This issue will specifically address house property income.
1) Should I have to disclose the house property details even if I don’t have any loan on the house property?
Yes. The house property details are to be disclosed while filing the income tax return irrespective of whether the taxpayer has availed any housing loan or not. Usually, taxpayers disclose the house property while filing the income tax return based on the following two parameters namely :
Interest paid on housing loan can be availed even on self-occupied house property.
House property if let out, then the rental income is reported irrespective of any interest on housing loan.
Mostly there is a tendency of not disclosing the house property especially if it is self-occupied and there is no loan on such property.
2) Is there any limit on claiming loss from house property?
If the property is let out (LOP), the income from house property is calculated by deducting from the rental income, property tax paid, a flat 30% on value post deduction of property tax for maintenance and interest if any on loans availed. There is no restriction on the interest that can be claimed in-case of let out property.
But in-case of self- occupied property, the maximum amount of interest on housing loan that can be claimed is Rs.2 lakhs only. Excess of interest paid over and above Rs.2 Lakhs cannot be claimed at all. Neither property tax paid nor allowance for repairs is allowed.
From FY 2017-18 onwards, there is a restriction on the quantum of loss that can be availed under the head income from house property. The maximum loss that can be claimed is only Rs. 2 Lakhs.
The excess loss unclaimed in the current financial year can be used to set it off against future income under the head house property in the next year.
3) I have taken a loan and paying interest. But the house is under construction. Can I avail interest benefit?
No. Interest on housing loan can be availed only on house property which is eligible for a dwelling. Interest paid is considered as preconstruction period interest and this can be claimed in 5 equal installments starting from the year in which the construction is complete. This interest will also form part of the 2 Lakhs threshold meant for SOP and this is not in addition to the interest paid during the year in which the construction is completed.
Tip: Obtain completion certificate or possession certificate from the builder always irrespective of how many years it takes to complete the construction.
4) I have 2 house properties. In one, I am residing and in another my parents are residing. Can I claim both as SOP?
The act says that an assessee can treat only 1 property as a SOP and the other as Deemed Let out Property (DLOP). But the choice is left to the taxpayer to decide on DLOP.
In case of DLOP, the method of calculating income from House property for LOP is applied and the only difference is instead of actual rental income, a notional rental income which the property would fetch if let out is used for calculation.
5) Two of us are owning the property. There is a housing loan and it is a SOP. Can both of us avail interest benefit?
In this case, since it is co-owned property, the interest benefit can be availed by both the owners and the interest limit of 2 lakhs is applicable for each individual separately.
6) I have taken a loan for the purchase of plot and paying interest. Can I claim interest benefit?
No. Interest benefit can be availed only if the loan is borrowed for house property and not for the plot. Even interest paid during the construction of the property cannot be claimed unless and until the construction is complete.
7) I am in Bangalore, in rented premises and I have a house in Chennai. Can I avail HRA exemption as well as SOP?
Taxpayer can avail both HRA exemption as well as SOP if he is residing in bangalore due to employment.
8) I am having a land and a house property. I am planning to sell both. What is the tax implication?
This will be addressed in the next edition.