The Income Tax Act of India has five heads of income, of which “Income from House Property ” is one of them.
In order to calculate the income from house property, one needs to know the annual value of house property. We saw in our last article how to calculate the annual value of a house.
This article will teach you how to find the income from the home you own.
How is income from house property calculated
After you have calculated the annual value for your house, you can claim two deductions on it. The value so got after the deductions is the income from your home. The two deductions are as follows :
(1) Statutory deduction: A sum equal to 30% of the net annual value of the house can be deducted from the annual value of the house. This is like a standard deduction offered.
(2) Interest on borrowed capital: If you have taken a home loan to
buy, build, construct or repair your house, then the interest on the loan can also be used as a deduction. Each year, the amount of interest is to be calculated separately and claimed as a deduction.
If you have been paying interest on a loan during the pre construction period of a house, then the interest will be summed up and deduction will be allowed in 5 successive years starting from the year in which the acquisition/construction was completed. Note that interest will be taken from the date of borrowing till the end of the previous year prior to the year in which house is completed. That is, if construction of house was completed in June 2009, the interest will be taken only till March 2009 (end of the previous year prior to the year in which house is completed ).
Shown below is the calculation along with the two deductions :
Rental income net of municipal taxes (Annual Value)