How to calculate income from house property for ITR1

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Income Tax Return (ITR) file is one of the greatest concerns of every salaried person around the globe. Closure of every financial year brings a lot of stress regarding the proper computation of your income tax. Individual, whose income is below 50 lakhs and has single house property, needs to fill up ITR1 or ‘Sahaj’ form for filing tax return. In this ‘Sahaj’ form, you not only need to provide detailed information about your income but also the break-up information about the income earned from your property. You can complete the process of filing online.

How to Compute House Property Income for ITR1?

Computation of the income you earn from your property is one simple process if you know what to look for. The calculation of the house property income solely depends upon the fact whether the property is occupied by you or rented-out. To calculate income tax deductions on your property income all you need to do is to calculate annual worth of the house. Check out the steps to compute house property income:

  • Self-Occupied House Property – You can claim tax deduction for a self-occupied house. A property will be called as self-occupied if:
  • The house is used by you or your family member including spouse, children and parents for residential intention.
  • The property you own stays empty over a long time due to your job at different city or location.
  • You do not live in the property you own rather live with your parents, the property will still be called self-occupied.

If you fall into any of the above mentioned conditions, the annual worth of the house property will automatically be considered as zero by the IT laws. However, if you have any of the above conditions and you are liable to repay home loan capital, you may claim for tax deduction up to 2lakhs. This is the maximum benefit you can get from your house property. Since the property value is nil or zero as discussed above, the tax benefit claimed for home loan repayment will become negative. Thus, you can avail a tax deduction equivalent to the amount of home loan interest you pay with maximum capping of 2lakhs. This deduction will be managed with other sources of incomes which will finally reduce your taxable income.

  • Let-Out House Property – If your property does not fall under self-occupied category and it is a ‘let-out’ asset then you have to fill out additional three fields to describe your house property in order to calculate income tax. To fill out these additional fields you need to compute the following values:
  • Gross Received Rent or Receivable Value – The gross receivable amount of rent is decided upon two values of the property:
  • Actual Receivable Rent – The amount of money received by you as rent from your tenant in a year including the arrears is considered as the actual receivable rent.
  • Expected Rent – Expected rent suggest the amount of rent expected to receive. However, this expected rent value depends upon the following factors:

Municipal Valuation – The annual rental value of your house property decided by the municipal authority is called the municipal valuation of house rent.

Fair Rent – The yearly rental value of similar properties situated in similar location is also considered while deciding the expected rent of a property.

Standard Rent – Standard rent of a property is the standardized rental value of a house determined by the State Rent Control Act of government to maintain fair rent within the state. No landlord can demand higher rent over the fixed rental value.

The higher of these two values is considered as the gross rent value of the property.

  • Taxes Paid – You need to mention the taxes you paid to the local municipal authority, if any, for the financial year 2017-2018. The tax details would be stated in the receipt provided by the local authority.
  • 30 Percent Standard Deduction of the Annual Value – The online ITR1 or Sahaj form automatically provides 30 percent tax deduction once you enter the gross rent value and the total amount of taxes being paid, no matter what your actual expenditure is. This standard deduction is given as the maintenance expenses of your house property.
  • Home Loan Interest Repayment – Even if your house property is not occupied by self and you are liable to repay home loan interest, you can claim for a loss maximum up to 2lakhs. Unlike self-inhabited property, actual amount of home loan interest can be declared in the form for assessing ‘let-out’ property value.

However, the maximum loss availed under this section remains 2lakhs. For instance, if you receive yearly house rent of 1lakh and pay annual home loan interest of 4lakhs, loss of 3lakh will be faced. But you can claim maximum up to 2lakhs in the current financial year and the remaining loss of 1lakh will be forwarded to the next financial year.

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