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There are two deductions available under section 24 from the Income from House Property
: 30% of the NAV is allowed as a deduction towards repairs, rent collection, etc. irrespective of the actual expenditure incurred. This deduction is not allowed if the Net Annual Value is nil. For self-occupied house, no standard deduction will be available as the NAV is nil.
This deduction is available for let-out property as well as for self-occupied property. Interest payable on home loan if taken for purchase, construction, repair, renewal or reconstruction of the house property is allowed as a deduction. For cleaning services in home, hey can check out Zerorez here!
In case of a let-out property, earlier there was no limit on the quantum of interest which can be claimed as a deduction under section 24(b). But from the financial year 2017-18 deduction for interest on let out property is allowed only up to Rs 2 Lakhs. However, in case of a self-occupied property, limit is Rs. 2,00,000 or Rs. 30,000, as the case may be. The assessee can claim the interest after the construction of the property is complete.
Interest is classified as pre-construction period interest and post-construction period interest.
Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:
Interest for the pre-construction period is allowed as a deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed. Thus, total deduction available to the taxpayer under section 24(b) on account of interest will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post construction period (if any).
The assessee will not be allowed standard deduction of 30% as the net annual value of the self-occupied house property is nil. The deduction is available to the assessee under section 24(b) in respect of self-occupied property will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to the post-construction period (if any). The assessee will be allowed a deduction for interest to the following extent:
Deduction for interest restricted to Rs. 30000: if one or more conditions exist out of the following three conditions, deduction for interest on self-occupied house property will be restricted to Rs.30000.
Deduction for interest restricted to Rs. 200000: if all the three conditions are satisfied, deduction for interest on self-occupied house property will be restricted to Rs.200000.
This example will help you know how the income from house property is ascertained
Example: Kishan owns two residential houses. The first is in Delhi and was constructed on 31.12.1991. This has been let out on a rent of Rs. 3,000 p.m. to a company for its office. The second house is in Lucknow which was constructed on 1.3.2013 and has been let out from the same day at Rs.2000 per month. He took a loan of Rs. 90,000 on 1.8.2011 @ 8% per annum interest for the purpose of construction of this house. The entire loan is still outstanding. Municipal taxes of the Lucknow house are unpaid. What will be the income from house property for the A.Y. 2017-18?
| Particulars | House 1 | House 2 |
| Municipal valuation | 30000 | 18000 |
| Municipal tax | 10% of Municipal valuation | 9% of Municipal valuation |
| Interest on loan | 7200 |
Computation of income from house property for the FIRST HOUSE
| Particulars | Amount |
| Gross annual value(GAV) (Rs.30000 or Rs.36000 whichever is higher) | 36000 |
| Less:- Municipal taxes paid during the year (10% of 30000) | 3000 |
| Net annual value(NAV) | 33000 |
| Less:- Deduction under section 24 | |
| · Deduction under section 24(a) @ 30% of NAV (Standard Deduction) (30% of 33000) | 9900 |
| · Deduction under section 24(b) on account of interest on borrowed capital | |
| Income from house property | 23100 |
Computation of income from house property for the SECOND HOUSE
| Particulars | Amount |
| Gross annual value(GAV) | 24000 |
| Less:- Municipal taxes paid during the year (10% of 30000) | – |
| Net annual value(NAV) | 24000 |
| Less:- Deduction under section 24 | |
| · Deduction under section 24(a) @ 30% of NAV (Standard Deduction) (30% of 24000) | 7200 |
| · Deduction under section 24(b) on account of interest on borrowed capital (7200+959) [ Working note 1] | 8159 |
| Income from house property | 8641 |
Total income from house property (First house + Second house) = 23100+8641 = 31741
Working note 1
Pre-construction period of interest will be allowed till 31 march just preceding to the previous year in which the house was completed
Interest from 1 August 2011 to 31 March 2012
No. of days in the above duration is 243(31+30+31+30+31+31+28+31) days.
Interest in the pre-construction period = 90000 x 8 x 243 = 4793
100 365
Deduction of the first instalment of capital interest = 4793/5 = 959 will be allowed in the previous year 2016-17
Post construction period interest is already given Rs. 7200
Total interest deductible under section 24(b) will be 7200+959 = 8159
Computation of income of a self-occupied property
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