When filing a return for income earned from the rented property, Section 24 of the Income Tax Act allows property owners to claim two exemptions, or say two house property deductions. The details of the exemptions are outlined below.
- Standard deduction: A flat 30% of the deduction is allowed on the property’s gross value for any repairs and maintenance. When calculating this amount, the municipal taxes are deducted beforehand. The deduction is allowed regardless of whether the expenses you have incurred are higher or lower. The concept of the statutory deduction is not applicable if the property’s annual value is NIL.
- Deduction for home loan interest payment: In the context of income from a rented property, property owners can deduct the interest on the loan that was borrowed to buy or construct the house on an accrual basis.
The interest on a home-related loan will be deducted in the amount of Rs. 1.5 lakhs or the actual interest paid, whichever is less. However, bear in mind that the deduction for the preceding amount is only allowed if the construction was completed within three years of the loan (availed on or after 1st April 1999) being taken out.
In other cases, a deduction is allowed for the amount of Rs. 30,000 or the actual interest paid, whichever is less.