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How to compute taxable income from House Property
Published : 27 Oct 21, 00:00
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 | |
| A | Gross Annual Value (‘GAV’) | XXX |
| B | Less: Municipal tax actually paid during the year | XXX |
| C | Net Annual Value (‘NAV’) (A-B) | XXX |
| D | Less: Standard deduction (30% of C) | XXX |
| E | Less: Home Loan Interest | XXX |
| F | Income 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 |
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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.
