The rent received from any property whether commercial or residential is taxable as Income from House Property. Certain deductions are also allowed from such income. The Income chargeable under head House Property would be added to the income computed under the 5 heads of income in the income tax return and tax would be levied as per the income tax slab rates. Optimize deductions on House Property.   
The following are allowed as deduction from Income from House Property:-

Deduction for Payment of Municipal Taxes

Local authorities levy the municipal taxes. This tax shall be deducted from the Gross Annual Value to arrive at the Net Annual Value. However, this deduction is allowed only if:

• The municipal taxes have been borne by the owner, and
• These have actually been paid during the financial year.

Statutory Deduction @ 30% of NAV

From the Net Annual Value, the taxpayer is allowed a statutory deduction of 30% of the Net Annual Value. This deduction of 30% is a flat deduction and is allowed to everyone.

Deduction for Repayment and Interest of Loan

Repayment of Home Loan consists of 2 components:

• Repayment of the Principal Amount (Section 80C)
• Payment of the Interest on Home Loan (Section 24B)

Repayment of the Principal Amount (Section 80C)
To avail deduction under this section, following points shall be noted:

• Allowed only to Individual/HUF
• The maximum tax deduction allowed under Section 80C is Rs. 1,50,000
• This tax deduction is the total of the deduction allowed under Section 80C and thus, includes other investment amount such as investment in PPF Account, Tax Saving Fixed Deposits, National Savings Certificate etc.
• Stamp Duty & Registration Fee is also allowed
• Deduction allowed only after the construction is complete and the completion certificate has been awarded.

Payment of the Interest on Home Loan (Section 24B)

• Deduction allowed if loan taken for the purpose of Purchase/ Construction/ Repair/ Renewal/ Reconstruction of a Residential House Property
• The maximum tax deduction allowed of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs
• In case the property for which the Home Loan has been taken is not self-occupied, no maximum limit has been prescribed
• In case a property has not been self-occupied by the owner for the reason of his employment, business or profession carried on at any other place and he has to reside at that other place not belonging to him, then the deduction allowed shall be Rs. 2 Lakhs
• Deduction allowed on accrual basis
• If the property is not acquired/constructed completed within 3 years from the end of financial year in which the loan was taken, the interest benefit in this case would be reduced from 2 Lakhs to Rs 30,000 only.

             SELF OCCUPIED Property:

Completion Status	Deduction Allowed
Completed within 3 years	Rs. 2,00,000
Beyond 3 years	Rs. 30,000

 

         NOT SELF OCCUPIED Property: No limit

Payment of the Pre- Construction Interest
Deduction of interest shall not be allowed before completion of construction. In this regard note the following:

• If Loan is taken for purpose of Repair/ Renewal/ Reconstruction: No Tax Deduction allowed for Interest paid before Completion
• If Loan is taken for the purpose of Purchase/ Construction: The Interest that has been paid before the completion of construction should be aggregated and the whole aggregated amount shall be allowed as tax deduction in 5 equal installments for 5 successive Financial Years starting from the year in which the construction has been completed.

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