Income Tax

What are the Provisions of Income Tax Act, 1961 over Taxation of Self-Owned House given on Rent

Under Indian Income Tax Act, 1961, rental income from house is taxable if your income is above the limit of Rs. 250,000 for assessment year 2019–20.

Following deductions are available as expenditure from the rental income:

  • The municipal taxes paid and 30% of annual value.
  • Annual value is rental income less municipal taxes.
  • If you have borrowed money to fund the home (that is being rented out). Deduction for interest payment on the loan during the financial year is also available.

ITR 1 has a separate section on Income from House Property where details of rental property will have to be given.

Rent income

Less: Municipal taxes

Annual Value

Less: 30% of Annual Value

Less: Interest paid on borrowed capital

If the above formula results in a loss then only loss of Rs, 200,000 can be adjusted against your other income and balance loss will have to be carried forward.

The same rules apply in case you have leased out a commercial property. Please note that to claim deduction of interest, you should own the property (or part of it as a co-owner).

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