Amounts not deductible from income from house property

Earning a rental income from a property that is leased out is liable for taxation under the section “Income from House Property” according to the Indian Income Tax Act, 1961. The Act offers certain deductions from the gross rental income, thereby reducing the taxable income from the property. Section 24 of the Act lays down the specifics of these deductions.

While certain deductions are permitted, there are particular amounts that cannot be deducted from the income from house property. This blog post will delve into the amounts that are not deductible from the income from house property.

1. Municipal Taxes: Municipal taxes are calculated based on the property’s annual value and are imposed by the local authority on the property owner. However, the owner cannot claim these taxes as deductions from the income from house property. Municipal taxes are levied for maintaining local infrastructure like roads and streetlights.

2. Standard Deduction: A standard deduction of 30% of the net annual value of the property is permitted as a deduction. But if the actual amount spent on repairs and maintenance exceeds this amount, then the excess amount can be claimed as a deduction. This means that the actual amount spent on repairs and maintenance is deductible, but not the standard deduction.

3. Interest on Loan: Interest paid on a loan taken for the acquisition, construction, repair, or renovation of a property is deductible from the income from house property. However, if the property is self-occupied and not let out, the maximum amount of interest allowed as a deduction is INR 2 lakh per annum.

4. Vacancy Allowance: The amount of rent lost due to the property being unoccupied is referred to as vacancy allowance. This amount is not deductible from the income from house property.

5. Capital Expenditure: Capital expenditure is incurred on the procurement, construction, or improvement of a property. This expenditure is not deductible from the income from house property. However, depreciation can be claimed on such expenditure.

6. Personal Use: If the property owner utilizes the property for personal purposes, the rental income earned from the property is not taxable. However, if only a part of the property is leased out and the owner uses the remaining part for personal purposes, then only the rental income earned from the leased-out part is taxable.

In conclusion, comprehending the amounts that are not deductible from the income from house property is crucial when computing the taxable income from such property. Municipal taxes, standard deduction, vacancy allowance, capital expenditure, and personal use are not deductible from the income from house property. Interest paid on a loan taken for the property can be claimed as a deduction subject to specific limits. Understanding these deductions and exclusions can aid in accurately calculating the taxable income from house property.