Calculation for computing Income from House Property
Determine what your income from house property is.
The owner of a house property is taxed under the head ‘Income from House Property’ in his income tax return. Income from a property which is used for carrying on business or profession is not taxed under this head.
Steps to calculate income from house property
Gross Annual Value of the property
The gross annual value of a self-occupied house is zero. It is the rent collected for a house on rent.
Less: Property Tax
Property tax, when paid, is allowed as a deduction.
Net Annual Value
Net Annual Value = Gross Annual Value – Property Tax
Less: 30% standard deduction on NAV
A standard 30% deduction on NAV is allowed as a deduction under Section 24 of the Income Tax Act. No other expenses such as painting and repairs can be claimed as tax relief beyond the 30% cap under this section.
Less: Interest on home loan
Deduction is allowed for Interest on home loan.
Income from house property
The resulting value is your income from house property. This is taxed at the slab rate applicable to you.
Loss from house property
Since the gross annual value of a self-occupied house is zero, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads.
When a property is let out, its gross annual value is the rental value of the property. The rental value must be higher than or equal to the reasonable rent of the property determined by the municipality.
Frequently Asked Questions (FAQ’s)
If you are using your property for residence throughout the year and it’s not let out or used for any other purpose, it is considered a self-occupied house property. The gross annual value of this property is zero. There is no income from your house property.
Note: Since the gross annual value of a self-occupied house is zero, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against your income from other heads.
The Ground Floor will not be taxed under “income from house property” head. It shall be taxed under Business & Profession head.The first floor will be treated as a self-occupied house property. Income from house property will be zero in this case.
Calculate the gross annual value of the property by finding out its reasonable rent and actual rent collected.
If Actual Rent is lower than Reasonable Rent, only because the house was vacant and not for any other reason, take actual rent collected as Gross Annual Value.
If Actual Rent is lower than Reasonable Rent because of other factors (say the tenant and the landlord are related), then take reasonable rent as GAV.