Tax on income from house property

If you own a house and are not using it for your own stay but you have rented it out to a tenant, you are required to pay tax on the rent you receive from the tenant or are expected to receive as rent from the property. The property could be residential or commercial, you have to pay tax on the actual or expected rent from the property. However, you are not required to pay any tax when the property is for self-use, that is, when you use the property for your own residence or for your profession or business.

In case there are more than one house properties for self-use, you will have to choose one property for self-use and offer other properties for taxation. In this case, a notional rent would be considered as “income from house property” and taxed accordingly.

There are two kinds of deductions available on income from house property. The standard deduction allows the house owner to claim a rebate of 30% on the total annual rental income from the property. This deduction is for repairs of the house property, irrespective of whether or not the house owner actually carries out any repairs.

The second deduction is available for interest paid on loan taken for purchase or construction of new property as also for repairs or reconstruction of existing house property. The processing fee or prepayment charges paid on the home loan are also available for deduction as ‘interest’ paid on the loan.