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Investment in House Property
(Understand the pros & cons under Income Tax)

House property has been a very attractive avenue not only from the point of view of Investment but also for future security purposes. Investing in house property brings in many changes in your income tax calculation. There are many things to be kept in mind while owning a house property.

Generally at the time of investing in a house property we have to resort to loans from our employer/banks/other financial institutions/companies/friends/relatives etc. Under Income Tax provisions, deductions are allowed on such loans repayments and their interest component. Lets have complete understanding of this important issue in different scenarios.

Self Occupied House Property

Owning a house is like a dream come true and living in our own house is like icing on the cake. It gives us immense satisfaction to live in our owned house. There are some important tax implication in case of a self occupied house property & we all should be aware of it:
  • Interest on loan taken for the House Property can be claimed as loss from house property upto a maximum of Rs. 200000/- under Section 24. (limit increased from Rs. 150000 to Rs. 200000 from the Financial Year 2014-15)
  • Principal repayment of loan can be claimed as deduction under Section 80C upto a maximum of Rs. 150000/-(limit increased from Rs. 100000 to Rs. 150000 from the Financial Year 2014-15).
  • If any pre construction period interest is paid, a deduction for the preconstruction period interest can also be claimed in five equal installments from the year of possession of property/completion of construction. This deduction of preconstruction period interest in five equal installments is admissible with in the over all limit of Rs. 200000/-.
 Important
One important point is that benefits of house loan interest are available only from the year of possession/acquisition of the property.

Click here to download Income/loss from House Property Calculator



Let Out House Property
(House Property given on rent):


Letting out of house property is very common. It brings us an additional income in the form of rent. But dont forget that rent is taxable as income from house property.Lets understand the tax implications in case of house property given on rent.
  • Rent received is taxable and will be included in total income as income from house property.
  • Deduction for repairs & maintenance @30% of rent is granted from total Rent income.
  • Interest on loan taken for the House Property given on rent can be claimed as loss from house property Under Section 24. From financial year 2017-18(Assessment Year 2018-19) as per Section 71(3A) maximum Rs. 200000 can be claimed as loss from house property. 
  • Principal repayment of loan can be claimed as deduction under Section 80C upto a maximum of Rs. 150000/-. 
example

For example if I have rented my house at Rs. 10000/- per month and my total loan repayment for the year 2017-18 is Rs. 480000/- (Rs. 280000/- interest and 200000/- the principal part). In this situation my claim for loss on house property in the Income tax return will be:

Rental Income
120000
Less Repairs & Maintenance @30%
-36000
Less Interest on Loan
-280000
Loss From House Property
-176000

In this same example if suppose interest on house loan is Rs.  380000 then claim admissible for loss from house property will be limited to Rs. 200000 . See the calculation:

Rental Income
120000
Less Repairs & Maintenance @30%
-36000
Less Interest on loan
-380000
Loss from House Property
-276000
Admissible Loss from House Property
200000



FAQs on House Property


Can interest on loan taken from friends & relatives for house property be also claimed as deduction like interest on home loans from banks/employers is claimed?
Yes, if you ar paying interest to your friends/relatives on the loan taken for hoouse you can claim deduction of the same as any other house loan. However you must get an interest certificate from the friend/relative from whom loan is taken.

Am I entitled to deduction of Interest on House Loan along with HRA exemption?
Yes. House loan provisions & HRA provisions are two seperate provisions. Both can be used together. Read the article here to understand in detail....

I have my house loan in joint name with my wife. Are we both entitled for the home loan benefits?
Yes. You and your wife both are eligible for home loan benefits individually. Read the article here to understand in detail.....

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