Section 24 of Income Tax - Deductions from House Property Income
Provisions relating to Deductions from House Property Income as per Section 24 of the Income Tax act
There are two major deductions available from House Property Income as per Section 24 of the Income Tax Act.
1.Standard Deduction u/s 24(a):
As per Section 24(a), 30% of the Annual Value of House Property is available and termed as Standard Deduction. i.e. If there is a Rental Income of Rs. 600000/- for a particular year, 30% of the same i.e. Rs.180000/- will be available as Standard Deduction and can be deducted from Rental Income.
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2. Interest on borrowed Capital u/s 24(b)
As per Section 24(b), if any house property is acquired, constructed, repaired, renewed, or reconstructed with any borrowed capital, the interest paid on borrowed capital will be allowable as a deduction.
There are certain conditions for availing of this deduction which are as under :
(a) If the loan for construction of a self-occupied house property is taken after 1st April 1999 and the construction has been completed within 5 years of taking of loan, then the deduction of interest can be taken up to Rs.200000/-.
(b) If the loan has been taken for the construction of the house property and any interest is paid before completion of the construction of the property, then the total interest paid before completion of the construction of the property is to be accumulated and the deduction can be taken from the year in which construction is completed and in next 4 years in equal installments.
For Example, Mr. X borrowed Rs. 1500000/- for the construction of the House property on 01st April 2018 and paid interest of Rs. 180000/-, 160000/- and 140000/- during the F.Yr. 2018-19, 2019-20 & 2020-21 respectively.
The construction of the House by Mr. X was completed on 1st April 2021.
In this case, the total interest paid before the completion of construction i.e.
Rs. 180000+160000+140000= 480000/- will be available for deduction in the year 2021-22 and next four years i.e. 2022-23, 2023-24, 2024-25 & 2025-26 in equal installments of Rs. 96000/- each.
(c) There is no limit on interest paid on borrowed capital deduction in case of house property which is rented.
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