The income you get from house property as rental income or its transfer is popularly called ‘Income from house property’. The property could be a house, office, building or a warehouse. The ‘Income from house property’ is a classification under the five heads of income which is considered for calculating your gross total during the year.
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If your income must be taxed under Income from House Property, the following 3 conditions must first be met.
Your property can also be inherited, let-out or self-occupied. You must calculate the income chargeable to tax in a specified way for self-occupied and let-out properties. Self-occupied properties are used for residential purposes and could be occupied by your family members. A vacant house is considered as self-occupied for income tax purposes. There could be exceptions if you are not able to occupy the property due to employment reasons. You can consider two houses to be self-occupied, while any other house is treated as let-out.
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The Gross Annual Value or GAV of a self-occupied property is zero. No matter what, you always arrive at 0 or a negative figure in case of a loss (This is for a home loan). This can be adjusted against other heads of income.
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If you have given house property on rent to a tenant even for a few months, this is let-out property and it’s calculated accordingly.
Let’s have an example to calculate income from house property. You have given your property on rent at Rs 20,000 a month. You have paid Rs 10,000 in municipal taxes for the given year. You have Rs 60,000 as interest on borrowed capital. (This is home loan interest).
Income from House Property |
Amount (Rs) |
Total annual rental income value |
20,000 * 12 = 2,40,000 |
Less: Municipal Taxes |
10,000 |
Net Annual Value or NAV |
2,30,000 |
Deductions under Section 24 |
|
NAV - 30% of NAV |
2,30,000 - 30% of 2,30,000 = 1,61,000 |
Interest on borrowed capital |
60,000 |
Income from house property |
101,000 |
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