Calculating income from house property

If you own a house which you let out, there will be Income Tax incurred on that. To understand this article, a term you will come across is Annual Value: IT speak for the actual rent received annually

Scenario 1: You have one house in your name, which is your residence: no Income Tax

Scenario 2: You have more than one house in your name – one where you live, the other, possibly in your home town. On the second property, you will need to pay tax. If the house is empty, you will have to pay tax on the notional market rate of rent.

IT deductions on this tax:

1. Standard deduction: 30% of the annual value. This is given for maintenance or repairs etc. on the property when not in use.

2. Interest (Section 24B) on money borrowed for buying/ constructing said house

If you own a property that you use for business, there is no tax on the aspect/ extent it is used for business. For example, if 50% of that property is used for your business and the other 50% is let to someone else for their business/ residence, for 50% of the property, there is no IT incurred for the time you are using those premises for business.

For all these cases, taxes need to be paid, and exemptions applied for only after full construction is done and possession is taken.

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