ITR filing: Tax rules on income from house property that your should know

Interest component of home loan for one let out house comes to around Rs. 3.50 lakhs. I receive a monthly rent of ₹15,000 p.m. I stay in a rented house. Under the circumstances can I claim loss from the house let out by me as deduction against my salary income?

For computing taxable income, you are allowed to claim a standard deduction of 30% of the rent received by you. In addition to the standard deduction, you are also allowed to claim deduction in respect of interest paid on money borrowed for buying, constructing, renovating and repairing the house. In case the house is self-occupied, you are allowed to claim maximum of two lakh deduction for maximum of two self-house property taken together.

However, in case the house property is let out you can claim deduction for full interest paid on the money so borrowed but the loss under the head “Income from House Property” can be set off against other income during the same financial year up to Rs. 2 lakhs and any unabsorbed loss over 2 lakhs has to be carried forward for set off against house property income in next eight years.

Against your rental income of Rs. 1.80 lakhs, you will get a standard deduction of Rs. 54,000/- leaving Rs. 1.26 lakhs. After adjusting interest of Rs. 3.50 lakhs the loss under the head “Income from house property” head comes to Rs. 2.24 lakhs. Since you can set off maximum of only two lakh of loss against your other income including your salary income the balance Rs. 24,000/- unabsorbed loss will have to be carried forward for next eight which can be only be set off against the positive income under the house property head.

(Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his twitter handle)