House Property Deductions

While computing income chargeable to tax under the head “Income from house property” in the case of a let-out property, only following items can be claimed as deductions from gross annual value. In other words, deduction cannot be claimed for any expenditure incurred by the taxpayer other than following:
1) Deduction on account of municipal taxes paid by the taxpayer during the year (*).
(*) Only municipal taxes paid by the owner during the year can be deducted, hence, municipal taxes due but not paid during the year cannot be deducted or taxes borne by the tenant cannot be deducted.

2) Deduction under section 24(a) @ 30% of Net Annual Value.

3) Deduction under section 24(b) on account of interest on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the property. The provisions in this regard are as follows :

While computing income chargeable to tax under the head “Income from house property” in case of a let-out property, the taxpayer can claim deduction under section 24(b) on account of interest on loan taken for the purpose of purchase, construction, repair, renewal or reconstruction of the property.

In case of a let-out property, there is no limit on the quantum of interest which can be claimed as deduction under section 24(b). However, in case of a self occupied property, limit is Rs. 2,00,000 or Rs. 30,000, as the case may be (discussed in later part).

Note: With effect from Assessment Year 2020-21, deduction for interest paid or payable on borrowed capital shall be allowed in respect of two self-occupied house properties. However, the aggregate amount of deduction under this provision shall remain same i.e., Rs. 30,000 or Rs. 2,00,000, as the case may be.

Interest is classified as pre-construction period interest and post construction period interest.

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Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.