Loss from House Property in Income Tax

• Self occupied property: If you own the property and also dwell in it, the Gross Annual value of the property will be nil. Since you're not earning any rent or income due to self occupation, the property taxes paid and interest on loan will ultimately lead to loss under the heading. The maximum deduction the assessee can make under section 24 of the Income Tax Act for interest on home loan is Rs.1.5 lacs.
• Loss of income under Let out property: In cases where the property has been let out, the Gross Annual Value will not be nil. If the deductions claimed under various heads is more than this value, it would be treated as loss under House Property.

Treatment of Loss from House Property for Taxation

During a specific assessment year, losses arising out of house property will be allowed to be offset against income from other sources. This loss can be adjusted against income shown under other heads i,e Salary, Business or Profession, Capital Gains or other sources as per the IT act. The remainder income after setting off the losses would be taxable in accordance with the IT slabs.

The loss from house property can be carried forward to the next year if it was not adjusted during the same assessment year. If the loss arising under House Property is being offset during the same assessment year, it can be adjusted with any other type of income. If you're planning to carry it forward to the subsequent years, it can only be offset from income arising out of House Property only. Loss from House Property can be carried forward for up to 8 assessment years and should be shown in the ITR filed.

The method for computing Income/Loss from House Property

Gross Annual Value (Rent received or expected rent(Nil in case of self occupied property))

Less: Municipal or other local taxes paid on the property

= Net Annual Value

Less: Deductions u/s 24

• Statutory deduction at 30 percent of the Net Annual Value (NAV)
• Interest paid on home loan

= Income or loss under the head House Property

Home Property Loss Set-off for Tax Purposes

1. You can use it for a house property loss set-off if you suffer a loss on your real estate but make money from any of the other five sources of income—salary, real estate, business or profession, capital gains, or other sources.
2. For such losses, the Finance Act of 2017 made an adjustment that will take effect in 2018–19.
3. The maximum loss from residential property that a taxpayer may deduct from income under other headings in a fiscal year is Rs 2 lakhs. The residual loss amount may be carried over to the ensuing fiscal year for offset.
4. It is crucial to keep in mind that any other revenue head in the same fiscal year may be used to offset a house's property loss.
5. The loss can only be offset against income from house property for the tax year if you carry it forward to the following year.
6. Additionally, for the following eight years, the taxpayer is unable to carry the remaining loss forward.
7. The taxpayer must trigger the upset in the year in which there is revenue from real estate in order to avoid penalties. 

Home Loans Deductions

You can deduct up to Rs 2 lakh from your home loan interest if you live in your home. You can still gain if the house is empty. If you rent the property out, you can write off all of your loan interest. The maximum amount of interest that can be deducted is up to Rs 30,000 in certain circumstances -

You took out a mortgage on or after April 1, 1999, but you didn't complete the purchase or construction of the property until five years after the end of the same fiscal year. Beginning on the last day of the assessment year, the five-year period will begin.

Prior to Budget 2016, the duration was three years in the FY 2026–17 and was increased to five years. A taxpayer should be aware that they can only deduct interest at the start of the assessment year, when the construction is finished.

1. You submitted your loan application before 1 April 1999.
2. You applied for the loan for remodelling or renewal on or after April 1, 1999.

Until the property is finished, the taxpayer cannot deduct the interest paid on the loan. Pre-construction refers to the time frame in question. The taxpayer may deduct interest on a loan over the course of five different tax installments. It starts with the year that the house's construction is complete.