If you own a house or earn rental income, it should be reported as Income from House Property in the Income Tax Return (ITR). The taxpayer must calculate the income and pay tax on rental income at slab rates. The taxpayer should report the following types of income under the head ‘Income from House Property‘:
- Rent Income from house property
- Vacant house property
- Housing loan on a property
- Jointly owned house property
Calculation of Rental Income
|Particulars||Self Occupied Property||Let Out Property|
|Gross Annual Value (GAV)||NIL||xxxx|
|Less:||Municipal Tax Paid||NIL||(xxxx)|
|Net Annual Value (NAV)||NIL||xxxx|
|Less:||Standard Deduction u/s 24 @ 30% of NAV||max
|Less:||Interest on Borrowed Capital u/s 24 (without any ceiling limit)||xxxx||(xxxx)|
- The standard deduction u/s 24 of 30% of NAV is allowed irrespective of actual expenditure incurred on insurance, repairs, water supply, etc.
- The taxpayer can claim a maximum loss of INR 2,00,000 under the head Income from House Property during a financial year.
- Pre-Construction Interest i.e. the interest paid in the pre-construction period will be allowed as a deduction in five successive financial years starting from the year in which construction was complete.
Co-ownership of House Property
- Co-owned Self-Occupied House Property
The annual value (NAV) of the property for each co-owner will be NIL and each co-owner can claim the deduction of up to INR 2,00,000 for housing loan interest.
- Co-owned Let-Out House Property
The income will be calculated as per normal provisions of House Property and it will then be apportioned among each co-owner. Each co-owner can claim the deduction for housing loan interest.
Tax Benefits on Rental Income
Taxpayers having a rental income can claim the following deductions and benefits in the Income Tax Return (ITR).
- Repayment of Loan – deduction of principal amount under Sec 80C
- Interest on Home Loan – deduction under Sec 24 of House Property subject to the prescribed limit discussed above
- Sec 80EE – Additional deduction of INR 50,000 for Interest on Home Loan for first time home buyers subject to prescribed conditions
- Sec 80EEA – Additional deduction of INR 1,50,000 for Interest on Home Loan for first time home buyers subject to prescribed conditions
TDS on Rent Income
If you have income from rent, the tenant would deduct TDS in the following situations:
- Section 194I – TDS on rent of land or building deducted at 10% if the rent amount exceeds INR 1,80,000 per annum.
- Section 194IB – TDS on rent of land or building deducted by individual or HUF (not liable to tax audit). TDS is deducted at 5% if the rent amount exceeds INR 50,000 per month.
The taxpayer i.e. landlord would receive Form 16A from the tenant once the tenant files the TDS Return every quarter. The taxpayer can view TDS Credits in Form 26AS on the income tax website and claim the TDS Credit in the Income Tax Return.
ITR Form for Rental Income
The taxpayer should file the ITR Form based on the amount of total income, type of house property income and income under other heads. Here is a summary of ITR Form that a taxpayer can file in case of rent income.
|ITR Form||Total Income||HP Income|
|ITR 1 or ITR 4||Upto INR 50 lacs||One House Property|
|ITR 2 or ITR 3||More than INR 50 lacs||Multiple House Property|
Set-Off & Carry Forward House Property Loss
House Property Loss can be set off against any other income in the current financial year. The remaining loss can be carried forward for 8 years and set off only against house property income in future years.
As per the Income Tax Act, a taxpayer who files Belated ITR u/s 139(4) cannot carry forward loss to future years. However, the taxpayer can carry forward house property loss even if he/she files a Belated Return.
As per Section 194I, individuals or HUF (not liable to tax audit in the previous financial year) are not required to deduct TDS on payment of rent even if the rent exceeds INR 1,80,000 per annum. Under Budget 2019, individuals or HUF (not liable to tax audit in the previous financial year) must deduct and deposit TDS at 5% if the rent exceeds INR 50,000 per month.
A taxpayer can claim a deduction of either u/s 80EE or 80EEA. The government had introduced the deduction u/s 80EE for first time home buyers. The taxpayer can claim Sec 80EE deduction of up to INR 50,000 for interest on loan sanctioned between 1.4.16 and 31.3.17.
Later, this benefit was extended by introducing Sec 80EEA. A taxpayer can claim Sec 80EEA deduction of up to INR 1,50,000 for interest on a loan sanctioned between 01.04.19 and 31.03.21.
If you hold status of a resident, income from property situated outside India is taxable whether such income is brought into India or not.
If you hold status of a non-resident or RBNOR (resident but not ordinarily resident), income from property situated outside India is taxable only if such income is received in India.