Income From House Property
House Property is classified under three major Heads:
A) Self Occupied Property
B) Letout Property
C) Deemed Letout Property
A) Self Occupied Property (SOP)
======================
The annual value of one self-occupied house property, which has not been let out for RENT at any time during the previous year, is taken as 'NIL' [Section 23 (2) (a) ].
From the annual value, only the interest on borrowed capital is allowed as deduction under section 24. Maximum Rs. 2,00,000 i.e. Interest paid on Housing Loan is Allowed.
***********************PLEASE NOTE ******************************
If interest on Housing Loan is Rs. 2,10,000 then only Rs. 2,00,000 will be allowed under SOP however Rs. 10,000 will also be allowed as DEDUCTION under Section 80EE if
1) should be First House Property Purchased
2)HP Agreement value less than 40 Lac
3)Housing Loan less than 25 lac.
4)Housing Loan Interest Paid exceeds Rs. 2,00,000.
B) Letout Property (LOP)
====================
The Gross annual value of Letout house property, which has been letout for RENT at any time during the previous year, is taken as 'highest of the following four options'
1. Actual Rent Received
2. Municipal Value of Property
3.Fair Rental Value
4. Standard Rent as per Rent control Act.
From the Gross Annual value,Municipal Tax Paid along with 30% of NAV and interest on Housing Loan is allowed as deduction without limit of Maximum interest paid.
C) Deemed Letout Property:
=======================
Is an Property other than SOP, which is ready for letout but kept idle or Locked or unused or used without rent for entire year.
PLEASE NOTE that calculation for Deemed Letout Property and Letout Property would be same.
CALCULATION
=============
Suppose Mr. A has two house property one which is SOP, on which Mr. A pays housing loan interest of Rs. 50,000 and Muncipal tax of Rs. 1,500 every
year and
his second house property is letout on rent of Rs. 100,000 per year on which Municipal tax of Rs. 2,000 and Housing Loan interest of Rs. 60,000 paid.
(i) Property No. 1 (calculation)
SOP Anuual value = NIL
(-)interest Paid = 50,000
====================
SOP Loss = (50,000)
(ii) Property No. 2 (calculation)
Gross Annual Value = 100,000
(-)Muncipal Tax = 2,000
======================
Net Annual Value (NAV) = (98,000)
Less:Deduction under Section 24
30% of NAV = 29,400
interest = 60,000
=====================
Letout HP Gain = 8,600
Thus TAx Payable by Mr. A on his both house property is Nil since,
SOP Loss (Property no.1) = (50,000)
HP Gain (Property no.2) = 8,600
Difference = 41,400 loss
***********************PLEASE NOTE ******************************
DEDUCTION under section 80C is also available for principal amount of loan repaid by you, if Housing loan repayment statement received from Bank states actual amount of interest and Principal repaid by you.
====================
Residential House:
====================
'A' residential house is 'One' residential house
Two of the Karnataka High Court Judgements have been nullified by this amendment. In case of sale of residential property or any other long term capital asset (other than a residential property) which result in capital gains, then such gains will be tax exempt if it is reinvest within specified time in another residential property.
Much disputes arose whether such capital gains have to be reinvested in one residential property or could be inested in more than one residential property. Two relatively recent Karnataka High Court Judgements held that there is no restriction to reinvest in just one residential house and it could be invested in more than one as the article 'a' used in sections 54 and 54F does not denote a numerical value. Further, the SLP filed by the tax department was also dismissed by the supreme court thereby making the Karnataka High Court Judgements law of Land.
Now this benefit has been taken away clarifying that the reinvestment has to be in just one residential property and not more than one. The capital gains tax exemption will be limited to only one residential property. if two or more house properties are procured or constructed then the one with maximum value should be claimed as tax exemption.
House Property is classified under three major Heads:
A) Self Occupied Property
B) Letout Property
C) Deemed Letout Property
A) Self Occupied Property (SOP)
======================
The annual value of one self-occupied house property, which has not been let out for RENT at any time during the previous year, is taken as 'NIL' [Section 23 (2) (a) ].
From the annual value, only the interest on borrowed capital is allowed as deduction under section 24. Maximum Rs. 2,00,000 i.e. Interest paid on Housing Loan is Allowed.
***********************PLEASE NOTE ******************************
If interest on Housing Loan is Rs. 2,10,000 then only Rs. 2,00,000 will be allowed under SOP however Rs. 10,000 will also be allowed as DEDUCTION under Section 80EE if
1) should be First House Property Purchased
2)HP Agreement value less than 40 Lac
3)Housing Loan less than 25 lac.
4)Housing Loan Interest Paid exceeds Rs. 2,00,000.
B) Letout Property (LOP)
====================
The Gross annual value of Letout house property, which has been letout for RENT at any time during the previous year, is taken as 'highest of the following four options'
1. Actual Rent Received
2. Municipal Value of Property
3.Fair Rental Value
4. Standard Rent as per Rent control Act.
From the Gross Annual value,Municipal Tax Paid along with 30% of NAV and interest on Housing Loan is allowed as deduction without limit of Maximum interest paid.
C) Deemed Letout Property:
=======================
Is an Property other than SOP, which is ready for letout but kept idle or Locked or unused or used without rent for entire year.
PLEASE NOTE that calculation for Deemed Letout Property and Letout Property would be same.
CALCULATION
=============
Suppose Mr. A has two house property one which is SOP, on which Mr. A pays housing loan interest of Rs. 50,000 and Muncipal tax of Rs. 1,500 every
year and
his second house property is letout on rent of Rs. 100,000 per year on which Municipal tax of Rs. 2,000 and Housing Loan interest of Rs. 60,000 paid.
(i) Property No. 1 (calculation)
SOP Anuual value = NIL
(-)interest Paid = 50,000
====================
SOP Loss = (50,000)
(ii) Property No. 2 (calculation)
Gross Annual Value = 100,000
(-)Muncipal Tax = 2,000
======================
Net Annual Value (NAV) = (98,000)
Less:Deduction under Section 24
30% of NAV = 29,400
interest = 60,000
=====================
Letout HP Gain = 8,600
Thus TAx Payable by Mr. A on his both house property is Nil since,
SOP Loss (Property no.1) = (50,000)
HP Gain (Property no.2) = 8,600
Difference = 41,400 loss
***********************PLEASE NOTE ******************************
DEDUCTION under section 80C is also available for principal amount of loan repaid by you, if Housing loan repayment statement received from Bank states actual amount of interest and Principal repaid by you.
====================
Residential House:
====================
'A' residential house is 'One' residential house
Two of the Karnataka High Court Judgements have been nullified by this amendment. In case of sale of residential property or any other long term capital asset (other than a residential property) which result in capital gains, then such gains will be tax exempt if it is reinvest within specified time in another residential property.
Much disputes arose whether such capital gains have to be reinvested in one residential property or could be inested in more than one residential property. Two relatively recent Karnataka High Court Judgements held that there is no restriction to reinvest in just one residential house and it could be invested in more than one as the article 'a' used in sections 54 and 54F does not denote a numerical value. Further, the SLP filed by the tax department was also dismissed by the supreme court thereby making the Karnataka High Court Judgements law of Land.
Now this benefit has been taken away clarifying that the reinvestment has to be in just one residential property and not more than one. The capital gains tax exemption will be limited to only one residential property. if two or more house properties are procured or constructed then the one with maximum value should be claimed as tax exemption.
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