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Income From House Property & Its Taxation
1. What is Income from House Property?
Self-Occupied Property: Used for personal residence, no rental income, but home loan interest can be deducted.
Let-Out Property: Rented out, rental income is taxable, and deductions for taxes paid and home loan interest are allowed.
Deemed to be Let-Out: Not rented out but treated as rented for tax purposes.
Under Construction Property: No rental income until construction is completed.
2. Taxability Conditions:
The property must belong to you and consist of buildings/land.
It’s used for residential purposes and not for your business.
3. Steps to Compute Income from House Property:
Gross Annual Value (GAV): For self-occupied properties, GAV is zero. For rented properties, it’s the rental income.
Net Annual Value (NAV): GAV minus municipal taxes paid.
Standard Deduction: 30% of NAV.
Home Loan Interest: Deduct home loan interest.
Final Taxable Income: The resulting income is taxed as per your tax slab.
4. Deductions:
Home Loan Interest: Deduct up to Rs. 2 lakhs for self-occupied property.
Principal Repayment: Deduction up to Rs. 1.5 lakh under section 80C.
Additional Deduction (80EEA): Rs. 1.5 lakh for homes under Rs. 45 lakh.
5. Tax Benefits for Joint Owners:
Co-owners can each claim up to Rs. 2 lakh on home loan interest, and deductions on principal repayment and stamp duty are shared based on ownership share.
6. Tax Savings Strategies:
Consider joint ownership with family members to split tax liability.
Let out vacant properties to avoid paying tax on notional rental income.
Own up to two self-occupied properties to reduce taxes.
7. HRA and Home Loan Deductions:
You can claim both HRA and home loan deductions as long as they apply to different properties.
8. Important Terms:
- Municipal Value: Value calculated by authorities for tax purposes.
- Fair Rent: Rent for similar properties in the area.
- Net Annual Value: GAV minus municipal taxes.
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Frequently Asked Questions
Income that arises from selling a capital asset is known as capital gains. A capital asset includes any type of property that an assessee holds for any purpose. The capital assets are taxable in the hands of the receiver in the year of transfer of the capital asset. Such tax is known as capital gains tax. Capital gains tax is of two types - short-term capital gains and long-term capital gains.
The sale value of the asset is reduced by the cost of acquisition, and the profit from the sale is charged to tax as capital gains.
Given below are a few examples of capital assets -
- Land
- Building
- House property
- Patents
- Trademarks
- Vehicles
- Leasehold Property
- Machinery
- Jewellery
Income that arises from selling a capital asset is known as capital gains. A capital asset includes any type of property that an assessee holds for any purpose. The capital assets are taxable in the hands of the receiver in the year of transfer of the capital asset. Such tax is known as capital gains tax. Capital gains tax is of two types - short-term capital gains and long-term capital gains.
The sale value of the asset is reduced by the cost of acquisition, and the profit from the sale is charged to tax as capital gains.
Given below are a few examples of capital assets -
- Land
- Building
- House property
- Patents
- Trademarks
- Vehicles
- Leasehold Property
- Machinery
- Jewellery
Income that arises from selling a capital asset is known as capital gains. A capital asset includes any type of property that an assessee holds for any purpose. The capital assets are taxable in the hands of the receiver in the year of transfer of the capital asset. Such tax is known as capital gains tax. Capital gains tax is of two types - short-term capital gains and long-term capital gains.
The sale value of the asset is reduced by the cost of acquisition, and the profit from the sale is charged to tax as capital gains.
Given below are a few examples of capital assets -
- Land
- Building
- House property
- Patents
- Trademarks
- Vehicles
- Leasehold Property
- Machinery
- Jewellery