mahesh has three house . their municipal valuation are rs 90000, rs 100000 and rs 120000 respectively. interest on loan taken for construction of those house are rs 30000, rs 60000 and rs 40000p.a. respectively those house have been used by assesse and his family member for own residence. which house he choose as a self residental house for income tax u/s 23(2) purpose ? the construction of house completed in may 2018 .
subject : income tax planning and management
Answers
Answer:
If you have a house/flat that is either rented out or kept vacant you need to know about income from house property for income tax calculation purposes. This is also important for tax saving if you want to set off the interest you are paying on any home loan taken for the same house against the income from house property.
A person's gross total income chargeable to tax is a sum of income under various heads such as 'income from salary', 'income from other sources' etc. One of these heads of income is 'Income from House Property'. While filing returns for the FY 2018-19, an individual is required to provide the break-up of the income from house property.
ADVERTISEMENT
What is income from house property
Income from House Property covers the rent earned from the House property which is chargeable to tax. Sometimes, the owner may have to pay tax on 'deemed rent' in case the property is not let out.
ADVERTISEMENT
The income from house property is added/ included in a person's (the assessee)' gross total income only if it satisfies three essential conditions:
1. The assessee is the owner of that property.
2. The property must consist of house, buildings and/or land.
3. The property may be used for any purpose except used by the owner for the purpose of running his business or profession.
Here ownership includes freehold, leasehold rights and also includes deemed ownership.
Section 27 of the Income Tax Act defines deemed ownership of the house property for the purpose of levying tax as:
ADVERTISEMENT
1. Transfer of ownership to a spouse or minor child
2. Holder of impartible estate. Impartible estate refers to the property which is not legally divisible such as dividing a single storey house with say 3 rooms among 7 heirs.
3. Property held by member of a co-operative society
4. Any person who has acquired a property under Power of Attorney transaction.
Deductions from house property before levying of tax
While computing the income earned from letting out the property, one can avail (where eligible) various deductions available under section 24 of the Income Tax Act to arrive at the net taxable income from house property income. These deductions include standard deduction of 30 per cent, the deduction of municipal taxes and deduction of interest paid on home loan which is allowed under this head stock market?