In this article I will be writing about how to adjust loss on house property. In my previous article I have explained how to calculate the income from house property. In certain scenarios there may be loss from the house property. Income tax laws provides options to set off those losses from your other sources of income. In this article I will look into more details about the scenarios and how to handle it. If you have any doubts please post it in the comments section. If you like the article please subscribe to our future articles here.
If the Property is Let Out
- If you have two properties, then loss from one property can be set off from the another property. For example if you have two houses namingly X and Y. X has annual income of Rs.50000 and Y has the loss of Rs.8000. You can deduct the Rs.8000 loss from your house X and show the income as Rs.42000.
- In case of any other remaining loss, it will be deducted from the other heads of income like salary, business, interest,etc.
- In case of the loss still remaining after deducting from the other heads of income, it will be carry forward to the next financial year. the balance loss shall be allowed to be carried forward and set off in subsequent years (subject to a limit of 8 assessment years) against income from house property. However, only losses pertaining to the assessment year 1999-2000 onwards can be carried forward.
If the property is Self-occupied
As we have seen in the previous article, the income from the self occuppied property is taken as nil. Only the following losses are taken for the self occupied property:
- Interest on loan up to Rs.30000 or Rs.150000. Interest upto Rs.1,50,000 is deductible if the following conditions are satisfied:
- capital is borrowed on or after April 1, 1999 for acquiring or constructing a property;
- the acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed; and
- the person extending the loan certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principal amount outstanding under an earlier loan taken for such acquisition or construction.
- If capital is borrowed for any other purpose (e.g. if capital is borrowed for reconstruction, repairs or renewals of a house property), then the maximum deduction on account of interest is Rs.30,000 (and not Rs.1,50,000).
How is Loss on House Property calculated?
In this post Madhu commented as “if the Property is let out, how does property Y have a loss of 8000/-? Is it due to being non- tenanted for some months?“.That is one interesting question because if the property is let out then how the loss come for that property. I will explain here with one small example.
If Mr.A own a house which he let out for the annual rental value of Rs.180000. Before calculating the rental income one has to deduct the following expenses:
- 30% of the annual value
- Interest paid for the home loans taken for constructing that house. Note that there is no upper limit for the interest exemption for the rented property. You can set off the whole interest payment against the income.
In our example Mr.A is paying the interest of Rs.220000 per annum. Here is the calculation:
Rent Received = Rs.180000
30% Deduction= Rs. 54000 (-)
Interest paid = Rs. 220000 (-)
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Loss = Rs. 94000
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Loss of Rs.94000 can be set off from the other rental income if you have or will be set off from other income like salary,etc.
Summary
This article explained very well about the loss incurred on the house property in scenarios like let out or self-occupied. You also can read our previous article about the calculating the income from house property. I hope this article is useful to the readers. Please post your feedback in the comments section. Thank you for reading!!
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September 4, 2009 at 1:29 am
I have just discovered your wonderful site!
Re. “how to adjust loss from house property”, if the Property is let out, how does property Y have a loss of 8000/-? Is it due to being non- tenanted for some months? Is not there some rule about untenanted property having to pay ‘deemed rent’ as well as wealth tax? Could you please explain. Thanks a lot.
Madhu
PS I subscribed, but have not yet got a confirmation in my hotmail account.
September 4, 2009 at 6:49 am
Hello Madhu,
Thank you for the comments.
Loss on the let out property is possible. Please read the following example:
If a has one rented property where he is getting the annual rent of Rs.150000. For the rented house interest paid for the loan is fully exempt from the tax (It is Rs.150000 for the self occupied house). One can deduct it from the rental income. In our case Mr.A is paying Rs.200000 as the interest for the housing loans. Here he is making the loss of Rs.50000 which can be set off from any other income. It can be salary income or rent from other house.
I hope this clears your doubts. Thank you for subscribing to our site. You should have received the confirmation mail. Please check your spam mails.
Please let me know if you have any doubts.
Thanks,
Krishna
December 21, 2009 at 8:22 am
What document do I have to submit if I want to show a loss in the second property
December 22, 2009 at 12:51 am
Hello,
I & my brother have purchased a flat. Though both of us are co-borrowers of home loan, the property is on my name.
To avail tax benefits I understand from several other posts on this page that both the co-borrowers must be co-owners as well.
Now my question is – what is the process to include my brother’s name as joint owner of the house? Is brother-sister joint ownership permitted? Kindly let me know….
January 26, 2010 at 10:39 pm
Dear Krishna ,
I bought a plot in 2008 , registered in Aug’2008 but HUDA transfer in Dec’08 & plan to sell in 2011 . So 3 year will be counted from registry date or HUDA Plot transfer date ( for 20% tax on capital gain ) . Secondly Can I use this capital gain in paying housing loan taken on flat bought in 2006 & then no tax liability will be there or is it better to buy a commercial shop to save this capital gain .
Pl let me know ..Regards
March 11, 2010 at 2:27 am
Hello,
This is regarding my query on Interst and Principal Paid on Housing Loan, if 5 years not completed.
Below are the details, request you to guide:
1. Booking Date – 15-Apr-2005. Full Loan amount disbursed in June 2005. EMI started in July 2005.
2. Posession Date – 10-Oct-2005
3. Sale Date – 4-Mar-2010. Only Token received. Registration not done.
Below are details of the Principal and Interest I have claimed over the previous years against my home loan:
Total Interest paid – 6,16,000
Total Principal paid – 1,90,000
Tax saved on Interest (30%) – 1,84,800
Tax saved on Interest (30%) - 57,000
Total Tax Saved – 2,41,800
I understand I need to hold the property for 5 years else all deduction for previous years will be tax.
Question 1 – From what date, 5 years are calculated.
.
Is it Booking Date? In my case 15-Apr-2005. If yes then 5 years will end in next month Apr-2010. Hope this is the answer
Is it Possession Date? In my case 10-Apr-2005. If yes then 5 years will end in Oct-2010.
Is it after end of the financial year of the house purchase date? In my case it will start from 1-Apr-2006 and end by 31-Mar-2011.
Question 2 – If 5 years are not complete, will the Interest amount (6,16,000) and Principal amount (1,90,000) are added to my current years income and taxed. If YES, I will have to pay around 2,41,800 (Total Tax Saved so far) to Income Tax. Please confirm.
Question 3 – What is a way out here to save tax??
Save tax Option 1 – Do the agreement after Booking Date (Apr 2005) or possession date (Oct-2010) or after 1-Apr-2011. Please confirm.
Your help in this regard is much appreciated, thanks in advance.
Contact # – Hari – 9619090559.
Looking forward for your replay.
April 21, 2010 at 7:13 am
I have taken a Housing Loan to buy a house and My EMI Got started Since six months back and the House will be ready for occupy after seven months from now . So can I Claim the Interest Part as a deduction from my salary before the house will be ready for occupy?
Under the head as given below?
1. as a loss from House Property
2. As Under Section 24(b)
Can you please Reply?
Thanks & Regards,
Suve
April 21, 2010 at 7:13 am
I have taken a Housing Loan to buy a house and My EMI Got started Since six months back and the House will be ready for occupy after seven months from now . So can I Claim the Interest Part as a deduction from my salary before the house will be ready for occupy?
Under the head as given below?
1. as a loss from House Property
2. As Under Section 24(b)
Can you please Reply?
Thanks & Regards,
Suve
May 23, 2010 at 1:39 am
Hello,
I need to file ITR-2 for the Assessment year 2010-11 as I am having 2 house properties. One is let out and the other is Self Occupied. Both the houses are on Loan.
Total Interest amount for both the house for the year is 35,000 and 90,000. In addition to that there is another interest amount of 65000 pertaining to pre-acquisition of the house property which I need to claim equally over the next 5 years, beginning from the current assessment year.
I need a little clarification while filing these details in the prescribed ITR-2 form.
i) In the Schedule House property, Do I need to include pre-construction interest amount also.
There are 3 more schedules i.e. Schedule CYLA (Current year Loss), Schedule BFLA (Brought forward Loss) and Schedule CFL (Carried forward to future years).
I am confused about entering the amount in these schedules.
In Schedule CYLA-what amount should be entered. Do I need to enter only Pre-construction Interest i.e. 65000 or should I enter current year entire interest plusPre Construction period interest i.e. 1,90,000 or only Current period interest i.e. 1,25,000.
Similarly what amount should be entered in Schedule BFLA and Schedule CFL.
I would highly appreciate if you can please clarify the above query.
June 6, 2010 at 5:11 am
Hi,
I would like to understand the treatment of loss from the sale of property. If x whos is salaried person and bouth a house in 2007 fro 25L, aditionally spend 5l on maintenence and interest on loan. Finally sold the property in 2009 for 28L. Now of the total cost of acquiring the property is 30L (25l+ 5l) but this was sold for 28l hence how to show the loss of 2L comming out this in income tax assessment. Secondly can the loass be adjusted against salary income?
Any inputs would be appreciated.
June 28, 2011 at 10:58 pm
Can you help me understand the tax implications on my two houses under LOHP :
I have a house in a different city from place of work which is rented out and I have computed the LOHP on this after deducting loan interest, municipal taxes and 30% standard deduction.
I have another house in the city of place of work which is also rented out, but the tenant is refusing to vacate although I have filed an eviction petition for own use and the matter is in the courts. I have computed the Income from House Property on this, after deducting municipal taxes and 30% standard deduction.
I have combined the above two and arrived at a combined LOHP.
I am living in a rented house in the city of place of work and have computed the HRA exemption in addition to this.
Is this the right approach ? Can house being under litigation be the grounds for claiming LOHP/IFHP on second property in city of place of work? Can I claim HRA as well? Under what circumstances will wealth tax kick in? Thanks
June 30, 2011 at 3:03 am
Hi,
I paid an advance for purchase of property and got an agreement to sell executed. However, I was not able to fulfil the agreement and as a result had to forfeit the advance. Can this loss be treated as short term capital loss?
Thanks
Sachin
August 6, 2011 at 2:59 am
interest on housing loan deductible is Rs.30000 or Rs150000.
September 9, 2011 at 9:26 pm
Hi I have the following query:
I booked a flat in October 2009. It was financed by HDFC and the first disbursement was made in Feb 2010. I will be getting the possesion of the flat by Jan 2012 and will rent it out by Feb 2012.
1) The Interest paid on the flat for the FY 2011-2012 will be Rs. 3,00,000.
2)Rental Income for 2 months Rs. 20,000* 2 = 40000
Can I clam tax exemption on wholly let out house property as follows:
a) Interest Paid Rs 3,00,00
b) Income from rent : Rs 40,000 – 30%= Rs 28,000
c) Loss from wholly let out house property:Rs 3,00,000 – 28,000 = Rs 2,72,000
October 5, 2011 at 4:46 pm
I have a loss from House property amounting to Rs.150000/-. Can i adjust from Income from speculative bussiness of the same year.
thanks
October 5, 2011 at 4:47 pm
I have a loss from House property amounting to Rs.150000/-. Can i adjust from Income from speculative bussiness of the same year.
February 17, 2012 at 3:46 am
Can the loss on HP be netted off from salary income and Tax deduction at source be done accordingly from the employers point of view
Regards
Vittal
.
February 22, 2012 at 11:08 pm
Hello,
this is Suresh. I bought a house with a loan of 2500000 last year (feb 2011). However i lost my job in June 2011 (FY 11-12) and for April and June Final settlement, my employer deducted Tax of 10500 Rs.
The total Interest i paid on my Home loan is Rs 2,16,997. And the Principle Amount paid is rs 4,90,821 (Partial Payment done) after i got my PF and final settlement amount from my employer.
My Annual Declaration (LIC, ULIP) – Rs 36,000.
Now, what is my Loss on House Property? how much to declare?
Please assist.
regards,
Suresh
July 18, 2012 at 2:52 pm
sir ,
i just want to know if we can set-off loss from self occupied house property with income from salaries?
it will be very useful if you reply fast….
July 24, 2012 at 9:57 pm
Hi
My query is regarding the House Loss carried forward.
In my case . last assessment year. I had a loss against house income that was carried forward. around 100000 INR. ( as I had no income , due to study sabatical )
This year the house is rented out. ( Rental income : 168000 INR )
Interest on Housing loan : 200000 INR)
so can I club the current year interest paid + brought forward loss ie
(200000+ 100000 ) as the total loss for this year and adjust it against the other income heads.
Kindly confirm.
Thanks
Dinesh
September 20, 2012 at 2:36 pm
I am in hyderabad .
If i have two properties ,one is LET OUT and another is not .So can i claim LOSS on propert from let out and 1.5 lacs interest paid from the second one?What documents needs to be submit for claiming for salaried employee?
Is it required both the properties should be out of Hyderabad ?
May 9, 2013 at 2:35 pm
I brought a flat in yr 2008 and construction completed in yr 2009
bank issued loan EMI started in jun2008 and bank automatically swithced the Pre-EMi to EMI in Dec 2008(that is before the construction completion date) in this case i can claim Pre-EMI amount in 5 equal installment as tax excemption apart from 150000 is it correct?
in figures
150000 (LOHP)
+ 70000 (Pre EMI per year)
total 220000 Is excepted from tax? ot its on 150000/-