Income from House Property:Meaning:

House property consists of any building or land appurtenant thereto of which the assessee is the
owner. The appurtenant lands may be in the form of a courtyard or compound forming part of the
building. But such land is to be distinguished from an open plot of land, which is not charged under
this head but under the head Income from Other sources or Business Income , as the case may be.
Besides, house property includes flats, shops, office space, factory sheds, agricultural land and farm
houses. Further, house property includes all type of house properties, i.e., residential houses,
godowns, cinema building, workshop building, hotel building, etc.
Example:- Mr. X has one big house. It includes vast open area within its boundaries. The house has
been let out at a rent of Rs. 1,00,000 p.m., out of which rent of Rs. 25,000 p.m. is attributable to the
open land. In this case, entire rental income is taxable under the head house property. Essential
conditions for taxing income under this head Income from house property is taxable in the hands of its
legal owner in whose name the property stands. Owner for this purpose means a person who can
exercise the rights of the owner not on behalf of the owner but in his own right. A person entitled to
receive income from a property in his own right is to be treated as its owner, even if no registered
document is executed in his name. The following three conditions must be satisfied before the income
of the property can be taxed under the head Income from House Property:
The property must consist of buildings and lands appurtenant thereto;
The assessee must be the owner of such house property;
The property may be used for any purpose, but it should not be used by the owner for the purpose of
any business or profession carried on by him, the profit of which is chargeable to tax. If the property
is used for own business or profession, it shall not be chargeable to tax. Ownership includes both freehold and lease-hold rights and also includes deemed ownership Tax Chargeability [Sec. 22] The
annual value of property consisting of any building or lands appurtenant thereto of which the assessee
is the owner shall be subject to Income-tax under the head Income from House Property after
claiming deduction under Sec. 24, provided such property or any portion of such property is not used
by the assessee for the purpose of any business or profession, carried on by him, the profits of which
are chargeable to Income-tax.

Section 24 Deductions from House Property Income

Income from House Property is possible in these cases
Rental Income on a let out property
Annual Value of a property which is deemed to be let out for income tax purposes (when you own more than
one house property)
Annual Value of the property which is self-occupied, which is Nil
Under section 24 of the Income Tax Act you are allowed to make certain deduction from the Net Annual Value
of your House Property. Net Annual Value is Gross Annual Value less Municipal Taxes Paid. In case the
property is let out, its rent received is your Gross Annual Value, whereas in case of a deemed to be let out
property, a reasonable rent of a similar place is your Gross Annual Value. For a self-occupied house property the
Gross Annual Value is Nil.
There are only 2 deductions available under section 24
Standard Deduction Standard Deduction is 30% of the Net Annual Value calculated above. This 30%
deduction is allowed even when your actual expenditure on the property is higher or lower. Therefore this
deduction is irrespective of the actual expenditure you may have incurred on insurance, repairs, electricity, water
supply etc. For a self-occupied house property, since the Annual Value is Nil, the standard deduction is also 0 on
such a property.
Deduction of Interest on Home Loan for the property In case you take a home loan for purchase, construction,
repair, renewal or reconstruction of your house property the interest is allowed as a deduction from the Net
Annual Value. Deduction for interest on money borrowed is allowed on accrual basis (allowed even though
interest may not actually have been paid), so keep claiming your interest deductions each year basis interest that
is due (instead of interest that is paid). Do remember that no deduction is allowed for any brokerage or
commission for arranging the loan. In case of a self-occupied house property, this deduction is allowed to be
claimed and therefore, you may in such a case have a loss under the head House Property. The total amount
allowed towards this deduction for a self-occupied house property is Rs 2,00,000 beginning assessment year
2015-16. In case of a let out or a deemed to be let out property, the entire interest is allowed as deduction under
section 24. You can start claiming this interest when the construction of your property is complete.
Pre-construction interest is allowed when you have taken a loan for purchase or construction of a house
property (not allowed in case of loan for repairs or reconstruction). The deduction for this interest is allowed in
5 equal installments starting from the year in which the house is purchased or the construction is completed. For
example, if construction of your property completed in FY 2014-15, on 16 th June 2014, you can claim 1/5 th of
interest paid uptil 31st March 2014 when you file your return for FY 2014-15.
Though pre construction interest is allowed to be deducted on the basis of 1/5 th each year beginning the year in
which the construction is completed the total amount that can be claimed in a year should not exceed Rs
2,00,000 in case of a self occupied house property.

Conditions for claiming Interest on home loan deduction You need to meet all the below 3 conditions to claim
this deduction
Loan has been take after 1st April 1999 for purchase or construction
The acquisition or construction is completed within 3 years from the end of the financial year in which the loan
was taken
There is interest certificate available for the interest payable on the loan
Note that your interest deduction may be limited to Rs 30,000 if any one of these conditions is met
Loan is borrowed before 1st April 1999 for purchase, construction, repairs or reconstruction of house property
Loan is borrowed on or after 1st April 1999 for repairs, renovation or reconstruction of house property.
If you have any questions regarding deductions allowed to you from your House Property Income.
Two or More Self Occupied House Property
You own more than one Self Occupied House Property
In case you own more than 1 House Property and both or all are self-occupied and not let out which means
either youve made one of them your residence and use the other one for some of your own purpose(not
business or profession, since that is covered under the head Profits & Gains of Business & Profession). Your
family, children stay there or you use the other one as a holiday home. In this case you will be allowed to treat
only one of the properties as Self Occupied and all others are considered to be deemed to be Let Out. Or simply,
you income for this house property will be calculated as if it has been let out.
Any one property can be chosen as Self Occupied Property The Tax Department wants you to assume only
one of the properties to be self occupied and therefore the Gross Annual Value of such a house will be nil. And
Interest on Borrowed Money (for purchase or construction) up to Rs 1,50,000 or Rs 30,000 (if taken for repairs
or reconstruction) shall be allowed to be deducted.
For the remaining properties (one or more) there will be an assumption of being let out The Tax Department
does not impose upon you which of the properties should be considered as let out. That choice is completely
yours. Also, in case of a let out property, there is no limit on the amount that you can claim towards interest on
borrowed money which means there is no cap of Rs 1,50,000. Now here is the opportunity for you to save tax
choose the house you would want to declare as let out where you have higher interest cost and lower Annual
Value and this will in turn reduce your overall tax liability. ( Note that Loss under the head House Property is
allowed to be deducted from other heads of income in the current year and can be carried forward for 8 years
and set off against income from house property in those 8 years).
You are not questioned about 2 loans for both these houses except of course by the banks they will make
sure you have sufficient capacity to pay off the loans. You are not asked by the tax department regarding your
choice of deemed to be let out property.

Lets look at this scenario with an example

Mr. X owns 2 houses. One in Delhi and one in Gurgaon. The House in Delhi was purchased for Rs 70 lakhs.
Loan on the house is Rs 30 lakhs. Interest on the loan is Rs 2,75,000. The house in Gurgaon was purchased for
Rs 60lakhs by X. X was given a loan for this house too of Rs 40lakhs. Interest on the loan is Rs 3,40,000. X
lives with his wife in Delhi while his remaining family who work in Gurgaon live in the Gurgaon House. If X
lets out the Delhi house he will earn an annual rent of Rs 3,00,000. If he rents out his house in upscale Gurgaon
he will earn an annual rent of Rs 3,60,000. Municipal Taxes paid by him for both the houses are the same of Rs
10,000 each.
Lets see what are Xs Choices
OPTION 1 Treat Delhi house as SELF OCCUPIED and Gurgaon House AS LET OUT.
Delhi House
Gross Annual Value

Nil

Less: Municipal Taxes

Nil

Net Annual Value

Nil

Less: Interest max allowed

-1,50,000

Loss from House Property

-1,50,000 (A)

Gurgaon House
Gross Annual Value

3,60,000

Less : Municipal Taxes

-10,000

Net Annual Value

3,50,000

Less: Standard Deduction

1,05,000

Less: Interest allowed (no limit)

Loss from House Property

3,40,000
-95,000 (B)

Total Loss from House Property (A) + (B) = 2,45,000

OPTION 2 Treat Gurgaon house as SELF OCCUPIED and Delhi House AS LET OUT.
Gurgaon House
Gross Annual Value

Nil

Less: Municipal Taxes

Nil

Net Annual Value

Nil

Less: Interest max allowed

-1,50,000

Loss from House Property

-1,50,000 (C)

Delhi House
Gross Annual Value

3,00,000

Less : Municipal Taxes

-10,000

Net Annual Value

Less: Standard Deduction
Less: Interest allowed (no limit)

2,90,000
87,000
2,75,000

Loss from House Property

-72,000 (D)

Total Loss from House Property (C) + (D) = 2,22,000

Xs Loss from House Property is higher when he opts for Option 1 in which we consider Delhi house as SELF
OCCUPIED and Gurgaon House AS LET OUT.
Let Out Property (LOP) A scenario where an individual enjoys a fixed income from a property in the form of
rent, it is known as Let Out Property. The annual value of the property is calculated through the following
steps:
1. Find out the expected rent from the property by comparing the rents of similar kinds of property in different
areas and use whichever is higher.
2. Calculate the actual rent received in a year.
3. Take the amount which is higher (from steps 1 & 2).
4. Calculate the amount lost while the place is vacant in a financial year.
5. The difference between 3 & 4 is the annual value of the property, known as the Gross Annual Value (GAV).
6. The net annual value of the property can be calculated by subtracting municipal tax from the gross annual
value.
Deemed to be Let Out Property (DLOP) If a taxpayer owns more than one residential property, they can treat
only one of those as self occupied while the other(s) will be treated as a deemed to be let out property, the
benefit for which can be claimed under Sec 23(2) on the taxpayers choice.
The taxpayer is liable to pay tax on these properties after calculating the GAV which is calculated the same way
as in case of a Let Out Property. However, the rent calculated will be the standard rent which has been
calculated as per the municipal laws. If a taxpayer is a landlord and is paying the municipal taxes for these
properties, then both of these will be subtracted to obtain the Net Annual Value. If the taxpayer has four
properties, they should preferably consider the property with the highest GAV as self occupied and the rest
should be regarded as DLOPs.
Self Occupied Property A property is considered to be self occupied when an individual uses it for their own
living purpose. If they own more than one property, only one can be considered as a self occupied property and
the rest are considered to be LOPs or DLOPs. Certain important points to be noted here are: A property is not
taxable under house property taxes if it is used for commercial purposes. The NAV on the property will be zero
if the property is occupied throughout the financial year. However, if it is occupied for some part of the year and
procured income i.e. rent then the LOP will be calculated for the time period it was let out. The annual value
will be calculated in the same way as the LOP.
Deductions allowed under 'income from house property'
Standard Deduction under Section 24(a) Possession of a residential property leads to high maintenance cost;
however, regardless of the fact whether the taxpayer has incurred any expense or not, they can claim a flat
exemption of 30% on the NAV of the property. This deduction is applicable only for an LOP or DLOP. In case
of a self-occupied property, a taxpayer is not eligible to claim any deduction as the NAV of the property is nil.
Interest on borrowed capital under Section 24(b) The interest paid on the home loan capital by a taxpayer is
exempted under section 24(b) regardless of the fact whether the property is self-occupied or not. Its, therefore,

important to understand the taxes applicable on house property and work out an arrangement that is both
beneficial and convenient for a taxpayer.
In easier way the following deductions are to be made from the annual value while computing income from
house property that is,
(a) 30% of the annual value, in respect of repairs and collection charges; (b) interest payable on loan taken for
acquisition, construction, repair, renewal or re-construction of the property; In respect of a self-occupied
property whose annual value is taken as Nil, no deduction is admissible except deduction for interest payable on
loan as mentioned at (b) above, subject to a ceiling of Rs 30,000/- ( if the property is acquired or constructed
with capital borrowed on or after 1.4.1999 and if the acquisition or construction is completed before 1.4.2003,
the interest allowable as deduction will be Rs.1,50,000/- instead of Rs.30,000/-).
Why Annual Value important for income from House Property?
The determination of Annual Value is important in the context of taxation of income from House Property
because though the tax under the head Income from house property is tax on income, yet it is not in that sense
a tax on income but upon inherent capacity of such property to yield income and for this annual value is the
yardstick.
The inherent capacity has been defined as the sum for which the property might reasonably be expected to be let
from year to-year. It is not necessary, that the property should be actually let. It is also not necessary that the
reasonable return from property should be equal to the actual rent realized when the property is, in fact, let out.
Where the actual rent received is more than the reasonable return, it has been specifically provided that the
actual rent will be the annual value. Where, however, the actual rent is less than the reasonable rent (e.g. in case
where the tenancy is affected by manipulation, emergency, close relationship or such other consideration), the
latter will be annual value.
The municipal value of the property, the cost of construction, the standard rent if any under the Rent Control
Act, the rent of similar properties in the same locality are relevant factors for the determination of the annual
value. However, if a property is let and was vacant during any part or whole of the year and due to such
vacancy, the rent received is less than the notional rent, such lesser amount shall be the Annual Value.
How to determine annual value of self-occupied property?
In case of one self-occupied house property which has not been actually let out at any time, the annual value is
taken as nil. If, one is having more than one house property using all of them for self-occupation, he is entitled
to exercise an option in terms of which, the value of one house property as specified by him will be taken at nil.
The annual value of the other self occupied house properties will be determined on notional basis as if these had
been let out.

Annual Value of one house away from work place

A person may own a house property; say in Bangalore, which he normally uses for his residence. He is
transferred to Chennai where he does not own any house property and stays in a rental accommodation. In such
case, the house property income therefore would normally have been chargeable although he derives no benefit

from the property. To save the taxpayer from hardship in such situations, it has been specifically provided that
the annual value of such a property would be taken to be nil subject to the following conditions:

The assessee must be owner of only one house property.

He is not able to occupy the house property because of his employment, business etc. being away from
place where the property is situated.

The property should not have been actually let.

He has to reside at the place of employment in a building not belonging to him.

He does not derive any other benefit from the property not occupied

How to determine Annual Value of let out house properties?

In respect of a let out house property, the rent received is usually taken as the annual lettable value. When,
however, the rent is not indicative of the actual earning capacity of the house, the notional annual value will
have to be found and adopted. The standard rent would be the Annual Value in the case of properties, subject to
Rent Control Legislation. However, when the actual rent received or receivable is higher than the notional value
as calculated above, the higher figure will be taken for the purpose of Income-tax. From the annual value as
determined above, municipal taxes are to be deducted if the following conditions are fulfilled:
The property is let out during the whole or any part of the previous year (There is no such deduction in respect
of a self-occupied house property).
The Municipal taxes must be borne by the landlord. (If the municipal taxes or any part thereof are borne by the
tenant, the same will not be deductible).
The municipal taxes must be paid during the year. (Where the municipal taxes have become due but have not
been actually paid, these will not be allowed. The municipal taxes may be claimed on payment basis i.e., only in
the year they were paid even if the taxes belonged to a different year). Amount left after deduction of municipal
taxes is net annual value.
How is the annual value of a house property calculated?
Under the Income Tax Act what is taxed under the head Income from House Property is the inherent capacity
of the property to earn income called the Annual Value of the property. The above is taxed in the hands of the
owner of the property.
Computation of Annual Value
(i) GROSS ANNUAL VALUE (G.A.V.) is the highest of
(a) Rent received or receivable
(b) Fair Market Value.
(c) Municipal valuation.
(If however, the Rent Control Act is applicable, the G.A.V. is the standard rent or rent received, whichever is
higher).

It may be noted that if the let out property was vacant for whole or any part of the previous year and owing to
such vacancy the actual rent received or receivable is less than the sum referred to in clause(a) above, then the
amount actually received/receivable shall be taken into account while computing the G.A.V. If any portion of
the rent is unrealisable, (conditions of unrealisability of rent are laid down in Rule 4 of I.T. Rules) then the same
shall not be included in the actual rent received/receivable while computing the G.A.V.
(ii) NET VALUE (N.A.V.) is the GAV less the municipal taxes paid by the owner. Provided that the taxes were
paid during the year.
(iii) ANNUAL VALUE is the N.A.V. less the deductions available u/s 24.
Deductions U/S 24:- Are exhaustive and no other deductions are available:(i) A sum equal to 30% of the annual value as computed above.
(ii) Interest on money borrowed for acquisition/construction/ repair/renovation of property is deductible on
accrual basis. Interest paid during the pre-construction/acquisition period will be allowed in five successive
financial years starting with the financial year in which construction/acquisition is completed. This deduction is
also available in respect of a self-occupied property and can be claimed up to maximum of Rs.30,000/-. The
Finance Act, 2001 had provided that w.e.f. A.Y. 2002-03 the amount of deduction available under this clause
would be available up to Rs.1,50,000/- in case the property is acquired or constructed with capital borrowed on
or after 1.4.99 and such acquisition or construction is completed before 1.4.2003. The Finance Act 2002 has
further removed the requirement of acquisition/ construction being completed before 1.4.2003 and has simply
provided that the acquisition/construction of the property must be completed within three years from the end of
the financial year in which the capital was borrowed.
Some Notable Points
In case of one self-occupied property, the annual value is taken as nil. Deduction u/s 24 for interest paid may
still be claimed therefrom. The resulting loss may be set off against income under other heads but cannot be
carried forward.
If more than one property is owned and all are used for self-occupation purposes only, then any one can be opted
as self-occupied, the others are deemed to be let out.
Annual value of one house away from workplace which is not let out can be taken as NIL provided that it is the
only house owned and it is not let out.
If a let out property is partly self-occupied or is self-occupied for a part of the year, then the value in proportion
to the portion of self-occupied property or period of self-occupation, as the case may be is to be excluded from
the annual value.
From assessment year 1999-2000 onwards, an assessee who apart from his salary income has loss under the
head Income from house property, may furnish the particulars of the same in the prescribed form to his
Drawing and Disbursing Officer who shall then take the above loss also into account for the purpose of TDS
from salary.
A new section 25B has been inserted with effect from assessment year 2001-2002 which provides that where the
assessee, being the owner of any property consisting of any buildings or lands appurtenant thereto which may
have been let to a tenant, receives any arrears of rent not charged to income tax for any previous year, then such
arrears shall be taxed as the income of the previous year in which the same is received after deducting therefrom
a sum equal to 30% of the amount of arrears in respect of repairs/collection charges. It may be noted that the

above provision shall apply whether or not the assessee remains the owner of the property in the year of receipt
of such arrears.
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

Standard Deduction @ 30% of NAV
Interest on Loan

****

Income from house property

****

Where GROSS ANNUAL VALUE (GAV) is the highest of

Rent received or receivable
Fair Market Value.
Municipal valuation.
If however the Rent Control Act is applicable, the GAV is the standard rent or rent received, whichever is higher.
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:
the property (or part thereof) is not actually let during whole (or any part) of the previous year; and
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 201516 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

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 fulfil conditions checked separately for
each section. For details you can read Simple Tax India 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.
Rs
Municipal Value

1,66,000
Rs

Fair Rent

1,76,000
Rs

Standard Rent

1,50,000

Repairs

Rs 20,000

Municipal Tax

Rs 16,000

Insurance

Rs 2,000

Expense
s

Loans
Rs
Interest on capital borrowed to construct the property

1,36,000

Interest on capital borrowed by mortgaging the property for daughters

marriage
Income

Rs 20,000

Income from Business

Rs 7,10,00

Computation of income from House Property will be as follows:

If Loan is

If Loan is taken

before 1-Apr-

after 1-Apr-

Num

Description

1999

1999

Gross Annual Value(As it is self-occupied property)

Nil

Nil

Less Municipal Tax(Municipal Tax deduction is not

2

allowed if Annual value is Nil)

Nil

Nil

Net Annual Value

Nil

Nil

Less Interest on borrowed capital(maximum is Rs

4

30,000 if borrowed before 1.Apr.1999 else 1,50,000 )

-30,000

-1,36,000

Income from house property

-30,000

-1,36,000

Business Income

7,10,000

7,10,000

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)

Gross Annual Value(As it is self occupied property)

Nil

Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value

2

is Nil)

Nil

Net Annual Value

Nil

Less Interest on borrowed capital(maximum is Rs 30,000 if borrowed before

4

1.Apr.1999 else 1,50,000 )

-1,70,000

Income from house property

-1,70,000

Income from Salary

6,00,000

Income from other sources

Net Income (5+6+7)

50,000
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-Mar2015 is Rs 1,50,000. During the previous years 2015-16 he paid Rs 1,74,000 as interest.

Num

Description

Amount(Rs)

Gross Annual Value(As it is self occupied property)

Nil

Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value

2

is Nil)

Nil

Net Annual Value

Nil

Less Interest on borrowed capital(maximum is Rs 30,000 if borrowed before

4
5

1.Apr.1999 else 1,50,000 )

-1,74,000

Less Interest for pre-construction stage (1/5th of 1,50,000)

-30,000

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 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
1

Description

Amount(Rs)

Gross Annual Value(As it is self-occupied property)

Nil

Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value

2

is Nil)

Nil

Net Annual Value

Nil

Less Interest on borrowed capital(maximum is Rs 30,000 if borrowed before

4

1.Apr.1999 else 1,50,000 )

-1,60,000

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)

Gross Annual Value(As it is self occupied property)

Nil

Less Municipal Tax(Municipal Tax deduction is not allowed if Annual value

2

is Nil)

Nil

Net Annual Value

Nil

Less Interest on borrowed capital(maximum is Rs 30,000 if borrowed before

4

1.Apr.1999 else 1,50,000 ) is 1,80,000

-1,50,000

Income from house property (maximum is Rs 2,00,000)

-1,80,000

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 71.