Income from house property is a major source of passive income for millions of people in India. Income generated from house property is subject to taxation under the Income Tax Act, 1961, and the legal owner who receives the income from the property is liable to pay tax. A house property could be your home, office, shop, a building or some land attached to the building like a parking lot. It is worth noting that the Income Tax Act does not differentiate between residential and commercial property.
Here are the some points on the taxation on income from house property that you should keep in mind.
All types of properties are taxed under the head “income from house property” in the income tax return.
If a property is used for the purpose of business or any other profession, it is taxed under the “income from business and profession” head.
The taxable value of any property that falls under the House Property category is essentially the annual value of the property.
Sections 22 to 27 of the Income Tax Act pertain to the taxation of Income from House Property.
Section 24 of the Income Tax Act states that income chargeable under the head “Income from house property” shall be calculated after making a standard deduction of 30% of the rent received by you.
Apart from the standard deduction, you are also allowed to claim deduction on the interest paid on any loans taken for buying, constructing, renovating or repairing the property. In case the house is self-occupied, you can claim maximum deduction of Rs 2 lakh for maximum of two self-house properties taken together.
The annual value of house properties is taken as income from house property and is calculated for taxation.
There are ways by which you can save on income from house property.
If you and your spouse have jointly taken a home loan, you both can claim tax exemption towards payment of principal and interest.