Calculating Income Or Loss From Property For IT Returns

In an earlier post, I explained how to file your IT returns online via the IT Department’s website.

This year, the IT Dept. has modified the most common ITR-1 form to include a field for “Income/loss from House Property”, something which was earlier only available in ITR-2. This allows tax payers to declare income or loss for up to a single house in the ITR-1 form itself, instead of having to file the more complicated ITR-2 form.

This excellent move greatly simplifies the IT return filing process for a large number of people who don’t have any source of income other than salary and interest income, but are paying EMIs on a housing loan for one house. It also helps people who have income from rent received from a single let out property. Both these people can now declare their rent income and/or interest payments in the ITR-1 form itself.

But how do we calculate the income or loss from our house property? Here is the procedure as per the IT Dept. (click to enlarge):

For rented/let-out properties:

1. In (a), enter the total rent which should have been received during the year for the property. This includes the actual rent received, plus that which was due but not received for whatever reason.
2. In (b), enter the amount of rent which was due but not received during the year.
3. In (c), enter the tax paid to local authorities, such as Property Tax.
4. Calculate (d), (e) and (f), which are self explanatory.
5. In (g), enter the total interest paid towards any home loan taken on that property. Unlike self-occupied property, there is no limit for properties that are rented out.
6. Calculate (h) and (i) as shown. Assuming no rent arrears from previous years, the value of (i) is your total income/loss from house property and should be entered into Row 2 of the ITR-1 form.

For self-occupied properties:

1. Since the house is self-occupied, you can neither declare any rent earnings, nor claim deduction for Property Tax or any other local taxes. So rows (a) through (f) will be empty.
2. The only deduction you can claim for self-occupied property is interest payment towards home loan for the property. This too is limited to Rs. 1,50,000 per year. This must be entered in (g).
3. The total income/loss from house property will be the interest payment amount entered in (g). This has to be mentioned in Row 2 of ITR-1 form as a NEGATIVE VALUE, so it will be deducted from the taxable income.

Note that in case you own more than one property, the above calculations must be repeated for every property, and the total income/loss from all of them should be declared in Row 2. You would also need to use ITR-2 instead of ITR-1 if you own more than one property.