Taxation of Rental Income

Rental Income – How much is chargeable to tax?

Rental income from a self-owned property being building or land appurtenant thereto is charged to tax under the head “Income from house property” in the hands of the owner.

Computation of rental income chargeable to tax under the head “Income from house property” is as under:

Actual Rent or Expected Rent                                     xxxx

Less: Municipal taxes                                                 xxxx

Net Annual Value (NAV)                                            xxxx

Less: 30% of NAV (Adhoc deduction)                         xxxx

Less: Interest on housing loan                                    xxxx

Income from House Property                                   xxxx

I have paid maintenance expenses, repair costs and misc expenses in relation to the let out property. Will I get deduction for the same?

No, there is no separate deduction for the maintenance or repair cost borne by the owner. However, the 30% adhoc deduction covers all such expenses.

I have bought a house where I live, out of bank loan. How much interest on housing loan can be claimed as deduction?

Since the property is self-occupied, total interest on loan, which can be claimed as deduction, cannot exceed Rs. 2,00,000. In addition to this, deduction under section 80EEA of Rs. 1,50,000 can be claimed subject to certain conditions specified therein.

Can I claim interest paid to friends/relatives on loan as deduction from rental income?

Yes. If the loan is taken for the purchase or construction of the house, then interest thereon can be claimed as deduction from rental income.

What is self-occupied property?

House property that the owner throughout the year occupies is treated as self-occupied property.

What is deemed rental income?

When a person owns more than one house, then the second and subsequent properties are considered as deemed to be let out. As a result, fair market value of the rental income is chargeable to tax, even if no actual income is earned thereon.

I have three houses. None of them is let out. How much will be treated as my income?

If individuals own two or more house properties for their use, they may exercise an option to treat any two house properties as self-occupied. You can choose any one property as deemed to be let out and pay tax on the fair rental value of that property.

My tenant left the property in the month of October, and despite all my efforts to let out my property, it remains vacant for the rest of the financial year. On which amount I should pay tax? Since the property becomes vacant after October, the rental income earned till October will be taxable. However, for rest of the period, there is no taxable income under the head “Income from House Property”.