property is a very attractive avenue from the point of view
As investing in house property brings in many changes in
your income tax calculation, it becomes even more interesting and cause
of attention too. There are many points 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/any other financial
institutions/others. In Income Tax deductions are allowed on
loans and their interest component. Lets have complete understanding of this important issue in different scenarios.
Owned House Property:
Click here to download Income/loss from House Property Calculator
we invest in a House Property with support of a loan it can reduce our
tax burden to a great extent. Now a house property owned by us can
be let out or self occupied. Lets discuss both the possibilities
Self Occupied House Property:
Living in our own house is a pleasure. Tax implication in case of a self occupied house property are:
important point is that benefits of house loan interest are available
from the year of possession/acquisition of the property.
- Interest on loan taken for the House Property can be claimed as loss from house property upto a maximum of Rs. 150000/-
- Principle repayment of loan can be claimed as deduction under Section 80C upto a maximum of Rs. 100000/-.
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 is available with in the limit of Rs. 150000/-.
*Note: 1) From financial year 2014-15 the limit for interest on house loan is proposed to increase to Rs. 200000
2) Section 80C limit
is proposed to be incresed to Rs. 150000 from Financial year
principle repayment of loan benefit limit will increse to
150000, once budget-2014 is approved.
Let Out House Property (House Property given on rent):
out of house property is very common. It brings us an additional
income in the form of rent. Tax implications in case of house property
given on rent are:
example if I have rented my house at Rs. 10000/- per month and my total
loan repayment for the year is Rs. 600000/- (Rs. 400000/- interest and
200000/- the principle part). In this situation my claim for loss on
house property in the Income tax return will be:
- Rent received will be included in total income as income from house property.
- Out of the rent income we get 30% of rent as deduction for repairs & maintenance
on loan taken for the House Property given on rent can be claimed as
loss from house property. There is no maximum limit for claiming
interest in such cases. We are allowed a full deduction of
interest component of the loan.
- Principle repayment of loan can be claimed as deduction under Section 80C upto a maximum of Rs. 100000/-. (Section
80C limit is proposed to be incresed to Rs. 150000 from Financial year
2014-15, so here also principle repayment benefit limit will increse to
Rs. 150000, once budget-2014 is approved.)
- Exemption of House Rent Allowance(HRA) if applicable can also be availed (HRA provisions are further discussed in detail).
|Rent Income ||120000|
|Less 30% for repairs||-36000|
|Less Interest on Loan for the year||-400000|
|Net loss from House Property||-316000|
total I'll get a deduction on account of Loss from House property of
Rs. 3,16,000 and Rs. 1,00,000 under section 80C for the pricipal part
of loan repayment. We must understand that the limit of Rs. 100000
under section 80C is inclusive of other investments like PPF, PF,
LIC etc. So this limit of Rs. 100000 applies to all of them taken
Further these benefits are not restricted to one
house, you can get these benefits for more than one house. If you
own two houses, benefits of both self occupied house property and let
out house property can be claimed.
Jointly owned property:
case of jointly owned property, all the purchaser are entitled
for tax benefits as explained above. In case of double income
group it is advisable that property should be bought in joint name of
husband and wife. Both husband and wife will be able to claim the above explained
tax benefits individually. However, following points need to be taken
care in case of jointly owned property:
HRA (House Rent Allowance) and Home Loan
- Property should be registered in joint names.
- Share of each owner in property should be clearly defined in registration documents.
- Loan should be taken by all the owners.
- Repayment of loan should be done by all the owners out of their income.
A very common question asked about HRA is- Can we claim HRA and house loan benefits together? Answer to this is Yes. From
Income Tax point of view HRA & Home Loan provisions are separate.
Both can be claimed simultaneously. One can take benefit of HRA as well
as avail the tax benefits of Home Loan on Let out House Property. We
have already discussed the provisions of Home Loan above, now lets have
clear idea of HRA provisions.
You can get the exemption for HRA to the least of following:
Least of the above three will be allowed to you as HRA exemption.
- HRA received during the year
- Excess of Rent paid over 10% of Salary (Basic+DA)
- 50% of Salary if residing in a Metro City (Delhi, Mumbai, Chennai, Kolkatta) and 40% of Salary if residing in a non metro city
claiming HRA exemption you need the Rent receipts and now from the financial year 2013-14 onwards, if the Rent paid
is more than Rs. 100000 annually, Land Lord's PAN is also mandatory. If
the Land Lord does not have PAN, a self declaration by the Land Lord
(containing his name and address) regarding this will also solve the purpose.
Click here to download HRA Calculator
FAQs on House Property
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. Read the article above to understand in detail.
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You may also like to see: TDS on purchase of property