iCalculator™ IN"Informing, Educating, Saving Money and Time in India"
IN Tax 2024

Housing Loan Interest on Let-Out Property and Income Tax in India

Rate and Share, Show you Care 😊 Your feedback and support helps us keep this resource FREE for all to use, thank you.
[ 48 Votes ]

If you have a property that is let-out or rented, the interest paid on the housing loan for that property can have specific implications for your income tax. Understanding these tax rules can help you optimize your tax liabilities. Let's look at the key points and benefits of housing loan interest for let-out properties in India.

Section 24: The Core Provision for Let-Out Properties

The most relevant provision for individuals with housing loans on let-out properties is Section 24 of the Income Tax Act, 1961. Unlike self-occupied properties where the interest deduction is capped at ₹2,00,000 per annum, the interest on the housing loan for let-out properties can be fully deducted from the rental income, without any upper limit.

How Does It Work?

The income from the let-out property is calculated as 'Gross Annual Value' minus 'Municipal Taxes.' The interest paid on the housing loan for the let-out property is then deducted from this income.

Income from Let-Out Property = Gross Annual Value - Municipal Taxes - Interest Paid on Loan

Where:

  1. Gross Annual Value: The reasonable rent that the property is expected to earn.
  2. Municipal Taxes: Taxes paid to the local municipal authority for the property.
  3. Interest Paid on Loan: The interest amount paid on the housing loan for the let-out property.

Additional Points to Consider

Here are some more important points that you should be aware of:

  • Both the owner and co-owner, if applicable, can claim this deduction based on their share of the loan repayment.
  • Standard Deduction of 30% on Net Annual Value is also applicable, which can be claimed irrespective of actual expenses incurred on the property.
  • There is no maximum limit on the amount of interest that can be deducted if the property is let-out.

Documentation Required

To claim these deductions, the necessary documents include:

  1. Home Loan Statement from the financial institution or bank.
  2. Proof of property ownership.
  3. Rent receipts, if applicable.
  4. Municipal tax receipts.