[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