Here are some deductions a home owner is eligible for. You need to ensure you have taken them into account while filing your returns. The time to file your income tax returns is approaching fast. Individuals need to file the income tax returns. While finalising your tax returns, you need to ensure you claim the deductions and incentives available against any income from a residential property.
Nowadays, no document needs to be attached with the IT returns. As such, the necessary documents and proofs should be kept ready, in case there is any query regarding them. It helps to prepare the IT returns carefully as you will not miss claiming any of the deductions you are eligible for.
Designate property as self-occupied
The income earned from a house is taxable. To come into the tax bracket, you must be the owner of the property (comprising of a building). Also, it must be capable of being rented out and yielding a rental income.If you have only one residential property, that property will be treated as a self occupied property. There will be no taxable income from this property, provided you have not let-out the property for any period of time during the year. In case you own more than one property, this exemption applies to only one self-occupied house. You have the discretion of choosing that property. Deemed income from all other properties will be taxable, even if they are self-occupied and no rental income is actually derived from them. You can choose any one property to be designated as self-occupied. The remaining properties although not actually let-out will be deemed to be let-out and their notional rental value will be treated as taxable income.
Deductions against annual value
In case of a house, it is the annual value that is taxable. Annual value means the capacity of the property to earn an income. It is the highest of the municipal value, fair rental value of a similar property, and the actual rent received. From the gross annual value, you can claim a deduction against the municipal tax paid. Against repairs and collection charges, 30 percent of the net adjusted annual rental value, irrespective of actual expenditure, can be claimed. So, no bills are required for this deduction.
Deductions against home loan
Against interest on borrowings, the interest paid or payable on money borrowed for the purchase, construction or repair of a house is deductible. In case you have taken a home loan, you can claim a tax benefit on the principal repayment under Section 80C as well as a tax benefit on the interest paid under Section 24. The tax benefits on a home loan can be claimed once the house is ready. The principal repaid can be claimed up to a maximum of Rs 1.50 lakhs under Section 80C. The interest paid can be claimed as a deduction under Section 24.You can claim up to Rs 2 lakhs or the actual interest paid, whichever is lower. In addition, you can claim a deduction against interest paid on a home loan taken for reconstruction or repair of a house of up to Rs 30,000, subject to the overall limit of Rs 2 lakhs. You need to get an interest and principal repayment certificate from the bank in respect of the home loan repayments to claim the exemptions.
Benefits for co-borrowers
In case you buy a house jointly with your spouse and take a joint home loan, both can claim income tax deductions. Both spouses should have separate sources of income. Both can claim separate deductions in their income tax returns. The repayment of the principal amount of the loan can be claimed as a deduction under Section 80C up to a maximum amount of Rs 1.50 lakhs individually by each co-owner.
In case a house is owned by more than one person and is also self-occupied by all co-owners, each co-owner will be entitled to the deduction individually on account of interest on the borrowed money up to a limit of Rs 2 lakhs. In case the house is let-out on rent, there is no restriction on this amount. In case of co-owners, all are entitled to tax benefits provided they are also co-borrowers of the home loan. The limit applies to each co-owner.
Deduction in case of second house
If you buy a second house with another home loan and let it out on rent, the entire interest paid on this home loan during a given year can be claimed as a deduction. If you have more than one house, any one of them can be deemed to be rented out. So, the interest on the home loan for that house can be claimed entirely as a deduction, provided the rental income or deemed income is taxable.
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