With effect from Assessment Year 2020-21, deduction for interest paid or payable on borrowed capital shall be allowed in respect of two self-occupied house ... • BasisofCharge[Section22] • Computationofincomefromhouseproperty • Deductions • ComputationofIncomefromHouseProperty • Treatmentofunrealizedrentandarrearsofrent[Explanationtosection23(1)] • Co-ownerandDeemedOwner • Set-offoflossfromHouseProperty II.IncomeundertheHouseProperties BasisofCharge[Section22]: Incomefromhousepropertyshallbetaxableunderthisheadiffollowingconditionsaresatisfied: a)Thehousepropertyshouldconsistofanybuildingorlandappurtenantthereto; b)Thetaxpayershouldbetheowneroftheproperty; c)Thehousepropertyshouldnotbeusedforthepurposeofbusinessorprofessioncarriedonbythetaxpayer. Computationofincomefromhouseproperty: Incomefromahousepropertyshallbedeterminedinthefollowingmanner: Particulars Amount GrossAnnualValue - Less:MunicipalTaxes - NetAnnualValue **** Less:Standarddeductionat30%[Section24(a)] - Less:Interestonborrowedcapital[Section24(b)] - Incomefromhouseproperty **** GrossAnnualvalue[Sec.23(1)] TheGrossAnnualValueofthehousepropertyshallbehigheroffollowing: a)Expectedrent,i.e.,thesumforwhichthepropertymightreasonablybeexpectedtobeletoutfromyeartoyear.Expectedrentshallbehigherofmunicipalvaluationorfairrentoftheproperty,subjecttomaximumofstandardrent; b)Rentactuallyreceivedorreceivableafterexcludingunrealizedrentbutbeforedeductinglossduetovacancy Outofsumcomputedabove,anylossincurredduetovacancyinthehousepropertyshallbedeductedandtheremainingsumsocomputedshallbedeemedtothegrossannualvalue. Deductions: Description NatureofDeductions MunicipalTaxes Municipaltaxesincludingservice-taxesleviedbyanylocalauthorityinrespectofhousepropertyisallowedasdeduction,if: a)Taxesarebornebytheowner;and b)Taxesareactuallypaidbyhimduringtheyear. StandardDeduction[Section24(a)] 30%ofnetannualvalueofthehousepropertyisallowedasdeductionifpropertyislet-outduringthepreviousyear. InterestonBorrowedCapital* [Section24(b)] a)Inrespectoflet-outproperty,actualinterestincurredoncapitalborrowedforthepurposeofacquisition,construction,repairing,re-constructionshallbeallowedasdeduction b)Inrespectofself-occupiedresidentialhouseproperty,interestincurredoncapitalborrowedforthepurposeofacquisitionorconstructionofhousepropertyshallbeallowedasdeductionuptoRs.2lakhs.Thedeductionshallbeallowedifcapitalisborrowedonorafter01-04-1999andacquisitionorconstructionofhousepropertyiscompletedwithin 5years. c)Inrespectofself-occupiedresidentialhouseproperty,interestincurredoncapitalborrowedforthepurposeofreconstruction,repairsorrenewalsofahousepropertyshallbeallowedasdeductionuptoRs.30,000. *Anyinterestpertainingtotheperiodpriortotheyearofacquisition/constructionofthehousepropertyshallbeallowedasdeductioninfiveequalinstallments,beginningwiththeyearinwhichthepropertywasacquired/constructed. *DeductionforinterestonborrowedcapitalshallbelimitedtoRs.30,000infollowingcircumstances: a)Ifcapitalisborrowedbefore01-04-1999forthepurposeofpurchaseorconstructionofahouseproperty; b)Ifcapitalisborrowedonorafter01-04-1999forthepurposeofre-construction,repairsorrenewalsofahouseproperty; c)Ifcapitalisborrowedonorafter01-04-1999butconstructionofhousepropertyisnotcompletedwithin fiveyearsfromendofthepreviousyearinwhichcapitalwasborrowed. WitheffectfromAssessmentYear2020-21,deductionforinterestpaidorpayableonborrowedcapitalshallbeallowedinrespectoftwoself-occupiedhouseproperties.However,theaggregateamountofdeductionunderthisprovisionshallremainsamei.e.,Rs.30,000orRs.2,00,000,asthecasemaybe. Deductionforinterestonhousingloan[Section80EE] DeductionofuptoRs50,000shallbeallowedtoanIndividualforinterestpayableonloantakenforthepurposeofacquisitionofahousepropertysubjecttofollowingconditions: a) LoanhasbeensanctionedbyFinancialinstitutionduringthefinancialyear2016-17; b) TheamountofloansanctioneddoesnotexceedRs35,00,000; c) ThevalueofresidentialpropertydoesnotexceedRs50,00,000; d) Theassesseedoesnotownanyresidentialhousepropertyonthedateofsanctionofloan; e) Wheredeductionhasbeenallowedunderthissection,nodeductionshallbeallowedinrespectofsuchinterestunderanyotherprovision. ComputationofIncomefromHouseProperty S.No. PropertyType GrossAnnualValueoftheproperty Deductionformunicipaltaxes NetAnnualValueoftheproperty StandardDeduction Interestonborrowedcapital 1. Oneself-occupiedhouseproperty Nil Nil Nil Nil DeductionforinterestonborrowedcapitalisalloweduptoRs.30,000orRs.2,00,000,asthecasemaybe. 2. Housepropertycouldnotbeoccupiedbytheownerduetoemploymentorbusinesscarriedonatanyotherplace Nil Nil Nil Nil DeductionforinterestonborrowedcapitalisalloweduptoRs.30,000orRs.2,00,000,asthecasemaybe. 3. Letoutproperty TobecomputedasperprovisionsofSection23(1) Allowedonactualpaymentbasis GrossannualvaluelessMunicipaltaxes 30%ofNetAnnualValue Entireamountofinterestpaidorpayableonborrowedcapitalshallbeallowedasdeduction.Pre-constructioninterestshallbeallowedasdeductionin5annualequalinstallments(Subjecttocertainconditions). 4. Morethanone-selfoccupiedproperty Onlyonepropertyselectedbythetaxpayerwillbeconsideredasself-occupiedhousepropertyandallotherpropertiesshallbedeemedtobelet-outforthepurposeofcomputationofincomeundertheheadhouseproperty. 5. Aself-occupiedpropertylet-outforthepartoftheyear Thehousewillbetakenaslet-outpropertyandnoconcessionshallbeavailableforthedurationduringwhichthepropertywasself-occupied. 6. Onepartofthepropertyislet-outandotherpartisusedforself-occupiedpurposes Eachpartofthepropertyshallbeconsideredasseparatepropertyandincomewillbecomputedaccordingly CompositeRent: Iflettingoutofbuildingalongwithmovableassetsi.e.,machinery,plan,furnitureorfixtures,etc.formspartofasingletransactionandareinseparable,thecompositerentshallbetaxableunderthehead“Profitsandgainsfrombusinessorprofession”or“Incomefromothersources”,asthecasemaybe.Ontheotherhand,ifthelettingoutofbuildingisseparablefromlettingofotherassets,thenincomefromlettingoutofbuildingshallbetaxableunderthehead“Incomefromhouseproperty”andincomefromlettingoutofotherassetsshallbetaxableunderthehead“Profitsandgainsfrombusinessorprofession”or“Incomefromothersources”,asthecasemaybe. Treatmentofunrealizedrentandarrearsofrent[Explanationtosection23(1)] Deductionforunrealizedrent: Unrealizedrentisthatportionofrentalincomewhichtheownercouldnotrealizefromthetenant.Unrealizedrentisallowedtobedeductedfromactualrentreceivedorreceivableonlyifthefollowingconditionsaresatisfied: a)Thetenancyisbonafide; b)Thedefaultingtenanthasvacated,orstepshavebeentakentocompelhimtovacatetheproperty; c)Thedefaultingtenantisnotinoccupationofanyotherpropertyoftheassessee; d)ThetaxpayerhastakenallreasonablestepstoinstitutelegalproceedingsfortherecoveryoftheunpaidrentorsatisfiestheAssessingOfficerthatlegalproceedingswouldbeuseless. Arrearsofrentorrecoveryofunrealizedrent[Section25A] Amountreceivedinrespectofarrearsofrentoranysubsequentrecoveryofunrealizedrentshallbedeemedtobetheincomeoftaxpayerunderthehead"Incomefromhouseproperty"intheyearinwhichsuchrentisrealizedorreceived(whetherornottheassesseeistheownerofthatpropertyinthatyear). Further,30%ofsuchrentshallbeallowedasdeduction. Co-ownerandDeemedOwner Propertyownedbyco-owners[Section26]: Ifhousepropertyisownedbyco-ownersandtheirshareinhousepropertyisdefiniteandascertainablethantheincomeofsuchhousepropertywillbeassessedinthehandsofeachco-ownerseparately.Forthepurposeofcomputingincomefromhouseproperty,theannualvalueofthepropertywillbetakeninproportiontotheirshareintheproperty.Insuchacase,eachco-ownershallbeentitledtoclaimbenefitofself-occupiedhousepropertyinrespectoftheirshareintheproperty(subjecttoprescribedconditions).However,wherethesharesofco-ownersarenotdefinite,theincomeofthepropertyshallbeassessedasthatofanAssociationofpersons. Deemedowner[Section27]: Incomefromhousepropertyistaxableinthehandsofitsowner.However,inthefollowingcases,legalownerisnotconsideredastherealownerofthepropertyandsomeoneelseisconsideredasthedeemedownerofthepropertytopaytaxonincomeearnedfromsuchhouseproperty: 1.Anindividual,whotransfersotherwisethanforadequateconsiderationanyhousepropertytohisorherspouse,notbeingatransferinconnectionwithanagreementtoliveapart,ortoaminorchildnotbeingamarrieddaughter,shallbedeemedtobetheownerofthehousepropertysotransferred; 2.Theholderofanimpartibleestateshallbedeemedtobetheindividualownerofallthepropertiescomprisedintheestate; 3.Amemberofaco-operativesociety,companyorotherassociationofpersonstowhomabuildingorpartthereofisallottedorleasedunderahousebuildingschemeshallbedeemedtobetheownerofthatbuildingorpartthereof; 4.ApersonwhoisallowedtotakeorretainpossessionofanybuildingorpartthereofinpartperformanceofacontractofthenaturereferredtoinSection53AoftheTransferofPropertyAct,1882shallbedeemedtobetheownerofthatbuildingorpartthereof; 5.Apersonwhoacquiresanyrights(excludinganyrightsbywayofaleasefrommonthtomonthorforaperiodnotexceedingoneyear)inorwithrespecttoanybuildingorpartthereof,byvirtueofanysuchtransactionasisreferredtoin section269UA(f),shallbedeemedtobetheownerofthatbuildingorpartthereof. RestrictiononsetoffoflossfromHouseProperty Ifthenetresultofcomputationofincomeunderthehead"HouseProperty"islossthensuchlosscanbeset-offagainstanyotherincomeuptoRs.2Lakhinanyassessmentyear. However,thelosswhichcouldn'tbesetoffcanbecarriedforwardforset-offinsubsequentyears.Itcanbecarriedforwardfor8Assessmentyearsforset-off. [AsamendedbyFinanceAct,2021]