web analytics

 

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 

--answer--

   
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 

--answer--

     
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

--endanswer--

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

--answer--

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
  1. Income Tax
  2. Income From House Property
Ask Download

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
  • Nagendra Kumar Bejawada's image
    Nagendra Kumar Bejawada
    July 29, 2017, 8:44 a.m.
    What is the maximum amount of deduction available u/s 24B for Interest on Housing Loan for a Rented house for A.Y. 2017-18?
    View answer
Jail