When you pay interest on a home loan for a Self Occupied House Property, you may end up with a loss under the head ‘Income from House Property’ in your Income Tax Return. In case of a Let Out Property there can be a Loss too – when your Net Annual Value is less than the Deductions allowed.
This is how Income from House Property is calculated –
Gross Annual Value (Rent or Nil in case of Self Occupied Property)
Less: Municipal Taxes Paid
= Net Annual Value
Less: Deductions under section 24
- Standard Deduction @ 30% of Net Annual Value
- Interest on Home Loan
= Income or Loss from House Property
If there is a loss it is allowed to be adjusted against any head of income of the same year in your Income Tax Return. For example –For financial year 2013-14, if your income under the head Salary is Rs 4,50,000, Income from Other Sources is Rs 25,000 and your loss from House Property is Rs 1,80,000, your final tax liability will be calculated on Rs 4,50,000+25,000-1,80,000 = Rs 2,95,000.
In case the entire loss cannot be adjusted against Incomes of the same year in which loss was incurred, this loss can be carried forward for 8 assessment years. However, in the subsequent 8 years it can only be set off against income from house property and from no other head of income. If it is not adjusted in 8 subsequent years it can no longer be carried forward. Do remember to show this loss in your Return.
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