Income from House Property

Types of House Property

 

·       Let-out House (LOH): The property that is given to another person by charging a sum as rent, and it will be on a on a monthly or quarterly basis.

·       Deemed let-out house (DLOH): Where the person has occupied more than two houses for his own residential purposes, two houses (as per his own choice) are treated as self-occupied houses, and the other remaining houses will be treated as deemed let-out houses.

·       Self-Occupied House (SOH): Any property used for his or her own residential purposes

·       House used for own Profession or Business: If property is used for his or her own business or profession purpose, it shall not be chargeable under the head of income from house property.

Types of Rents

• Municipal Rental Value: It is the value determined by the municipality. The owner pays tax on municipal value.
• Fair Rent or Notional Rent: It means the rent fetched by a similar property in the same or similar locality.
• Standard Rent: It is the maximum rent that a person can legally charge under the rent control act prevailing in the state in which the property is situated. The owner cannot recover rent more than standard rent.
• Annual Rent: Rent of the previous year (that is, rent for 12 months) or that part of the previous year when the property was available for letting out
• Unrealized Rent: It is the rent that the owner cannot realize.

Deductions under Section 24

The following deductions are permissible under this section from the adjusted annual value, i.e., after the deduction of municipal taxes.

1. Standard Deduction u/s 24(a): (for let-out property and deemed let-out property only) For repairs and collection charges, 30% of the net annual value will be allowed to be deducted from this account without regard to the amount that is actually spent.
2. Interest on Borrowed Capital u/s 24 (b): (Interest on Borrowed Capital + 1/5^th interest of preconstruction period)
1. If let out or deemed Let out property: No Maximum Limit
2. If self-occupied property: The maximum amounts allowed to construct new homes are Rs. 2,00,000 and Rs. 30,000 for house renewals. If the assessee exercises the new taxation regime under Section 115BAC, it is not allowed. (w.e.f. April 1, 2020)