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Your home, building, office, or shop can be called house property. All the properties are taxable whether they come under commercial or residential. When the property is utilized for residential purposes, it is taxed under income from house property. Whereas, if the property is occupied for business or profession, then it is regarded as income from business or profession.
About Income From House Property and Taxes
A house property could be your home, office, shop, a building, or some land attached to the building like a parking lot. Income from house property encompasses all the income earned by the assessee from a property. The building and all the land to the building are part of the house property. The computation of tax varies for different types of house properties.
A self-occupied house property is a property used for residing. The taxpayer’s family, parents, spouse, or children may occupy the residential property. For the purpose of income tax, an unoccupied house property is considered as self-occupied. Before the financial year 2019 to 2020, if the taxpayer owns more than one self-occupied property, then only one is considered and handled as a self-occupied property. The remaining are accounted as let out or rented. The choice of which property to choose as self-occupied rests with the taxpayer. From the financial year 2019 to 2020, 2 houses could be considered as self-occupied while the remaining as rented out or let out for income tax purposes.
A house property that has been rented out or let out for the whole or part of the year is called let out house property
Inherited properties are those that are handed down from parents and grandparents. They can either be used as self-occupied or rented out.
The income from house property is given as follows:
The calculation of income from house property involves a series of steps. They are enumerated and explained in detail as follows:
The gross annual value of rented property is the rental value of the property. In such a scenario, the rental value should be more than or equal to the realistic rent of the property that is decided by the municipality.
If you plan carefully, you will be able to save a considerable amount from taxation. Some of the following things can allow you to save a considerable amount from taxation.
Applying For A Joint Home Loan
If you are a joint owner of a property with someone and also apply for a joint home loan with your partner, you will both qualify for tax deductions on interest up to an amount of Rs. 1,50,000 separately.
Planning A Second Home?
If you already have one self-occupied property registered to your name and desire to avoid paying taxes for a second home, then you can register the second property in the name of your spouse/relatives to avoid excess taxation.
Joint Ownership Taxation On Income From House Property
Joint ownership taxation on income from house property can be divided amongst co-owners and hence decrease the load.
Ownership Of More Than One Property
If you own multiple properties, only one of these can be classified under self occupied property and registered as the same. It is essential to evaluate the tax liability on all your properties. Then, choose the one with the highest tax liability and let out the remaining. You can also alter the self occupied property every year.
Empty houses that you own will still be taxed according to the fair rental value. So, it is wise to rent all vacant houses that you own to prevent loss due to taxation and gain on income.
A new section 80 EEA was added to extend the tax benefits of interest deduction for housing loans taken for affordable housing during the period 1 April 2019 to 31 March 2020. The taxpayer must not be entitled for deduction under section 80 EEA.
1. How much income from house property is taxed?
The deductions applicable for income from house property can be considered as the following according to Section 24.
2. What conditions must be fulfilled for income to be categorized as income under house property?
3. Can you classify income from house property as business income?
Yes, there are multiple rules under court and income tax in this regard. If you are in the business of renting out a property, then the rental income obtained even from the residential property will be considered as business income.
4. Can you adjust house property loss from salary?
Loss from house property can be adjusted against income under any head. Business losses apart from speculative business can be adjusted against any head of income with the exception of income from salary.
5. Does income from house property cover commercial property?
Income from house property is usually taxable under the head “Income from house property” in the hands of the owner. This is applicable both to residential as well as commercial property.
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