Familiarize11 with rules, laws and other important information relating to your property


Q : Is income from house property taxable?

A : Like incomes from salary, business profits, and profession, income from house property is taxable and added to the total income.

Q : How is computing of house property done?

A : Income from house property is computed on the basis of annual value of the property. Annual value as distinguished from rental value is calculated based on inherent capacity of the house property to earn income. Inherent capacity denotes the amount for which the property might be reasonably let out. This will be higher of rent paid by the tenant or annual rate value fixed by municipality, or the rent of similar property in the locality etc.

Q : Is the annual value of the house subject to income tax if it is self occupied?

A:No, when a house property is self occupied the annual value of such property is taken as nil and as such no income tax is payable. In fact you shall be eligible for deductions such as interest on loan taken for purcahse of property etc. from your total income.

However, if you happen to be owner of more than one house property for own residential purposes, then only one house can be treated as self occupied and the annual value of such property be taken as nil, all other houses shall be deemed to be let out and annual value shall be computed accordingly.

Q : What are the deductions available in case of self occupied property?

A:Interest payable (whether paid or not) on loan for purchase, construction or reconstruction of house property is allowed as a deduction ( from total income) up to Rs.200000/- PA.

It may be pertinent to note that interest attributable to the period prior to acquisition / construction is also allowable as deduction. For the purpose of such deduction the interest paid/payable before the final completion of construction or acquisition of the property will be aggregated and allowed in equal installments over five successive financial years starting from the year in which the acquisition or construction is completed.

Q : What are the deductions available in case the property is given out on rent or which is deemed to be let out?

A:The following deductions are permissible:

  • Municipal tax paid
  • 30% of  Net annual value(after deduction of municipla tax) towards repairs and collection charges ( allowed in notional basis irrespective of the amount incurred)
  • Interest on money borrowed for the purpose of construction or acquisition of a house property.
Q : What is the benefit of Capital Gain in case of sale of house property?

A : Benefit on sale of any capital assets (Section 54F)

The Income Tax Act, 1961 gives a person concession to purchase a residential house as and when they sell any long term capital asset (for e.g. shares, bonds, debentures, moor car etc.). When you sell long term capital asset normally you are required to pay tax on the gain in the value of asset after the benefit of indexation. If however you can reinvest the net consideration you received from the sale of capital assets in a house property and if the amount invested is equal to or more than the net consideration no income tax is payable in such capital gain. However, the following needs to be noted for claiming such benefit.

You should purchase the new residential house within a period of one year before or two years after the date on which the transfer took place or construct a residential house within 3 years of such transfer.

You should not purchase a residential house other than the new asset within a period of one year of construct any residential house other than the new house within a period of three year after the date of transfer of the original asset.

In case the new house property is not purcahsed within due date of filling of income tax return, you need to deposit  the sales consideration in capital gain account scheme with an authorized bank before the due date of filing of income tax return.

Benefits on re-investment in house property (section 54)

Apart from this if a person reinvests in a house property i.e. invests the long term capital gain of a house property in purchase of new house. Such reinvestment is exempt from Capital Gains u/s 54 provided in the the new house is purchased one year before or two years after the transaction.

Q : What are the other deductions available to me?


(Maximum exemption is limited to Rs.1.5 Lac including the employee’s PF contribution)


LIP: Life Insurance Premium

·         Copy of current FY premium receipt in the name of Self/Spouse/Children.

·         Late fee will not be considered.


ULIP: Unit Linked Insurance Plan

·         Copy of current FY premium receipt in the name of Self/Spouse/Children.


ELSS: Equity Linked Saving Scheme/Mutual Funds

·         Copy of unit statement issued by Mutual Fund for investment in current FY in the name of Self showing the amount of investment made.


PPF: Public Provident Fund

·         Copies of current FY contribution receipt and Pass Book entry in the name of Self/Spouse/Children.

·         Maximum exemption permitted is Rs.150, 000.


NSC: National Savings Certificate

·         Copy of certificate for investment in current FY in the name of Self.


Any notified Bonds:

·         Copy of eligible certificate for investment in current FY in the name of Self.


FD: Fixed deposit for five years

·         Copy of fixed deposit certificate for amount deposited in current FY in the name of self for tenure not less than five years with confirmation from bank for exemption u/s 80C.


CEF: Child Education Fees

·         Fee receipts must mention Tuition Fees over them.

·         Any fees paid under heads like Fees / Education Fees / Quarterly Fees / School Fees / Academic Fees will not be considered. Under such circumstances an acknowledgement on school’s letter head for the actual Tuition Fees paid must be attached along with.

·         All fee receipts paid for current FY till date need to be submitted.


EMI: Principle paid through EMI on Home Loan

·         For claiming tax benefit on Principle (part of EMI) amount paid for the home loan u/s 80C, employee needs to attach along Bank Provisional Certificate / Bank Statement mentioning the actual principle paid till 31st Dec2018.

·         Payment schedule will not be accepted.

·         In case the home loan is held under joint names then declaration for % of benefit being availed by the employee & the joint holder in the respective investment required (Annexure-5). In absence of such declaration only 50% of the benefit will be considered.