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In our earlier article Tax : Income From House Property we had given an overview of  how to calculate Income From House Property. In this article we shall consider the case of one house for self-occupied purpose i.e being used by the owner for residences and no other property. It gives an overview of Income from Self Occupied House Property, Income Tax on Income for Self Occupied Property. Then it explains various cases with examples of computation of income from one Self Occupied House property like House constructed before 1-Apr-1999, House constructed after 1-Apr-1999,  for interest in pre-construction stage of the house, when house is co-owned and both husband and wife are paying EMI,when house is co-owned but husband is paying EMI, Unoccupied property and HRA allowance, Carry Over the Loss From Income From House Property.

Overview of Income from House property

Annual Value of a home is the  capacity of the property to earn income i.e sum for which the property might reasonably be expected to be let out from year to year. Computing income from house property is shown in table below :

Gross Annual Value ****
Less: Municipal Taxes (if paid by owner) ****
Net Annual Value ****
Less:Deduction under Sec.24

  1. Standard Deduction  @ 30% of NAV
  2. Interest on Loan
****
Income from house property ****

Where  GROSS ANNUAL VALUE(GAV) is the highest of

  1. Rent received or receivable
  2. Fair Market Value.
  3. Municipal valuation.

If however the Rent Control Act is applicable, the GAV is the standard rent or rent received, whichever is higher.

How to show Income from Self Occupied House Property in ITR1

Maximum Income form House property for 1 Self Occupied House that you claim is = Maximum of(2,00,000 and  Income from House property for 1 Self Occupied House calculated )

You have to fill in maximum of 200000 irrespective of how much your home loan interest is if its self occupied.

Fill Home loan interest in ITR1 with - (minus) sign

Fill Home loan interest in ITR1 with – (minus) sign

If Total Income from House property for 1 Self Occupied House is less than 2,00,000 then you enter that amount as Income from House Property as shown in image below

Fill Home loan interest income for Self occupied House in ITR1

Fill Home loan interest income for Self occupied House in ITR1

Income Tax on One Self Occupied Property

Self Occupied Property is house used for own residential purposes throughout the year.  This means

  • House is not let out for whole or part the previous year
  • No any other benefit is derived by the owner

Annual Value : Section 23 (2) (a) prescribes that annual value of such house shall be taken to be nil, if the conditions mentioned below are satisfied:

  1. the property (or part thereof) is not actually let during whole (or any part) of the previous year; and
  2. no other benefit is derived therefrom

Statutory Deduction Sec 24 (a) : Deduction of 30 % of Net Annual Value (NAV)  is allowed . No deduction is provided if Net Annual Value is NIL  hence for Self Occupied Property one cannot claim deduction.

Interest on borrowed capital for self occupied property 

For claiming income tax deduction, the Equated Monthly Installment (EMI) amount is divided into the principal and interest components. The repayment of the principal amount of loan is claimed as a deduction under section 80C of the Income Tax Act up to a maximum amount of Rs. 1 lakh

The maximum amount of interest permissible in cases of self-occupied property is Rs. 2,00,000 (from FY 2015-16 limit of 1.5 lakh was raised to 2 lakh) in respect of funds borrowed on or after 01.04.1999 and 30,000 before 01.04.1999).

Income from Self occupied Property

Income from Self occupied Property

Loss of income from House Property

If there is a Loss from House Property, the same can be set-off against income from any other head in the same Assessment Year  as per the  provisions of Section 70

If the Loss cannot be set-off against income from any other head in the same Assessment Year, the Loss is allowed to be carried forward and set-off in 8 subsequent Assessment Years against income from House Property only  as per the  provisions of Section 71B.

Unoccupied property

Unoccupied property is property which cannot be occupied by the owner because of his employment/business/profession carried out at any other place he stays in a rented premise in such other place. Taxation of income from unoccupied property is same as the Self occupied property. So In case of unoccupied property

  • Gross taxable value of such property is considered as NIL
  • Deduction of interest on housing loan for acquisition is allowed deduction up to Rs 2,00,000
  • He can also claim House Rent Allowance (HRA ) As per income tax act both benefits(HRA and deduction of interest) are independent of each other and there is no relation what to so ever in claiming HRA exemption and House loan interest ,if person fulfill conditions checked separately for each section. For details you can read SimpleTaxIndia Tax Benefit on HRA and Home Loan available or Not. To Refresh for calculation of  HRA, least of the following three options will be exempt from tax
    • 50% of the basic salary and DA, where the residential house is situated at Mumbai, Kolkata, Delhi or Chennai and an amount equal to 40% of above salary where residential house is situated in any other place.
    • HRA actually received by the employee in respect of the period during which rented accommodation is occupied by the employee during the financial year
    • The excess of rent paid over 10% of the salary.

Examples of Computation of income from Self Occupied Property

Mr Mehra owns a house property. It is used by him throughout the year for his and his family members residence.

Municipal Value Rs 1,66,000
Fair Rent Rs 1,76,000
Standard Rent Rs 1,50,000
Expenses
 Repairs  Rs 20,000
 Municipal Tax  Rs 16,000
 Insurance  Rs 2,000
 Loans
 Interest on capital borrowed to construct the property Rs 1,36,000
 Interest on capital borrowed by mortgaging the property for daughter’s marriage Rs   20,000
Income
Income from Business  Rs 7,10,00

Computation of income from House Property will be as follows :

Num  Description If Loan is before 1-Apr-1999 If Loan is taken after 1-Apr-1999
1 Gross Annual Value(As it is self occupied property) Nil Nil
2 Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value is Nil) Nil Nil
3 Net Annual Value Nil Nil
4 Less Interest on borrowed capital(maximum is Rs 30,000 if  borrowed before 1.Apr.1999 else 1,50,000 ) -30,000 -1,36,000
5 Income from house property -30,000 -1,36,000
6 Business Income 7,10,000  7,10,000
7 Net Income (6+5) 6,80,000  5,74,000

Mr. Sharma  purchased a house property in April 2012 by taking a housing loan from Bank which is self occupied. Compute the income from house property for the year given following details

  • Interest paid on loan upto 31st Mar 2015 1,70,000
  • Principal paid towards the loan 80,000
  • Municipal Taxes paid 8,000
  • Insured Premium 3,000
  • Income from his salary is 6,00,000 and other sources Rs 50,000
Num  Description Amount(Rs)
1 Gross Annual Value(As it is self occupied property) Nil
2 Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value is Nil) Nil
3 Net Annual Value Nil
4 Less Interest on borrowed capital(maximum is Rs 30,000 if  borrowed before 1.Apr.1999 else 1,50,000 ) -1,70,000
5 Income from house property -1,70,000
6 Income from Salary 6,00,000
7 Income from other sources    50,000
8 Net Income (5+6+7) 4,80,000

Example for interest in pre-construction stage of the house

Mr Kapoor has one house property in Delhi where he stays with his family.Rent of similar property in neighborhood is Rs 25,00 per month. The municipal valuation is Rs 23,000 per month. Municipal taxes paid is Rs 8,000.  The house was constructed in the year 2010 with the loan of  Rs 20 lakh taken from PNB. The construction was completed on 30-Nov-2012 . The accumulated interest upto 31-Mar-2015 is Rs 1,50,000. During the previous years 2015-16 he paid Rs 1,74,000 as interest.

Num  Description Amount(Rs)
1 Gross Annual Value(As it is self occupied property) Nil
2 Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value is Nil) Nil
3 Net Annual Value Nil
4 Less Interest on borrowed capital(maximum is Rs 30,000 if  borrowed before 1.Apr.1999 else 1,50,000 ) -1,74,000
Less Interest for pre-construction stage (1/5th of 1,50,000)    -30,000
5 Income from house property (maximum is Rs 2,00,000) -2,00,000

M As per income-tax Interest up to the end of Financial year ,immediate proceeding to the year in which house is completed is considered as Income tax pre construction period .  As construction was completed in Nov 2012 he can claim interest upto Mar 2015 in five installments in income tax from FY 2012-13 to FY 2017-18. Hence Kapoor can claim 1/5th of interest paid in pre-construction stage every year for 5 Years.

Example when house is co-owned and both husband and wife are paying EMI

Mr and Mrs Khanna have jointly taken a home loan for a house they are living in. Mr Khanna pays 75 percent of the EMI. What will be their individual tax benefits?

For claiming income tax deduction, the EMI amount is divided into the principal and interest components.

  • The repayment of the principal amount of loan is claimed as a deduction under section 80C of the Income Tax Act up to a maximum amount of Rs. 1 lakh individually by each co-owner.
  • The repayment of the interest portion of the EMI is also allowed as a deduction under section 24 of the Act, which is given under the head “income from house property”.
  • In case a person is just a co-borrower of a loan and not a co-owner in the property, he cannot claim the tax rebates.
  • If the co-owners are equal owners of a property but if the share of the loan is 2:1, the tax benefits can also be availed in the same ratio.

As they are living in the house for which home loan is taken, both of them are  entitled to deduction in the ratio (3:1) on account of interest on borrowed money up to a maximum of Rs 2 lakh from AY 2016-17 (before it was 1.5 lakh) individually.

Example when house is co-owned but husband is paying EMI

Flat is registered in name of Mr and Mrs Kale. In registration share of partnership is not defined. Whole EMI is paid by Mr Kale.  Even though Mrs Kale is co-applicant in flat, can Mr Kale claim 100% interest loss for that property as he is paying 100 % EMI ?

Though the Flat in Joint name but the payment has been(are /will be) paid by you and wife has not contributed any money in the Flat purchasing . As per section 27(i) of the income tax act ,ownership shall be deemed for taxing income from house property :

(i)When house property is transferred to spouse (otherwise than in connection with an agreement to live apart) or minor child (not being a married daughter) without adequate consideration (Section 27(i))

So if house is transferred to wife/Husband without any consideration then Husband/wife remains the deemed owner of the house and income from house property will be added in transferor’s income.

In this case Mr Kale has given his wife name in flat for convenience and he has contributed full money in the flat. Hence he has become the deemed owner as per Section 27 of the income tax act . So as per this Section full(100%) Income from house /Flat is to be added in his income. Income here means loss also.

What if Mrs Kale starts earning and has to file Income Tax Return?

As Mrs Kale is also earning now however Mr Kale should not take contribution in the house from her. Let her invest money with her own choice . If he needs money for repaying loan then he can take loan from her.

Example of Unoccupied property and HRA allowance

Mr Paul has HRA as Rs 30,000 per month or Rs 3.6. lakh per year, and he pays a rent of Rs 22,000 per month. For his  basic salary of Rs 60,000 per month, HRA computation would be

  • The actual HRA he gets is Rs 30,000 per month.
  • The actual rent paid less 10% of his salary works out to Rs 16,000 (Rs 22,000 – 6000 ) 6000 is 10% of Rs 60,000.
  • And 50% of his basic salary works out to Rs 30,000.

The minimum amount works out to Rs 16,000 per month or Rs 1.92 lakh per year. And that is the amount that you can claim as a deduction from your taxable income. The remaining portion of your HRA i.e. Rs 1.68 lakh (Rs 3.6 lakh – Rs 1.92 lakh) will be added to his income for the year.

For his Unoccupied house (even when he is not staying but his parents are) his interest for loan is Rs 1,60,000

Num  Description Amount(Rs)
1 Gross Annual Value(As it is self occupied property) Nil
2 Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value is Nil) Nil
3 Net Annual Value Nil
4 Less Interest on borrowed capital(maximum is Rs 30,000 if  borrowed before 1.Apr.1999 else 1,50,000 ) -1,60,000
5 Income from house property (maximum is Rs 2,00,000) -1,60,000

Example of Carry Over the Loss From Income From House Property

Mr Khan has one property which is self occupied with  Municipal valuation Rs 50,000 Fair rent  Rs 60,000  Municipal tax paid by the owner (including Rs. 1000 of last year)10,000 Interest on loan borrowed for construction (started after 01.04.99 and completed before 1.4.2003) 1,80,000. His salary is Rs 90,000.

Num  Description Amount(Rs)
1 Gross Annual Value(As it is self occupied property) Nil
2 Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value is Nil) Nil
3 Net Annual Value Nil
4 Less Interest on borrowed capital(maximum is Rs 30,000 if  borrowed before 1.Apr.1999 else 1,50,000 ) is 1,80,000 -1,50,000
5 Income from house property (maximum is Rs 2,00,000) -1,80,000
6 Income from Salary 90,000
7 Net Income or rather Loss which will be carried forward to next year  -90,000

Net Loss will be carried forward to next year for being set off as per the  provisions of Section 71B

Related Articles :

In this article we have tried to explain about tax on income from only one house which is Self occupied and explained how income from house property is taxed with examples in various cases. If there are some mistakes or errors please let us know we shall correct it.

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