Deductions u/s 24 from Annual Value

15/11/2023 1 By indiafreenotes

Section 24 of the Income Tax Act in India provides deductions that can be claimed from the income chargeable under the head “Income from House Property.” These deductions are related to the Annual Value of a property.

Deductions under Section 24 play a crucial role in reducing the taxable income arising from house property. Taxpayers should be aware of the specific conditions and limits associated with each deduction. Keeping proper documentation related to property ownership, home loans, and interest payments is essential for accurate tax filing. Additionally, it’s advisable to consult with a tax professional or refer to the latest tax laws for the most up-to-date information.

Standard Deduction:

  • Deduction Amount: A standard deduction of 30% of the Net Annual Value is allowed under Section 24(a).
  • Calculation: Standard Deduction is calculated as 30% of the Net Annual Value (NAV), which is the Annual Value minus municipal taxes paid.

Interest on Borrowed Capital (Home Loan):

  • Deduction Amount:
    • For a self-occupied property, the maximum deduction allowed is ₹2,00,000.
    • For a property that is not self-occupied (let-out or deemed to be let-out), there is no upper limit on the deduction.
  • Conditions:
    • The loan must be taken for the purpose of purchase or construction of a residential property.
    • The construction or purchase must be completed within five years from the end of the financial year in which the loan was taken.

Conditions for Claiming Deductions:

  • Possession of Property: Deductions under Section 24 are available when the taxpayer is in possession of the property.
  • Completion of Construction: Deductions related to interest on borrowed capital are available once the construction is completed or the property is acquired.

Pre-Construction Interest:

  • Deduction Amount: Interest paid during the pre-construction period can be claimed in five equal installments, starting from the year in which the construction is completed.
  • Conditions: The total deduction for pre-construction interest is subject to a maximum limit of ₹30,000 per year.

Joint Ownership:

  • Deduction for Co-owners: If the property is jointly owned, each co-owner can claim deductions in proportion to their ownership share.
  • Interest Deduction for Joint Loan: If a loan is taken jointly, each borrower can individually claim the interest deduction.

Recent Changes:

  • It’s essential to check for any amendments or changes in tax laws, as the provisions related to deductions under Section 24 may be subject to updates.