000.00
Are You worried about Calculation of Income from House Property? Here is the file for ease of calculation
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