Deduction under Sec. 24 | Deductions while Calculating House Property Income

[Deduction u/s 24, Deductions while calculating Income From House Property, Municipal Taxes Deduction, Income Tax Act 1961]

There are mainly two deductions while calculating Income from House Property - one in Municipal taxes and another is Deduction u/s 24.

Deduction of Municipal Taxes from Annual Value

From the annual value municipal taxes are to be deducted if the following conditions are fulfilled:-

(a)    The property is let out during the whole or any part of the previous year,

(b)   The Municipal taxes must be borne by the landlord. If the Municipal taxes or any part thereof are borne by the tenant, it will not be allowed.

(c)    The Municipal taxes must be paid during the year. Where the municipal taxes become due but have not been actually paid, it will not be allowed.

Deductions u/s 24 of the Income Tax Act

Following two deductions will be allowable from the net annual value to arrive at the taxable income under the head ‘income from house property’:-

(a)    Statutory deduction: 30 per cent of the net annual value will be allowed as a deduction towards repairs and collection of rent for the property, irrespective of the actual expenditure incurred.

(b)   Interest on borrowed capital: The interest on borrowed capital will be allowable as a deduction on an accrual basis if the money has been borrowed to buy or construct the house. It is immaterial whether the interest has actually been paid during the year or not. If money is borrowed for some other purpose, interest payable thereon cannot be claimed as a deduction.

Limit of deduction u/s 24(b)

A. In case of Let out/ deemed to be let out house property: Interest on Money borrowed is allowed as deduction without any limit. Here interest on money borrowed = interest of P/Y + 1/5 of Pre-construction period (PCP) interest. PCP started from the date of borrowing and ended on 31st Mar immediately preceding (Before) the year of completion.

B. In Case of Self Occupied House Property:  Max. Rs. 2,00,000 is allowed as deduction if the following conditions are satisfied:

Ø  A loan taken after 1 – 4 – 99

Ø  For construction/purchase (Capital expenditure) of house

Ø  Construction completed within 5 years from the end of the financial year in which loan is borrowed.

Ø  Loan certificate is obtained

For all other cases, the maximum allowed deduction is Rs. 30000