Deductions from House Property Income – Taxability

Income from house property is levied not upon actual income from the property but upon the annual value. From the annual value the following deductions are available u/s 24 of the Income Tax Act, 1961 –

  1. Standard Deduction – A deduction u/s 24(a) of sum equal to 30% of the annual value is deductible irrespective of any expenditure incurred by the taxpayer. This deduction is in substitution of earlier deduction for repairs, collection charges, ground rent, insurance etc.
  1. Interest on Borrowed CapitalWhere the house property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital, u/s 24(b) is allowable as deduction on accrual basis.

However, the amount of said deduction for interest in respect of a self-occupied property shall be as under:-

  1. Where the property is acquired or constructed with borrowed capital and such acquisition or construction is completed before three years from the end of the financial year in which capital was borrowed, the amount of deduction shall be limited to Rs. 150,000 ;

For the said higher deduction of Rs. 150,000 the assessee should have a certificate from the lender specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property or conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan. The assessee should obtain such certificate and keep with him. Whenever so required by the Assessing Officer (A.O.), it should be furnished.

  1. In other cases, where the amount was borrowed, the amount of deduction shall be limited to Rs. 30,000/-.

Interest Payable by an assessee in respect of funds borrowed for the acquisition or construction of a house property and pertaining to a period prior to the previous year in which such property has been acquired or constructed, to the extent it is not allowed as a deduction under any other provision of the Act, will be deducted in five equal annual instalments, commencing from previous year in which the house is acquired or constructed.

In case of self occupied property, for which annual value has been taken as nil none of the above deductions except the interest on loan subject to limit mentioned above is admissible. Moreover, this deduction on account of interest will also be available to assessees who are unable to occupy the property by reason of their employment, business or profession carried on at a place other than the place where such property is situated.

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