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 (-)
Loss = Rs. 94000
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.
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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