3rd SERIES OF FAQs ON INCOME FROM HOUSE PROPERTY

Q. 9 Can interest paid on loans taken from friends and relatives be claimed as deduction while calculating house property income?

Yes, if the loan is taken for purchase, construction, repair, renewal or reconstruction of the house. If the loan is taken for personal or other purposes then the interest on such loan cannot be claimed as deduction.

?Q. 10 While computing income chargeable to tax under the head “Income from house property” in the case of a let-out property, how much interest on housing loan can be claimed as deduction?

While computing income chargeable to tax under the head "Income from house property" in case of a let-out property, the taxpayer can claim deduction under section 24(b) on account of interest on loan taken for the purpose of purchase, construction, repair, renewal or reconstruction of the property.

In case of a let-out property, there is no limit on the quantum of interest which can be claimed as deduction under section 24(b ) . However, in case of a self occupied property, limit is Rs. 2,00,000 or Rs. 30,000, as the case may be (discussed in later FAQ).

Q. 11 What is pre-construction period?

While computing income chargeable to tax under the head "Income from house property" in case of a let-out property, the taxpayer can claim deduction under?section 24(b) ?on account of interest on loan taken for the purpose of purchase, construction, repair, renewal or reconstruction of the property.

Deduction on account of interest is classified in two forms,?viz.,?interest pertaining to pre-construction period and interest pertaining to post-construction period.

Post-construction period interest is the interest pertaining to the relevant year (i.e.,?the year for which income is being computed).

Pre-construction period is the period commencing from the date of borrowing of loan and ends on earlier of the following:

???Date of repayment of loan; or

??31st March immediately prior to the date of completion of the construction/acquisition of the property.

Interest pertaining to pre-construction period is allowed as deduction in five equal annual instalments, commencing from the year in which the house property is acquired or constructed.

Thus, total deduction available to the taxpayer under?section 24(b) on account of interest will be 1/5th of interest pertaining to pre-construction period (if any) + Interest pertaining to post construction period (if any).

Q. 12 My spouse and I jointly own a house in which both of us have invested equally out of independent sources. Can the rental income received be split up between us and taxed in the individual hands?

Yes, if the share of each co-owner is ascertainable.

?Q. 13 What is self-occupied property?

A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence (also refer next FAQ).

?Q. 14 How to compute income from self occupied property?

A self-occupied property means a property which is occupied throughout the year by the taxpayer for his residence. Income chargeable to tax under the head "Income from house property" in case of a self-occupied property is computed in following manner :