How to calculate Income From House Property
Here is how you compute your income from a house property:
a. Determine Gross Annual Value (GAV) of the property: The gross annual value of a self-occupied house is zero. For a let out property, it is the rent collected for a house on rent.
b. Reduce Property Tax: Property tax, when paid, is allowed as a deduction from GAV of property.
c. Determine Net Annual Value(NAV) : Net Annual Value = Gross Annual Value – Property Tax
d. Reduce 30% of NAV towards standard deduction: 30% on NAV is allowed as a deduction from the NAV under Section 24 of the Income Tax Act. No other expenses such as painting and repairs can be claimed as tax relief beyond the 30% cap under this section.
e. Reduce home loan interest: Deduction under Section 24 is also available for interest paid during the year on housing loan availed.
f. Determine Income from house property: The resulting value is your income from house property. This is taxed at the slab rate applicable to you.
g. Loss from house property: When you own a self occupied house, since its GAV is Nil, claiming the deduction on home loan interest will result in a loss from house property. This loss can be adjusted against income from other heads.
Note: When a property is let out, its gross annual value is the rental value of the property. The rental value must be higher than or equal to the reasonable rent of the property determined by the municipality.