Income from House Property Part-3 (Sec 22 and 24 IT Act)

In this series of posts, we have been covering the tax awareness on Income from House property (Sec-22 and Sec-24 of IT Act). We have covered 2 parts till now and we are covering the 3rd and ultimate part today.

Part-1 : Sec-22 : Basis of Charge (House Property)

Part-2 : Sec-24 : Income from Let House Property

Part-3 : Sec-24 : Income from Self Occupied Property (current post)

In the last two posts, we essentially studied the following:
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 : We studied Sec-24 of IT 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 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 income for you.

From the annual value, 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 Rs.30,000/- (as a standard deduction) whichever is less.

• When borrowal of money or acquisition of the property is after 31.3.1999 - the upper limit of deduction is Rs.1,50,000/- applicable to A.Y 2002-03 and onwards.

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.

Cheers

Manoj Arora