Section 24 – Income Tax on House Property

Income from House Property Tax

The income generated by house ownership, whether it is rental income or transfer income, is called “house ownership income.” Essentially, according to the Income Tax Law, any property, such as a house, building, office, or warehouse, is regarded as “house property”. “Homeownership income” is one of the five income items considered when calculating the appraiser’s gross income (GTI) for the year. However, multiple deductions are allowed before the tax is imposed on homeownership income. People earn a good income from house property. Want to know if there are different types of homeownership to consider? Keep this in mind homeownership can be owner-occupied, leased, or inherited, depending on the tax.

What is Gross Annual Value of a Property?

The total annual value of the property is the value of the property that can be reasonably estimated to be rented from one year to the next. It is more like a nominal rent, which can be earned in the case of renting out real estate. Even if the property is not rented out, the nominal GST rent or deemed rent receivable is subject to tax.

Annual Value of a Property

The annual value of a self occupied property is the amount that can reasonably be expected to be leased from one year to the next. Therefore, the annual value of a property is the amount of nominal rent that could have been earned if the property were rented out. Finally, the annual value of your property is calculated by multiplying the monthly market rent of your property by 12. If you rent a property, IRAS will simply multiply your monthly rent by 12 and then subtract reasonable furniture and maintenance costs.

Deduction Under Section 24 of Income Tax Act

Municipal tax is the amount paid to municipal companies in the area each year. The city tax must be deducted from the total annual value to arrive at the annual net value of the house property. Section 24 is an important subject here. Only municipal tax deductions borne and paid by the owner during the fiscal year are allowed. The standard deduction is 30% of the annual net value calculated above. Even if your actual cost on the property is higher or lower, a 30% deduction is allowed. Therefore, this deduction has nothing to do with the actual expenses that you may incur in insurance, maintenance, electricity, water supply, etc. For owner-occupied houses, since the annual value is zero, the standard deduction for the property is also zero

What are the Deduction of Interest on a Home Loan for the Property

If the homeowner or his family live in the house, the homeowner can claim a mortgage interest deduction of up to Rs 200,000. When the house is unoccupied, the same treatment applies. If you do not meet any of the following conditions for a refund of Rs 200,000, your interest deduction is limited to Rs 30,000.

How to Calculate and Save Income Tax on Selling Home

If the property is occupied or unoccupied in the previous year, its annual value is empty, because the owner will not receive any income from the property. The term “idle property” refers to property that cannot be occupied because the owner’s work, business or occupation is in a different location, and he/she lives in another place that does not belong to his/her building. The owner-occupied house exemption benefit (two own-occupied properties, as of 2020-21) is only applicable to an individual. This type of property is not allowed to deduct municipal taxes. In some cases, property consisting of any building or ancillary land can be held as commercial shares, and all or part of the property may not be leased out during all or part of the previous year; in this case, the property or The annual value of a portion of the property will be NULL. The validity period of this benefit is one year from the end of the fiscal year in which the competent authority obtains the certificate of completion of the real estate (maximum two years from 2020-21).

What is Deemed Owner and Tax Liability?

The owner under consideration is the implied owner, and it cannot be the person whose property is registered. In some cases, for taxation purposes, non-property owners are regarded as owners. A deemed owner has huge power.

1) When a person transfers any property in the house to his spouse or non-property owner without any proper consideration. When children are grown up, such individuals are regarded as the owners of the property. In the case of a spouse, this transfer should not be subject to any separation agreement.

 2) When two or more people own a legally indivisible house property, the owner of the taxable property will be regarded as the owner of the property. For example, when an undivided Hindu family (HUF) owns common property on behalf of all its members, it will be regarded as the owner, although legally, the property will be in the name of the family members.

3) A person who acquires any right to house property through a lease of not less than 12 years is considered the owner of the property.

4) The person who is the transferee (buyer) who owns the property per the transfer contract and has performed or is willing to perform part of the contract, attracting the provisions of Article 53A of the Property Transfer Act of 1882 and being regarded as The owner of the property. It should be noted that in this case, the assignee has no ownership of the property, he only owns the property.

5) A person who is a member of a cooperative, company, or other person’s association granted under the housing construction plan of the society, company or association (as the case may be) will be considered the owner of the property under consideration.

What is Composite Rent?

The total amount of the rent collected by the house, as well as the elevator, gas, water, electricity and other facilities that the house is equipped with, is called the composite rent When the appraiser receives the compound rent of the building and the services/amenities from the tenant, the rent must be divided.

Best Tips to Save Tax on Property Income?

People are always looking for ways to save on income tax. No one likes to miss an opportunity to save money. Different people prefer different methods. Sometimes they stick to what they know and lack more effective ways to cut taxes. So, this article is for those who want to learn more about how and how to save money paid by income tax.

What are the Tax Deduction In Case of Availing a Home Loan

You can save on taxes by planning your mortgage under Section 80C. The upper limit of the basic amount is 100 million won. 1.5 entries are for section 80C and the maximum recommended amount is Rs.2 Lakh for section 24. Section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80CCG, 80G Tax Savings Options Below is a list of tax saving options for different sectors. Savings Account Income typically, the maximum profit for savings account being Rs 10,000 for tax purposes. This is the cumulative amount of all savings accounts. bank savings. This limit is up to 50,000 rupees for senior citizens.

NRE Account Income Benefit: NRI has an NRE Account in India. The accumulated amount and payment amount are used as term deposits. Due to the generosity of national authorities on the NRA, this amount is not taxable. The amount of profit is called tax-free income. Life insurance deposit: Withdrawal of life insurance is possible after maturity or after the application is received. The amount received is tax-free as long as the premium does not exceed 20% of the insured amount. This applies to insurance policies issued before April 1, 2012. For documents published after April 1, 2012, this ratio is reduced to 15.5. Exchange: This amount is deducted from tax under Section 16(16). In these scenarios, there is no limit as the total amount of personal or public donations is deducted from the tax. Amount received as a sold investment fund or share in an investment fund: 10% tax is levied if the long-term transfer gain exceeds. Amounts received as dividends from stocks or investments: This amount is tax-free.

What is Deductions from House Property Income Under Section 24

If the homeowner or his family live in the property of the house, the homeowner can claim a mortgage interest deduction of up to Rs 200,000. When the house is unoccupied, the same treatment applies. Homeownership income tax: Owning a house one day-everyone dream of this, saves for it and hopes to realize it one day. However, owning a house is not without responsibility. Paying your property tax every year is one of them.

Pre-construction Interest

When you apply for a loan to buy or build a house, you can apply for the interest deduction before construction. However, this is not allowed in the case of repair or reconstruction loans. In any case, the total amount of pre-construction interest and housing loan interest that can be applied for within one year should not exceed Rs 200,000. This interest can be deducted in 5 equal instalments from the year the house is purchased or completed.

What are the Basic Conditions for Claiming Interest on Home Loan

The loan has been used for purchase or construction after April 1, 1999. The acquisition of property or the construction of the property is finished within 5 years (3 years to the 2015-16 fiscal year) after the end of the financial year in which the loan was obtained. The interest certificate can be used to pay the loan interest. Please note that if any of the following conditions are met, your interest deduction may be limited to 30,000 rupees: The loan was borrowed before April 1, 1999, for the purchase, construction, repair or reconstruction of a house. Purchase, construction, repair or reconstruction of homeownership, the purchase or construction is completed within 5 years after the financial year, in which the loan was raised end, i.e., (3 years from the 2015-16 fiscal year)

Computation of Income Under House Property

Assume that a person repays a housing loan of 400,000 rupees every year, of which 200,000 rupees is interest. It also generated pre-construction interest of Rs 300,000. He earns 7,000 rupees a month from rented properties and pays 3,000 rupees in municipal taxes for the house. Let us calculate your housing income in two situations:

• You own an owner-occupied property.
• The property has been rented out

What are the Examples of Claiming Deductions?

After the 2019 Budget is revised, Mr. X can declare two properties as owner-occupied properties, which are Null each year. Before 2019, only one property was claimed to be owner-occupied, and the theoretical rent of the second property was taxable. Mr. X can claim at most rupees. An additional deduction of Rs 200,000 (for owner-occupied properties) is used to pay the actual interest on the mortgage of Rs 300,000. Since the annual value of the owner-occupied property is considered zero, the income from owning the house will become negative after applying for housing loan interest. This negative number can offset the other income of the year. In addition, the loss amount can be carried forward to the next 8 AYs, which can only be offset by future house ownership income.

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