Earning income by Renting out the property is a major source of income for many individuals in India and many a times they incur some expenses such as paying maintenance charges for that property or paying rent of furniture installed in that property and they have a query that whether they can claim such expenses against their house property income or not.
In this post we are going to discuss the same issue in detail along with provisions of Income Tax Act:
In a single word the answer to above argument is “No” you cannot deduct any such expense against house property income but let’s discuss/ understand it further in detail:
Income from House property is covered from section 22 to 27 in the Income Tax Act, 1961.
Section 23 and 24 defines the amount which can be deducted from House property Income and it covers:
- Section 23 provides for deduction of taxes paid to local authority for that property i.e. property tax or house tax and such deduction is allowed on payment basis.
- The first deduction allowed u/s 24 is 30% standard deduction of annual value of property.
- The second deduction u/s 24 is with regard to interest paid on housing loan taken for construction/ purchase/ renovation of house.
According to Income tax Act only the above deductions are allowed from the income you earn by renting your house and such income is taxed as income from House Property. Other than these no deduction are allowed even if you have incurred some expenses to earn this income because government is already giving 30% standard deduction from this income to everyone without any proof of expense.
With regard to point number 1 above, the deduction is allowed on payment basis therefore even if you pay property tax for past 3 years you will get deduction in the year of payment and this deduction is only allowed if your property is a rent property and not a self occupied property as it is deductible from annual value.
With regard to point number 3 above, the deduction with regard to interest on housing loan is allowed upto ₹200000 for loan taken for purchase or construction of house or upto ₹30000 in case of renovation of house and it will be restricted upto a maximum of ₹2 lakh in case of a self occupied property, whereas in case of rented property there is no such restriction.
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