Last month’s post on calculation of income from house property evoked a few queries/doubts on what are the allowable deductions/tax exempt income under this head.
The following property incomes are totally exempt from tax
- Annual value of one self occupied property [section 23(2)].
- Property income of an approved scientific research association [section 10(21)].
- Property income of an educational institution and hospital [section 10(23C)].
- Property income of a local authority [section 10(20)].
- Property income of a registered trade union [section 10(24)].
- Income from property held for charitable purposes [section 11].
- Property income of a political party [section 13A].
- Income from property used for own business or profession [section 22].
- Income from a farm house [section 2(1A) (c) and section 10(1)]
The following are the ONLY two deductions allowed u/s 24 of Income Tax Act
30 per cent of the net annual value will be allowed as a deduction towards expenditure on repairs and collection of rent for the property (this includes stamp duty, brokerage etc.), irrespective of what the actual expenditure is.
Interest on borrowed capital (home loans)
The interest on borrowed capital will be allowable as a deduction on an accrual basis if the money has been borrowed to buy or construct the house. Amount of interest payable for the relevant can be claimed as deduction, with the following exceptions –
- Brokerage or commission paid to arrange a loan for house construction is not allowed.
- In case of NRIs, if the interest is payable outside India, no deduction will be allowed unless tax is deducted at source or someone in India is treated as agent of the non-resident.
- Interest payable on the home loan interest is not allowed.