Loss from House Property in Income Tax

There is a certain category known as ‘Loss from House Property’ which is a common thing to come across when you are declaring your total income from a property or a house. Loss from House Property can include many things like self-occupied property.

At the time of declaring income from house property when you file for taxes, “Loss from House Property” is quite a common scenario. Let's put various facets associated under the spotlight and help you understand its treatment.

Loss from House Property - Reasons

The loss arising out of income derived from house property can be mainly due to two reasons as described below.

  1. 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.
  2. 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

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

= Income or loss under the head House Property

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