How to Calculate Income from House Property Under the New Tax Regime: Deductions and Benefits
Under the new tax regime, there are certain calculations and important aspects to consider when calculating income from house property. This article will guide you through the process and explain the deductions and benefits you can claim.
New Tax Regime:
From FY 2023-24 (AY 2024-25) onwards, the new tax regime will be the default tax regime for all taxpayers. This means that when you file your income tax return next year, the new tax regime will be selected automatically. If you want to continue with the old tax regime, you will have to specifically opt for it. Under the new tax regime, many deductions available under the old tax regime will no longer be applicable.
Tax Laws for Different Types of Properties:
The Income Tax Act classifies house properties into three categories: self-occupied, let-out, and vacant (deemed to be let-out).
Self-occupied: A self-occupied house property is one that is occupied by the individual or their family members. Up to two houses are considered self-occupied. Under the new tax regime, no deduction is allowed for self-occupied houses, meaning you cannot claim interest paid on home loans.
Let-out House: If you earn rental income from a house property, you can claim deductions under the new tax regime. Deductions for interest on home loans, municipal taxes paid, and a standard deduction of 30% are available for let-out houses.
Vacant House: If you own more than two houses and there is no rental income from them, they are considered “deemed to be let-out” properties. The tax treatment for these properties is the same as let-out properties. You can claim a standard deduction of 30% of the notional NAV, municipal taxes paid, and home loan interest limited to the rental income.
Deductions that can be claimed from house property in the new tax regime:
1. Home Loan Interest Deduction: You can claim a deduction for interest paid on your home loan from your rental income. However, this deduction is only available if the house is put on rent. For self-occupied properties, the deduction for home loan interest is restricted to Rs 2 lakh and is only available under the old tax regime.
2. Setting off Loss from House Property: Loss from house property cannot be set off against other income under the new tax regime. This means that any loss under the head income from house property cannot be set off against any other heads of income.
3. Set-off of Losses from Multiple House Properties: If you have multiple let-out house properties, you can set off the loss from one property with the income from another property.
4. Carry Forward of House Property Losses: There is no scope for carrying forward losses in the new tax regime. In the old tax regime, house property losses could be carried forward for up to eight financial years.
Calculation of Income from Let-out House Property under the New Tax Regime:
To calculate the income from a let-out house property, you need to calculate the gross annual value (GAV) and deduct municipal taxes paid. The value after deducting municipal taxes is called the net annual value (NAV). From the NAV, deduct 30% as a standard deduction for maintenance and other house upkeep expenses. If the house was bought on a home loan, deduct the interest paid on the loan. The figure arrived after deducting the standard deduction and home loan interest is the income from the house property under the new tax regime.
In conclusion, understanding the calculations and deductions for income from house property under the new tax regime is crucial. By following the guidelines and rules, you can optimize your tax planning and ensure compliance with the tax laws.
Calculation of Income/Loss from House Property under both Old and New Tax Regime:
Particulars Old Tax Regime New Tax Regime
Gross annual value (GAV) N/A Rs xxxx
Income/Loss from house property Rs (xxxx) Rs xxxx
Less (interest on home loan) Rs (xxx) Rs (xxx)
Less (municipal tax) N/A Rs (xx)
Less (standard deduction @30% of NAV) Rs xx N/A
Net annual value (NAV) N/A Rs xxxx
Self-occupied Let out/Deemed let out Self-occupied Let out/Deemed let out
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