Statutory deduction under Income from House Property under Section 24(a),(b) Income Tax Act 1961

By | July 16, 2014

Deduction from Income from house property .i.e. Deduction available under house property head for rent & Interest paid on loan taken for such house property. As Per Income Tax Act 1961 “Statutory deduction” includes:

(a) A sum equal to thirty per cent of the annual value. Deduction of 30% of rent received is allowed as deduction under house property head.

(b) Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital. Current Limit has been increased from Rs 1.50 lakhs to Rs 2 Lakhs from Financial Year 2014-15 .i.e. AY 2015-16.  More details about this clause read How to Claim Deduction of Interest on Loan Borrowed Capital on House Property under Section 24(b)

S. 23 & 24(b) of IT Act, 1961—Income from house property—The provision of s. 23(1)(c) applies only to property which is let, in whole or in part, i.e., falling under s. 23(1)(b) and which (the latter) provision becomes operational only where the amount of actual rent received or receivable upon letting is in excess of the sum referred to in s. 23(1)(a), i.e., the fair rental value (FRV) (defined as the sum for which the property might reasonably be expected to be let from year to year), and not otherwise, in which (latter) cases, the annual value of even a let out property would be computed under s. 23(1)(a) at its FRV. Since the assessee has not disclose any income (annual value) from a self-occupied property though it has specified another property under the provisions of s. 23(4)(a) therefore, the claim for deduction under s. 24(b) of interest incurred on amount borrowed for purchase of said house property is not allowable—Ramesh Chand  vs. ITO (2010) 130 TTJ (UO) 12 (ITAT-Agra)

Reference: – As Per Section 24(a) (b) Of the Income Tax Act 1961

24. Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—

(a) A sum equal to thirty per cent of the annual value;

(b) Where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees:

Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed [within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed one lakh fifty thousand rupees with effect from 1st April 2015 one lakh fifty thousand rupees increased to Rs Two lakhs rupees.

Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal installments for the said previous year and for each of the four immediately succeeding previous years:]

[Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]

Leave a Reply