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
Out of all the heads under which income is chargeable to tax, income from house property is the most difficult to calculate. This is because this is a tax which is paid on notional income, i.e the annual value of the house which is its capacity to earn income and not on the actual income earned.
If you own only one self occupied house, it is not chargeable to tax.
If you have more than one property, you have an option of choosing one of them as self occupied whose annual value will be taken as NIL. The other property, even if it is not rented out and earning you an income would be deemed to have been rented out and tax is payable on the annual value based on this deemed rental income. This annual value is calculated as per the provisions of section 23 of Income Tax Act. Let us see how this is done step by step. Continue reading →