How to Compute

Income Tax
Income From House Property

Apart from 30% Standard Deduction,

Assessee can also claim Deduction for Interest on Housing loan

if he has interest payable on  housing loan

Such loan may be taken for construction of house or for its  repairs or renovation

 NAV XX Less Deductions from House Property Standard Deduction 30% XX Interest on Housing Loan * XX income from House Property XX

*Limit of Deduction

If house is given on rent ,then full allowed as deduction  without maximum limit.

(If house self occupied,then Max Deduction of 30000/200000 which we will study later.)

Note:-

Interest on loan is also called Interest on Borrowed Capital

Q1

 NAV of Rented House= 200,000 Loan taken  at the Rate of 8 % p.a 1,000,000

Calculate income from house property

 NAV 200000 LESS Standard Deduction 30% -60000 Interest on Loan -80000 (1000000*8%) Income from House Property 60000

Q2

 Municipal valuation 300000 Fair Rent 400000 Standard Rent 360000 Actual Rent 480000 (40000*12) Unrealized Rent 40000 Housing loan taken @ 8% p.a 1000000 Municipal taxes due 10000 (Paid Rs 8000) Ground Rent 7000 Insurance premium 3000 Repair done 20000 Calculate income from the rented house property

 A Higher of Municipal Value or Fair Rent 400000 B Standard Rent 360000 C Expected Rent (Lower of A or B) 360000 D Actual Rent 480000 E GAV 480000 (Higher of Expected or Actual Rent) Less F Municipal Taxes Paid -8000 G Unearned Rent(40000*1) -40000 H NAV 432000 Less i Standard Deduction -129600 (30%*432000) j Interest on Housing Loan -80000 k Income from House Property 222400

#### Property Under Construction

• Interest is allowed only from the year in which construction is completed .
• If loan taken but construction not completed than interest on the same will accumulate and allowed from the year in  which construction completed  in five equal Annual installments .

Q3

 NAV  = 2000000 House was purchased for construction by taking loan on 1 august 2011 and Construction completed on 30 June 2014 Interest paid in different financial year was 2011-12 80000 2012-13 70000 2013-14 30000 2014-15 20000 Total interest Paid 200000

What is amount allowed as deduction in each year

No Deduction allowed in 2011-12,2012-13 and 2013-14 as construction of property not completed.

Deduction will start from 2014-15 onwards

Amt of Deduction wil be

Interest paid in 2014-15=20000

+

1/5 of Interest paid in 2011-12,2012-13 and 2013-14

=(80000+70000+30000)*1/5=180000*1/5=36000

Hence Total Deduction in 2014-15=20000+36000=56000

NAV will be Computed as follows

 NAV 2000000 Less Standard Deduction 30% -600000 Interest on Housing Loan Current Year Interest -20000 Previous Years Interest -36000 income from House Property 1344000