Deductions Under Income Tax Act1961

Income from House Property

Deduction under Sec(24) Interest on Borrowed Capital Standard Deduction

Interest on Borrowed Capital Interest on borrowed capital is deductible as follows: If the following conditions are satisfied Interest on borrowed capital is deductible upto Rs 150,000. Capital is borrowed on or after April 1, 1999 for acquiring or constructing a property. The acquisition/construction should be completed within 3 years from the end of the financial year in which capital was borrowed. The person, extending the loan, certifies that such interest is payable in respect of the amount advanced for acquisition or construction of the house or as refinance of the principle amount outstanding under an earlier loan taken for such acquisition or construction.

If the conditions stated above are not satisfied, then the interest on borrowed capital is deductible up to Rs 30,000. However, the following conditions have to be fulfilled: Capital is borrowed before April 1, 1999 for purchase, construction, reconstruction repairs or renewal of a house property. Capital should be borrowed on or after April 1, 1999 for reconstruction, repairs or renewals of a house property. If the capital is borrowed on or after April 1, 1999, but construction is not completed within 3 years from the end of the year, in which capital is borrowed.

Interest Deduction up to Rs.150000/- is available only for acquisition and construction, provided b) Loan taken on or after 1-4-1999 and construction completed within 3 years from the end of financial year in which loan is borrowed. c) For claiming deduction’s interest certificate and details of principle outstanding, interest amount etc. Along with the return on income.

Pre-Construction period interest

Interest payable by an assessee in respect of funds borrowed for property, deductible in FIVE annual Installments starting from the year previous prior to the year in which the Construction/ Acquisition of such property was completed or date of Repayment of loan whichever is earlier. Pre Construction period means period commencing from the date of loan or immediately preceding March 31st of the year of completion whichever is earlier.

For Eg: B takes a loan of Rs. 50,000/- @10% p.a., on March 31st 2003, construction of the house is completed on December 22nd, 2007, then Pre Construction period is March 31st 2003 to March 31st 2006, Interest value coming up to Rs. 15,000/- deductible in 5 annual installments of Rs. 3000/- each.

Post Construction period Interest: This is the Interest paid by the assessee from the previous year onwards in which Construction/ Acquisition of the property is completed.

Standard Deduction STANDARD DEDUCTION  allowable @ 30% of Net Annual Value.

Municipal Taxes. From GAV we have to deduct municipal taxes(including service taxes) levied by any authority in respect of House property. Municipal Taxes are deductible only if b) These taxes are borne by the owner. c) And are actually paid by him during the previous year. Municipal taxes levied by local authority but not paid by the assessee during the previous year, are not deductible.

Cont… If the property is situated in foreign country, municipal taxes levied by foreign authority are deductible (if paid by the owner). Amount paid by an assessee to a municipality for regularisation of unauthorised construction is not deductible.

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