As per the income tax act, assessee can declare 2 house properties as Self-occupied while he/she has to compulsorily declare all others as rented out. It means the subsequent properties are considered as deemed let out House Property. Further, assessee needs to calculate rent based on fair market value and tax is levied on the same. Deemed Let Out Property is also known as Vacant Property.
The calculation of income from Deemed let-out property is similar to Let Out House. However, deduction u/s 24(b) is available up to 2 lakhs rupees i.e, same as Self Occupied.
What is the difference between Self Occupied & Let Out?
| Self-Occupied | Let Out |
| A Self Occupied House Property is the one that you use as your own residence, your spouse, children and/or parents. | Let Out is when you give a house property for rent for during the financial year either for the whole or a part of the year. |
In case you have multiple house properties, from AY 2020-21 you can show 2 properties self-occupied house property.
The other house properties are vacant then they should be taken as deemed let-out house property.
How to Determine Taxable Income from Deemed Let Out House Property?
Income from Deemed Let Out Property is calculated as per the following steps:
- Calculate Gross Annual Value (GAV)
- Deduct Municipal Taxes
- Calculate Net Annual Value (NAV)
- Claim Standard Deduction of 30%
- Deduct Interest paid on Home Loan u/s 24(b)
- Calculate Gross Annual Value (GAV)
GAV of Deemed let out property is least of the following:
– Fair Rent Value (FRV) (Determined using Annual Rent Value of similar properties in your area)
– Assessed Value (Determined as per Municipal Tax Value of the property)
– Standard Rent (Determined as per Rent Act) - Deduct Municipal Taxes Paid
Municipal tax is nothing but a property tax paid by a taxpayer. The deduction of the full amount of Municipal Taxed paid is allowed. It reduces the Net Annual Value of the property. This deduction is not allowed if not paid by the owner
- Calculate Net Annual Value (NAV)
NAV is nothing but GAV reduced by Municipal Taxes Paid.
| Particulars | Self Occupied | Let Out | Deemed Let Out |
| Gross Annual Value (Generally, total rent received) | NIL | XXX | XXX |
| Less: Municipal Taxes Paid | Not Applicable | XX | XX |
| Net Annual Value | NIL | XXX | XXX |
| Less: Deduction u/s 24 1. Standard Deduction at 30% 2. Interest on Housing Loan |
Not Applicable INR 2 Lakh Limit | XX No Limit |
XX No Limit |
| Income from House Property | (XXX) | XX | XXX |
FAQs
Property that is given on rent for the whole or part of the year is termed as Let Out House Property. If a person has more than one, in such a case only one can be considered as self-occupied at the option of the individual.
A taxpayer can claim deduction under Section 24 of interest paid on home loan for each of the houses separately. However, the overall loss from property that can be claimed for a year is restricted to INR 2 lakhs.
In case the Loss from House Property has not been adjusted in the same year, such loss will be carried forward to the next year and allowed to be set off with income arising other the same head i.e. House Property.