Part-3 : Sec-24 : Income from Self Occupied Property (current post)
Part-1 : Sec -22 of Income Tax Act which talks about what is considered a house property and what kind of taxes are applicable on the same.
Part-2 : Sec-24 of Income Tax Act. Once you have a taxable house property which is worthy of generating income for you, we must understand the applicability of Sec-24 for a rented out property.
The applicability of Sec-24 is covered under two sections (and hence Part-2 and Part-3 of this series of posts)
So, lets read on the Computation of Income from a self-occupied Property. It is important to understand in detail about Part-2 of this series before reading about Part-3.
The 'annual value' (We studied about Annual Value in Part 2) of one self-occupied house property, which has not been actually let out at any time during the previous year, is taken as ‘Nil’. This is very obvious since you are occupying the property, therefore it cannot generate any rental income for you.
From the annual value (which will be zero for a self occupied property), only the interest on borrowed capital is allowed as a deduction under section 24.
The amount of deduction will be:
• Either the actual amount accrued towards taxes and other expenses towards maintaining the household (as defined for a let out property in Part-2 of this series of posts) or INR 30,000 (as a standard deduction) whichever is less.
• When borrowing of money or acquisition of the property is after 31.3.1999 - the upper limit of deduction is INR 2,00,000 applicable to A.Y 2002-03 and onward.
Note that there is a upper limit of INR 2,00,000 for loan interest paid that can be deducted for Income Tax calculation in the case of self occupied property. At the same time, there is no such upper limit in the case of loan interest deduction for a let out property. The simple reason for the same is that in case of let out property, there is actual income generation as well.
Note that there is a upper limit of INR 2,00,000 for loan interest paid that can be deducted for Income Tax calculation in the case of self occupied property. At the same time, there is no such upper limit in the case of loan interest deduction for a let out property. The simple reason for the same is that in case of let out property, there is actual income generation as well.
What if you own more than 1 property
There may be cases where you own more than one property. In a normal scenario, one of those would be self occupied and the others would be let out. The tax calculation for each such property would be calculated separately based on their applicability as per Part-2 or Part-3 of this series of posts.
There may also be a scenario where more than one property is occupied for self occupancy. If a person owns more than one house property, and using all of them for self occupation, he is entitled to exercise an option in terms of which, the annual value of one house property as specified by him will be taken at Nil and the tax calculation would be done as per Part-3 of this series of Posts. The other self occupied house property/is will be deemed to be let out and their annual value will be determined on notional basis as if they had been let out, as per Part-2 of this series of posts.
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The book "From the Rat Race to Financial Freedom" has many such investment concepts explained in a very simple and uncomplicated manner, especially in the Indian context.
Cheers
Manoj Arora
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