What is income from house property?

Let me help you with what is income from house property. Income from House Property is a category of income under the Indian Income Tax Act, 1961. It refers to income earned by a taxpayer from any building or property, such as a residential house, commercial property, or rented land. I have shared more details about it below.

Define Income From House Property

Income from house property refers to the money that a person makes, primarily from rent, by owning a piece of real estate. This income is taxable under the heading “Income from House Property” only if the property is owned by the taxpayer and not used for business or professional purposes.

1. The taxpayer must be the legal owner of the property. Income from sub-letting is taxed under \"Other Sources,\" not \"House Property.\"

2. Includes residential, commercial, or let out property. Vacant land not connected to a building does not fall under this category.

3. If used for personal residence, the annual value is NIL. However, interest in a home loan can be claimed as a deduction.

4. If rented, the rental income is taxed after allowing deductions.

 This is the basic meaning of income from house property.

If the taxpayer owns multiple properties but uses only one as self-occupied, others are let-out.

Income from House Property = Annual Value - Deductions under Section 24

Annual Value (AV): For let-out property, it’s the higher of actual rent received or expected rent.

Deductions under Section 24:

1. Standard Deduction: 30% of Net Annual Value (NAV).

2. Interest on Home Loan: Deduction is up to Rs.2,00,000 for self-occupied property and actual interest for let-out property.

I hope you understand what is house property income.

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How to calculate income from house property (with example)? 

If you own a residential property in India and you have put it out on rent or you are planning to transfer its rights to someone else in exchange for money, then you should be aware of income from house property. If you are new to this concept and wondering what is income from house property, how it is calculated then you are at the right place. I am going to tell you about its meaning and calculation here.

The Income Tax Act identifies income from house property when the property, i.e., house, building, office, warehouse is let out on rent or is being transferred. The money earned in the transaction is income from house property. 

There are 3 conditions under which income from house property is calculated:

• The property should be a building, land or an apartment

• The assessee should be the owner of the property

• The house property should not be used for business or professional purposes

There are a few things which are considered before calculating the income from house property

• Tax on the house is calculated on the property's NAV.

• Income from house property will be computed only for the period of rent received and not the entire year if the owner’s house is vacant for a significant amount of time and is later let out.

• If the owner of the home lives in another city due to employment and pays municipal taxes on time then the income from house property can be set off without deductions.