+91 9212007566

011-41620109 / 011-26100109
Wed, 24-Jul-2024

Tax Effect of Expenses incurred on Residential House

Home >> Blog >>Tax Effect of Expenses incurred on Residential House

Tax Effect of Expenses incurred on Residential House

This Article will discuss about the expenses incurred on the Residential House Property of and Individual. Major part of the lifetime income of an individual being spent on Accommodation facilities for himself and family. This is very well in the knowledge of the finance ministry of India because of which the Income Tax Act has been provided with many deductions and benefits for the Residential House expenses. Not only the repair and maintenance expense deduction but also the deduction in case where an individual sells his/her house property. However there are few conditions that needs to be fulfilled to get away for paying tax on capital gains arising out of selling the house property.

Following are the Benefits by way of Deductions in relation to House property of Individuals:

  • Standard Deduction under Section 24 of the Income Tax Act: The Standard Deduction under section 24 of the income tax act is available for every individual who has let out house property and earning a rent of any amount. The amount Earned by the individual by letting out the house property is subject to tax under the Income Tax Act. However the tax needs to be calculated after deduction of 30 percent from the Net Annual Value of the House Property.

Net Annual Property Refers to the amount earned by the individual by way of rent.

Example: If Rent Earned by the individual is 100,000 in a year than he has to offer only 70,000 {100000 – (100000X30%)}.

However, Actual expenses incurred on the house property will not be allowed as deduction.

  • Deduction for Interest Payable on House Loan: Most of the Individuals don’t have the knowledge that, expense incurred for Interest payment on House loan is a Deductible expense i.e. provide the tax bracket to the individual. Limit for Interest payment deduction is Rs. 2 Lakhs where the house property is been self-occupied by the Individual and on the other hand no limit of Interest payment deduction where the house property is been let out. ( If Assesse does not claim deduction under section 24 for payment of interest, then same can be taken under chapter VI-A Section 80EEA, however the house property value should not exceed Rs. 45 Lakhs in that case)


Following are the deductions available when the House property is being sold:

  • Deduction under section 54: If Individual is Selling House property then the Section 54 is a must read for the individual, which states that an Individual or HUF can avail the tax exemption for the whole or part of Long Term Capital Gain earned on selling of Residential property by Purchasing or Constructing a Residential property within 1 year before selling or 3 years after selling the residential Property (In case of Purchase of Property then 3 years period will be substituted with 2 years period).

If Construction to be started after Selling or Purchased of Residential Property is not to be purchased in the same year in which the sale happen, then there is a scheme called CGAS, in which amount equal to Long term Capital Gains can be Invested and When Property will be purchased then Amount will be withdrawn and exemption is still unaffected.

  • Selling House property and Claiming Deduction Under section 54EC: Deduction under section 54EC is available to everyone and on any asset. Provided that the Gains earned are Long term Capital Gain and the Investment Made in the prescribed investments is within a period of 6 months from the sale of the House property. Maximum Deduction available under this Section is 50 Lakhs.

Prescribed Investments: Capital Gain Bonds of NHAI & REC.

E.g. – If any person sold House Property and earn Long term Capital Gain then that person can get an exemption of Rs. 50 Lakhs from the Long Term Capital Gains if by investing the amount of Capital Gains in the Capital Gain Bonds of NHAI & REC.




Deduction for Rent paid if House property is taken on Rent:


  • Deduction under section 80GG: This Deduction is a relief and benefit for those assesses who do not receive any HRA (House Rent Allowance). Deduction under this section can be taken of Maximum Rs. 60,000 or the actual rent whichever is less.
  • Deduction for HRA (House Rent Allowance): If Assesse is receiving any HRA from the employer then a deduction can be claimed under section 10(13A). However the deduction will be restricted to certain limits prescribed for this section.

Hope the article was helpful. Thanks

The information provided under this website is solely available at your request for informational purposes only, should not be interpreted as soliciting or advisement. We are not liable for any consequence of any action taken by the user relying on material/information provided under this website. In cases where the user has any legal issues, he/she in all cases must seek independent legal advice

Copyright © 2019 - 2020 Atul Mangal & Co All rights reserved.

Quick Enquiry
Click and Scan for Contact